[00:02:01] Patrick Donley: Hey, everybody. Welcome to the Millennial Investing Podcast. I’m your host today, Patrick Donley. And joining me today is Mr. Sief Khafagi from TechVestor. Sief, welcome to the show. Thanks for having me, Patrick. I’m happy to interview you today. I had the pleasure of interviewing one of your guy that’s in charge of acquisitions, Taylor Jones.

[00:02:20] Patrick Donley: Had a great time learning about TechVestor. But I want to hear more about your story. You’ve got a really fascinating story. We’ve touched on it a little bit before the interview started. I wanted to hear a little bit about your kind of experience early days while you were working at Facebook.

[00:02:34] Patrick Donley: You worked there for five years, just getting involved in real estate. You’ve got this tech background, but you’re also in the Bay area working, living. doing a lot of traveling. Talk to me a little bit more about just how you, the interest in real estate got sparked. 

[00:02:49] Sief Khafagi: Yeah, I was in a very privileged position being in the bay.

[00:02:53] Sief Khafagi: I was working for one of the biggest tech companies in the world during a time of growth and I was being paid very well living as a single male. in the Bay, workaholic. And all of a sudden I realized I was living in California and taxes were a thing. And I had to ask myself, how can I lower these taxes?

[00:03:09] Sief Khafagi: I started getting involved in real estate, whether it was single family or multifamily and just learning more about how I can defer taxes. And at the same time I was staying in dozens and dozens of Airbnbs over the course of those five years for my job and hiring and recruiting and learned how poorly ran they were at the time by Mom and Pops.

[00:03:27] Sief Khafagi: So that’s the short story of kind of connecting the dots with both sides of the coin there. 

[00:03:32] Patrick Donley: You mentioned single family stuff, multifamily stuff, were you doing that on your own? Or as an LP? 

[00:03:39] Sief Khafagi: A multifamily I was doing as an LP, single family, I was trying to buy a couple here and I was getting into the idea of out of state investing and remote investing and buying things that worked, interest rates were normal at the time I had the W 2 income that banks loved and things along those lines.

[00:03:54] Sief Khafagi: So I was trying to do things actively, but I also realized very quickly that I did not want to be active in the long term rental space. The reason for that is, and I didn’t, I wouldn’t know why until much later, but there’s no true operating advantages, in my opinion, as a long term rental owner, you set the rents and you hope for the best.

[00:04:14] Sief Khafagi: You can operate somewhat better than other people, but you can’t really drive significantly better revenue than others. The market sets comps or else you just don’t rent. And I didn’t like that, right? As a creator, as a builder and someone who typically wants to excel in a space. And get more outsized returns.

[00:04:32] Sief Khafagi: I ask myself how could I make this better? How can I be the best performer in this asset loss? And obviously I was staying at a bunch of short-term rentals and I saw how poorly they were operated. Same single family asset, but different operations. And I was like, I can be better than that. I can do better than that, and that’s where the journey would start.

[00:04:50] Patrick Donley: I’m curious about you as a kid, did you have any side hustles, entrepreneurial ventures that you did? Was that part of your D n A growing 

[00:04:57] Sief Khafagi: up? I did. I did. It’s funny you ask, so I started probably dozens and dozens of things that ultimately failed, whether it was in hours or months, , whether the failure rate, everything from. selling on Amazon. I used to flip cars that’s actually how I put myself through school was flipping cars. And I started a business for youth kids for like summer camp and ended up selling that three months after it was my first big check that I ever got.

[00:05:23] Sief Khafagi: It was a five figure check and I was like, Oh my God, this is amazing. I can just start businesses, build them, scale them and eventually exit them. So did that. And then I would eventually in college, I was really good at interviewing. With companies and it was mostly soft skills and a bunch of my colleagues had the technical skills, but they didn’t know how to interview.

[00:05:41] Sief Khafagi: And so I built a small startup that would help folks get and break into big tech. Google’s Facebook of the world. And that worked out pretty well until Facebook called and said, why don’t you bring those skill sets inside instead of telling all our secrets to everyone outside? So that’s how the journey would eventually progress.

[00:05:59] Patrick Donley: That’s awesome. I’ve found that’s a common theme among a lot of the people that I interview is like they’ve often had at a young age, they’ve gotten involved in some kind of side hustle or entrepreneurial gig, small business, whatever. Sounds like you had a ton of different things that you were doing.

[00:06:12] Patrick Donley: I wanted to hear more about that interviewing aspect. So you got brought on to Facebook. You took a team, I think, tell me the numbers, 80 when you started to over a thousand. 

[00:06:23] Sief Khafagi: So when we first started the our team, which was on the infrastructure side, had about 80 folks in the org. I was brought on just to recruit simply.

[00:06:32] Sief Khafagi: And then I’d eventually grown to management, I think within the first. A year or so, a year and a half, and start building my own team to help recruit. But it was hyper-growth years for Facebook, right? It was, we want to hire 10, 20, 30, 40, 50,000 people, and our bootcamp sizes were in the thousands opening up new offices left and right.

[00:06:49] Sief Khafagi: So it was just a lot going on at the same time. Facebook obviously had the recognition in the brand name. Our job was find the best senior talent, convince them they can not only come and work for Facebook, but this is pretty remote work, so this is convince them to come work for Facebook and move from the example you and I were talking a little bit about earlier was move from Dayton, Ohio to Facebook, New York, and what does that mean for their family?

[00:07:12] Sief Khafagi: It wasn’t about the money. It wasn’t about where they were working. It was convincing this family of four why that was a good idea. And what their life would look like. 

[00:07:20] Patrick Donley: And so you’ve been able to bring the, all those skills that you learned at Facebook to TechVestor, we’re going to get into TechVestor a little bit here in shortly, but I first wanted to hear your five years in at Facebook.

[00:07:31] Patrick Donley: At what stage do you meet Sabrina, your partner and get this idea for TechVestor? 

[00:07:38] Sief Khafagi: Yeah, so Sabrina and I ran in similar circles in general. She was in multifamily real estate. She’s actually had her real estate license even back from when she used to live in New York. And she ended up working at Apple specifically on AirPods.

[00:07:51] Sief Khafagi: She was one of the lead project managers for AirPods as it would launch. And we’d often find ourselves in the same room and the same conversation around real estate and technology. She used to own Airbnbs. I was staying in them and we would connect on the idea of. Why they would suck. And she would tell me how she would run things and I was like, that’s a lot better than how these are being ran, at least from my perspective of a guest.

[00:08:11] Sief Khafagi: And why couldn’t someone’s scale it as an asset class. And obviously speaking to folks on the multifamily side where we were potentially LPs as well, everyone was like, you can’t scale it. It’s not possible. And here are the reasons why. But for us, we said. But we could solve some of that with technology like your problems that you have because you have this real estate perspective Sounds very hard that same problem through our lens is actually fairly easy because we could build X or do Y and when we took that approach right and I think actually us being naive is really what allowed us to start this business because if I Knew what I knew now knowing the journey of how hard it would be.

[00:08:50] Sief Khafagi: I don’t know if I would have done it And I think that’s just an honest representation of an entrepreneur saying, Hey, this is hard. It’s hard to scale. It’s hard to do. There’s a million and one moving pieces. But I think being naive at the beginning really allowed us to go in blindly and build right without knowing what to expect next.

[00:09:06] Patrick Donley: I wanted to hear more about the startup phase, actually leaving the security and safety of Facebook. You had, I think, just had a baby, a kid. So that is a huge jump to do. I think there’s a lot of people in similar situations or in a salary position, they’ve got the entrepreneurial itch, whether it’s real estate or small business or whatever.

[00:09:26] Patrick Donley: But that jump from a W2 job to something new and entrepreneurial is tough. Can you talk about your experience of that? 

[00:09:35] Sief Khafagi: Yeah. We were pregnant in our last trimester and my wife and I sit down and I was like, Hey, I want to do this thing. And it was terrifying to be quite honest with you. It was also during a time where COVID was.

[00:09:51] Sief Khafagi: More rampant than ever before at the time. And it was like starting this type of business during COVID and leaving a job where you’re about to have a baby, and obviously all the perks that come with it is a tough conversation. But my wife and I, which I mean, God bless her soul. She’s the most supportive woman I think I’ve ever met in my life.

[00:10:11] Sief Khafagi: She’s let’s do it. Let’s figure it out, whatever it means. Having that level of support was insanely. Probably the most important thing, but she took care of everything else while I was able to build. And I think that partnership really allowed us to succeed in Excel. And I was raised in a kind of very traditional family where go be a doctor, go be a lawyer, go work for the big brand name.

[00:10:32] Sief Khafagi: And it’s something can you gloat about at Thanksgiving dinner, if you catch my drift, or mom gloats about it at Thanksgiving dinner. And so for me to tell even my family that I was living this Prestigious job to go be a nobody to build for myself. There was a lot of thrash for sure. People thinking that they know what’s best for you.

[00:10:49] Sief Khafagi: But at the same time, I’ve always wanted to do this. And I knew the earlier I do it, the easier it would be just with kids. And I arguably, I still did it too late, but I ended up doing it. And I’m very proud that we did. 

[00:11:02] Patrick Donley: So you launched it during COVID. Looking back on things you wish you would have started prior to that?

[00:11:09] Sief Khafagi: More so on the family dynamics, right? Today I have two kids, two boys both under the age of three. And you ask yourself obviously family impacts decision making and time and financials, right? And so if I would have started five years ago, I would arguably would have been in a much better place.

[00:11:27] Sief Khafagi: But hindsight’s 20 20. Did I know what I knew five years ago? No, it’s sometimes it’s just about timing, right? When things eventually click in your mind and that’s when things clicked for me, right? Sometimes it takes time for things to click. 

[00:11:41] Patrick Donley: Yeah. I interviewed a guy a couple of weeks ago, Ben Wolf, who, I don’t know if you’re familiar with him.

[00:11:47] Patrick Donley: He’s got a company called Stay Onera and he had some interesting thoughts on it. Similar situation, I think to you, he started his company with a just newly married, maybe a kid on the way, tough to do It’s just, he did worst case scenario thinking like, what’s the worst case scenario?

[00:12:02] Patrick Donley: I end up working another W2 job. It’s where I’m at right now. It’s like, why not at least try it? I can at least go back you’ve got a marketable skill set. 

[00:12:11] Sief Khafagi: That’s exactly how we felt. And I think that’s the first person actually told me that was my best friend. He goes, open up your LinkedIn.

[00:12:19] Sief Khafagi: So I opened up my LinkedIn and he goes, go to your messages. I went to my messages and he goes, how many unreads do you have? And I was like a decent amount. And he said, great. So if this fails, you’re right back here. So take a shot. And it’s, you worked hard to get in that position, to build and build that scale and have that marketable resume as people will call it.

[00:12:37] Sief Khafagi: It is what it is. And people in this world do pay attention at times to where you’ve worked and what you’ve done. It is part of the life that we live and judge. 

[00:12:46] Patrick Donley: Sure. Absolutely. So I want to hear about Those early hires, you’ve got vast experience hiring people at Facebook over a thousand people, it sounds talk to me about the first couple of hires that you did, how you went about finding and acquiring talent to help grow TechVestor. 

[00:13:03] Sief Khafagi: I’ll tell you a story, although my wife won’t agree with it. My team calls me the DM king, but my wife says I have no game in the DMs. But in the recruiting world, for me, it was about building the best foundational team possible.

[00:13:18] Sief Khafagi: And the reason for that is I saw it firsthand at Facebook. If you could build the best possible team, everything else becomes solvable. And You also needed to find people who were so passionate about the problem that you were solving that it wasn’t about the money. It wasn’t about anything else because the problems were so hard that they would need to find ways to overcome it.

[00:13:37] Sief Khafagi: And so folks like Taylor, who you’ve interviewed, I reached out to him, I think it was through Twitter at the time, and he was just, his passion for short term rentals and numbers and acquisitions, you could just tell it was very clear. And I pitched him. A lot of Kool Aid, come drink this Kool Aid, right?

[00:13:54] Sief Khafagi: Here’s what we want to build. Here’s where we’re going. Here’s a journey. Here’s a roadmap. Here’s how you can help shape it. It took me probably two months, two and a half months to land Taylor, give or take. And it was just a lot of long nights and a lot of recruiting. And I was very fixated on landing someone like himself.

[00:14:08] Sief Khafagi: We’d eventually land folks like John, who’s our head of data, also known as the Airbnb data guy in the space through networks. The great thing with talent is once you hire really great talent. They typically also know really great talent. It becomes this beautiful flywheel effect, right? He came through, he knew Taylor.

[00:14:23] Sief Khafagi: That was a great win. We added Josh who’s ex DR Horton, right? Has ran single family track maps all across the country in the past and also runs vertically integrated construction companies today. So he understood renovations and renovations at scale and remote renovations. And we added Mick, VCASA. He used to run portfolios there and all these folks were meticulously picked and recruited either by me or someone in our network.

[00:14:46] Sief Khafagi: And I think one of the biggest tips I would give to anyone listening to this podcast on hiring is put yourself in a position to hire people far before you’re ready. Hire great people and figure out what to do next. And I think oftentimes big companies and even small companies, they either don’t have the privilege to where they could when we hired probably half our leadership team.

[00:15:07] Sief Khafagi: We didn’t need them when we hired them. It was, we ran across them, talked to them, met them, and we were like, wow, we need this skill set. We need this person, this really smart, passionate individual on our team. And let’s figure out what we’re going to do next. I have no idea what they’re going to do. But I’d love to have you on my team.

[00:15:25] Patrick Donley: Yeah, it’s a great way to think about it. Let’s take a step back a little bit and talk specifically about TechVestor. What’s your vision? What problem are you guys trying to solve for? Just bare bones, basic stuff, like what TechVestor does and what you’re up to. 

[00:15:39] Sief Khafagi: TechVestor makes investing in Airbnbs simple, passive, and profitable.

[00:15:43] Sief Khafagi: So it’s really hard to find an Airbnb. It’s even harder to run one, a profitable one as an investment. And so we take all that off your plate. You invest with us with as little as 25 grand. You’re an owner of a diversified portfolio of short term rentals. You get your share of cashflow, appreciation, tax benefits, and everything else in between.

[00:16:01] Sief Khafagi: We handle all the work, including guest communication, renovation, acquisition, management, taxes. And send you a check every quarter. So in a nutshell, that’s what we do. We give you exposure to the asset class without you having to do any of the work. 

[00:16:14] Patrick Donley: You mentioned the data guy. I wanted to go a little bit into maybe your secret sauce a little bit about how you’re finding properties, acquiring properties.

[00:16:23] Patrick Donley: Talk to me a little bit about the data that you guys pour through to find the right properties to put in the portfolio. 

[00:16:31] Sief Khafagi: Yeah, we have real estate fundamentals first. And so while there is tech in our name, we build technology to guide us. And the reason I want to make that distinction is sometimes we hear people say, oh, you’re a tech company.

[00:16:40] Sief Khafagi: And the short answer is we’re not. We’re a real estate company that happens to build technology. We’re not like Zillow where we’re making offers using AI and automations and just blindly. We are human led and we believe real estate should be human led first and foremost because it is hyper local. So we do have a lot of data and technology and we built our own internal software.

[00:16:58] Sief Khafagi: We actually started as a software product back in the day where we underwrite hundreds of thousands of homes. We market map 250 plus markets across the country where we understand real estate supply, Airbnb supply, Airbnb demand, who’s going where. What’s the flow of travel? Where, when, and why? And that data really allows us to pinpoint where we buy, what we buy.

[00:17:16] Sief Khafagi: So think of a funnel, right? It’s really broad to begin with. And then our data tells us maybe we should focus on this market. And in this market, these are the ideal properties to buy. What I mean by ideal is Bed count, unit size, head count size. Then the next thing is, okay, what else is about that property?

[00:17:34] Sief Khafagi: Sometimes it’s as specific as it needs to have two living rooms, a pool be on a third of an acre, and be within these two sub neighborhoods of this larger market. For whatever reason, that’s where the density of a revenue tends to gravitate towards. And then from there, it’s okay, how do we design it and amenitize it for who’s going there?

[00:17:52] Sief Khafagi: Oftentimes owners amenitize for themselves, their second home, et cetera. We don’t do that, right? It’s an investment first. So we amenitize for who’s going. So then we start to build and build down to a very specific buy box where in X market, we’re buying five bedroom homes with a pool, two living rooms, adding these specific amenities, designing and amenitizing in this specific way for this specific avatar, because we know that’s what works.

[00:18:14] Sief Khafagi: That’s what the data tells us. And more importantly. We know that the data tells us the current operators are doing reasonably well, but we know we can do significantly better because we can get economies of scale. We have way better revenue management. We have way better design and amenities. We were purpose building and designing because we have the capital technology and talent to do so therefore we believe we can do better than what the market is. That’s the, in short, how we think about using data and technology. Bridge all that gap together. 

[00:18:39] Patrick Donley: I wanted to hear why you chose to vertically integrate. Why not sub out things? Why not keep it? I wanted to hear about that decision. Why you chose to, in some ways, it’s a lot more complicated, a lot more employees, obviously, a lot more management.

[00:18:53] Patrick Donley: Talk to me about that. 

[00:18:55] Sief Khafagi: Yeah, I’ll tell you a story. And in short, we were forced to vertically integrate. We actually didn’t want to, when we first started the company for the very same reasons that you’re actually bringing up. We said, we’re really good at these two things today. Let’s focus on these two things and sub out everything else.

[00:19:09] Sief Khafagi: We signed a 25 million dollar contract with one of the largest property managers in the country, Vacasa, because we needed a national property manager that would understand what we do because we were buying everywhere. That made sense to us at the time. And two things happened very quickly. Their standards weren’t our standards.

[00:19:26] Sief Khafagi: We had a miss on those things. We had a much higher demand for the type of experience and product we wanted to build and deliver to both investors and guest. They didn’t have those same standards. And too CASA started going down the hole, go look at their stock today. Either they’re just a completely different company.

[00:19:41] Sief Khafagi: They started cutting services, cutting headcount, things that need, that were a part of our agreement. And we actually had to be quite frank with you. That was the first time in our company’s health that I thought. Okay, is this to be the beginning of the end? Because how are we supposed to go build all of these things this quickly in the middle of a fund and from acquisition to design to renovation?

[00:20:02] Sief Khafagi: So we ended up deciding to build our own operating company, our own opco. So we run a very traditional Opco propco model in the real estate space and building the Opco came out of the pain Seeing how a company like VAC Casa was handling our product and we just went for it. We built, we had no other choice, to be quite honest with you, Patrick, right?

[00:20:21] Sief Khafagi: We were said, we have to do this, we have to do that. We have to scale. We have to be able to offer these things. It’s either that or this fund’s gonna die, and our backs were against the wall. And in retrospect, I can’t imagine a world where we don’t have the Opco because of the advantages that it gives.

[00:20:35] Sief Khafagi: But at the time it was, we had to do it or else we die. That was the first moment where you’re like, it’s give or take. 

[00:20:42] Patrick Donley: Are you guys like for property management, for example, you’re doing your own, obviously in house, do you manage anybody else’s or do you strictly stick with your own properties in your own portfolio?

[00:20:52] Sief Khafagi: Nope, we have tunnel vision. So our thesis in the industry is first of all, owners of the problem. As well as property managers and we for a hot second tested out the idea of managing for third parties and saw how painful that is for a variety of reasons. So today we don’t manage for anybody. We only manage for ourselves.

[00:21:10] Sief Khafagi: Everything we do is vertically integrated for ourselves. We own the dirt, we own the property, we own the operation, we own everything on top of it, we can control every aspect, which is what allows us to drive the best possible product. 

[00:21:21] Patrick Donley: And you guys are going into many, multiple markets, right? You’re spread out geographically, are you spread out in terms of the type of property that you’re buying to, in terms of, or you focus on, you figured out what works, or, talk to me a little bit about how you narrow in on the property.

[00:21:38] Patrick Donley: that you’re going to buy or develop. Do you actually do any new development? 

[00:21:43] Sief Khafagi: Not today. It’s something we’ve looked into and something perhaps we’ll consider in the future. But today we are focused on buying kind of run of the mill homes and being able to develop them from this type of business, which is a single family home or lack of a business into a business generating asset.

[00:21:58] Sief Khafagi: So our, one of our investors actually told us this very early. They said, you’re taking, you’re getting development like returns without. We’re not actually building the product, but because we’re operating it differently we’re generating that significant Alpha and so we’re able to get those return profiles today without building.

[00:22:14] Sief Khafagi: And maybe in the future we’ll consider building, but going back to your question, we buy in several kinds of markets. I think we’re in seven or 10 markets today at the top of my head that are active and each of those markets we buy It’s hyperlocal. It could be a five bedroom plus, it could be a four bedroom plus, it could have to have a pool.

[00:22:31] Sief Khafagi: It may not have a pool. Each market is a little different, but we have asset level diversification. We have seasonality level diversification because as you might imagine, short term rentals, a product in the summer in Scottsdale is actually it’s low season, but a product in say the Poconos in Pennsylvania is actually it’s high season.

[00:22:46] Sief Khafagi: So we want to balance those things out and we want to build a diversified approach to seasonality. Thank you. Traveler type, risk profile, insurance risk, and a bunch of other variables, right? So it’s an ETF, for lack of a better word, of the way we think about it is it’s our version of the S&P 500.

[00:23:03] Patrick Donley: So let’s say I’m a guy, a woman listening to this. I’ve got 25, 25 is the minimum number, and you’ve got to be an accredited investor. I’ve got 25, 000. I want to invest with Techvestor. Walk me through the process of what the onboarding process looks like. 

[00:23:19] Sief Khafagi: Yep. So you’d go to techvestor. com, you’d book a call Talk to one of our incredible investor relations partners.

[00:23:24] Sief Khafagi: They’d walk you through the investment, answer all your questions, and you’d be sent our data room to review right after. Make sure that can review with your partners, make sure it’s a good fit for you, assuming you want to move forward. The minimum is 25 grand and you can go obviously as high as you’d like.

[00:23:38] Sief Khafagi: Bigger check sizes do get better terms in terms of splits and prefs and all that kind of good stuff. So your investor partner would have already shared that with you. You’d go ahead and sign your PPM, which is a private placement memorandum. In there obviously is a very long document on things like risks and disclosures and things you should know and a bunch of legal mumbo jumbo that we have to share with you.

[00:23:57] Sief Khafagi: From there you would wire, get onboarded to your portal, and you’d start receiving your quarterly check. As soon as we start generating cashflow, depending on what point of the fund we’re in, you share in everything, cashflow, appreciation, tax benefits, everything’s pro rata. So the nice thing here is it’s as if you literally bought the home yourself.

[00:24:13] Sief Khafagi: You get all the same benefits, except you get none of the headaches. 

[00:24:16] Patrick Donley: So talk to me a little bit, if you can, about returns. I don’t know that you can promise any kind of returns, obviously, but what kind of returns are you expecting? I was just looking at you had a record setting July. It sounded like I think you had close to a million dollars in revenue.

[00:24:30] Patrick Donley: beat projections by 127%. You guys are doing great. So talk to me a little bit about the returns. How quickly can I the rule of 72, how can I double my money? How quickly? 

[00:24:42] Sief Khafagi: Yeah. So that’s a great question. So first and foremost, and I think you hit it on the head, nothing I’ll share here is a guarantee or a promise.

[00:24:49] Sief Khafagi: And I’m sure my many lawyers will want me to say that, but the idea is that you’re going to double your money over five years, right? That’s the projection about half of that give or take is going to come from cashflow and income. And half of that is going to come from equity on exit.

[00:25:00] Sief Khafagi: Essentially the sale or appreciation of the home or the asset you’re, you can expect your first distribution to happen within usually three to six months from investing, and we send out money on a quarterly basis. We target an eight to 12% annual cash on cash, dividend or cash flow, and then the remainder is really on exit.

[00:25:16] Sief Khafagi: We plan to hold for four to six years. That’s our general projected hold period, obviously. No one knows what’s gonna happen. We have fixed rate debt. All of our debt is fixed for a minimum of 10 plus years. If not, most of it is 30. So we’re never gonna be a forced seller. So in the event that we need to hold for 7, 8, 9, 10 years or more, it’s a possibility.

[00:25:36] Sief Khafagi: But we are hyper incentivized. Everyone, including investors and ourselves to generate the best return. And oftentimes that’s finding the best exit sooner than later, but aggregating those assets will be important. And yes, a two X equity multiple is the target. 

[00:25:49] Patrick Donley: So talk to me about more specifically about the exit strategy.

[00:25:54] Patrick Donley: What are you guys planning? What are you targeting? How do you think about that? 

[00:25:58] Sief Khafagi: So one thing that we Tested very early, as would retail folks who are looking for turnkey homes, just essentially being a normal landlord, would they be interested in just buying these turnkey short term rentals? And the short answer is it’s a resounding yes.

[00:26:11] Sief Khafagi: We sold eight in our first fund beat projections all across the board. And we just saw such an insane demand for that. What we didn’t realize is how much appetite institutions actually have for what we’re doing. So we’ve gotten contacted by the who’s who on the institutional level when you think about single family buying.

[00:26:28] Sief Khafagi: But what they’re looking for is buying a stabilized portfolio. We haven’t really met an institution that wants to build this because it’s hard to build it brick by brick. They need to go spend a hundred million dollars in a transaction for it to be interesting for a variety of reasons. And them seeing us build and build, they’ve come to us and say, Hey, we’re interested at 300, 400, 800 doors because this is something that we want to own.

[00:26:49] Sief Khafagi: And so our exit strategy is most likely geared towards institutional. And that’s what we want, right? Cause you get cap rate compression with density, with scale, with the number of units, they understand the business economics and you ultimately really become the only player in town. If you wanted to go today to buy 200 short term rentals on a single transaction, doesn’t exist.

[00:27:06] Sief Khafagi: You can’t do it. And the reason most institutions actually haven’t entered the space is because they can’t do it themselves. It doesn’t make sense for them to spin up. Go vertically integrated, do a 500, 000 home at a time, but they’ll happily pay the premium to someone who already has. That’s been the message, and that’s our specific exit plan.

[00:27:23] Patrick Donley: So are you in talks with those kind of buyers now? 

[00:27:27] Sief Khafagi: Yeah, definitely. In fact, I have one of those conversations today after this podcast. And none of those conversations are firm, and I want to be very clear just because of anyone listening to this podcast, I wouldn’t want to mislead anyone.

[00:27:38] Sief Khafagi: We don’t know what’s going to happen, right? Conversations are conversations, but. In terms of appetite, I think the appetite is very strong from an institutional level. They get it. They understand real estate. They understand density. They understand scale. They understand higher revenue generating assets and cash flow.

[00:27:53] Sief Khafagi: They’re looking for yield and they’re very intrigued by what we’re doing and they continue to remain in conversation. 

[00:27:59] Patrick Donley: Did you think at all we are the investors podcast network is the background is Warren Buffett and Charlie Munger and the the idea of long term holds and just letting money compound over years?

[00:28:12] Patrick Donley: It grow exponentially. Moses Kagan comes to mind on real estate Twitter. He’s another proponent of just holding great real estate, never selling it and letting it compound. Is that something you guys considered at all? 

[00:28:24] Sief Khafagi: It is, and it’s probably a question that I get way more often than I would’ve ever expected to be honest with you.

[00:28:30] Sief Khafagi: When you raise money, I think oftentimes the first question you get is, when do I get it back? As a gp and then. A follow up question you often get is if things are going well, why would you sell? It’s almost two conundrums that conflict each other right away. And the reason we have a plan to exit is because I think we have to have exit options.

[00:28:48] Sief Khafagi: But I also think, and what we really share with investors is, time will tell what the best outcome will be. We’re flexible. We’ve done everything right to hedge. We have fixed rate debt for a very long time. We continue to operate very well, and if time tells us that longer hold periods or forever hold are a better option, then I certainly think our investor base will be open to that.

[00:29:09] Sief Khafagi: I think the opportunity of what we’re doing is very different and really hasn’t been done before, so it’s very hard to map it to something else and say, Hey, we can do this for the next 30 or 40 or 50 years and it’s gonna be the same high performing asset. I think we wanna be flexible with.

[00:29:23] Sief Khafagi: Let’s do what’s best, right? And just have that open mind. And if holding for a very long time makes sense, then I think generally that’ll be what will happen. And most investors would be very happy to do I think the answer will be obvious when it is. 

[00:29:35] Patrick Donley: Yeah, that makes sense. I wanted to hear a little bit about just the trends that you see going on with Airbnb, the short term rental market.

[00:29:42] Patrick Donley: I listened to an interview yesterday with Richard Fertig. It was a year old interview, but he couldn’t have spoken more highly about the space. You also hear about an Airbnb bust or Airbus or whatever they say. Talk to me a little bit about what going forward, like the next 12 months, 18 months just in the space and some of the challenges that you are expecting.

[00:30:02] Sief Khafagi: I’ll answer that from two ways. I think for current operators, I think you have had a large influx of supply. And I think you see in the headlines of, Oh my God, there’s an Airbnb bust happening. I think that’s mistaken. I think that’s misleading. And you have to remember that 95, 99 percent of this industry is mom and pop.

[00:30:21] Sief Khafagi: It’s, and I’m not, it’s not only the managers, it’s also the owners, right? And people say, Oh this property is professionally managed. Sure, but that’s, it also has rules that an owner has set that is being ran by a professional manager. And so what I think we’ll see is your bottom 10 or 20 percent of properties will very much continue to struggle.

[00:30:41] Sief Khafagi: What really makes them different? There’s no amenities. They’re not being operated well. It’s being operated by an individual or a company that doesn’t know how to optimize for revenue and profitability and ranking. Airbnb, all it is an algorithm. It’s just like Google. Ranking on the first page.

[00:30:55] Sief Khafagi: There’s a way to do it. And most people don’t really understand that. Airbnb has a user journey that they want to take their users to. And the product is you, right? Is it your product? It’s your house. So how do you feed into that? So I think you’ll continue to see an exodus of Airbnb hosts because they’re going to compete with more and more professional operators like Ben.

[00:31:12] Sief Khafagi: Richard, like ourselves. And we all have very different products. I’m an LP with Richard and Stott. And they have a very different thesis and approach to what we do than what we do. And Ben and Onera are building very different type of homes than what we do. And I think all of us are going to win actually in our own verticals because we’re all institutional level type operators who understand what we’re doing compared to the status quo.

[00:31:34] Sief Khafagi: Secondly, I think you look at today, the moving forward, things that are really hard is. You have a lack of real estate supply, historic lows. It’s really hard to acquire. And I think that’s where we have an advantage with technology where we can take a market map and understand what to buy. But I think it’s also another advantage when you can take a product that isn’t perfect and make it better, but you need to have the skill set to do that.

[00:31:54] Sief Khafagi: The, and the capital, right? I can take a product that maybe isn’t my perfect buy box in the same market and renovate it and design it and change it to make it my perfect product in this market. Your average mom and pop owner who. Needs to spend a quarter million dollars to do that renovation. Probably finds that pretty scary to do for a variety of reasons.

[00:32:13] Sief Khafagi: Capital time, intensity, what they don’t know, and so you’ll still, I don’t think you’ll see a lot of people get into the Airbnb side on a retail level very soon, especially in the markets that we’re in moving forward. Especially if real estate supply stays like this. And I think that’s where you’ll lean on people like myself and our team here at TechFest or with what we’re doing.

[00:32:32] Sief Khafagi: I think Ben’s doing something that’s awesome. And I mentioned Richard as well, but we’re all doing very different things, but they all feed into where the world’s going. 

[00:32:39] Patrick Donley: Do you focus on those bottom 10 or 20 percent of poorly operated Airbnbs as possible acquisitions? 

[00:32:47] Sief Khafagi: Not today. And I’ll tell you why, like for us, we find the most value in taking a property that’s never been an Airbnb and turning it into one.

[00:32:57] Sief Khafagi: That’s where we create the most alpha and value for our investors. And if I buy an existing Airbnb today, that’s doing X amount in revenue and that owner values it. The way I would value it if I was selling it, I won’t be able to generate that alpha. We’d be almost doing the same thing. And so for us, we look for something that really hasn’t been an Airbnb.

[00:33:15] Sief Khafagi: We’ve bought in a few and we’ve done really well. There was one that we bought that was doing about 140 grand for three years prior. First year with us, did two 10 and it’s Clearly, we can add value very quickly, but we much prefer getting those development like returns, like I mentioned earlier, without taking the development like risk.

[00:33:31] Sief Khafagi: It’s for us where we add the most value. 

[00:33:34] Patrick Donley: So what are some of the things you’re doing right off the bat in terms of amenities, build outs? How are you generating the alpha, increasing the value of those properties?

[00:33:43] Sief Khafagi: It’s not rocket science. So when I say these things I want to be very clear, better design.

[00:33:48] Sief Khafagi: Better amenities. Things like we add in pickleball courts and basketball courts and hot tubs and golf simulators and things that we believe will be things that people care about for the next seven to 10 years. It’s not just a pool, it’s not just a thing like that. We also just know where supply and demand imbalances lie you look at a market that might have 30, 000 listings. I look at that market that has 2, 000 listings that compete with us, but has demand for eight because I know the data. I know who’s going there. So we look way, way below in the data and peel back the onion. Better operations. I can’t. We look at revenue management.

[00:34:22] Sief Khafagi: by the minute I can tell you seasonality by the day we built our own internal tools because we couldn’t find the tools exist on the marketplace. Cause most owners aren’t like this. So those are a few of the reasons why we certainly outperform. 

[00:34:34] Patrick Donley: What’s the long range vision for you guys? Do you do a yearly fund?

[00:34:39] Patrick Donley: Like I know you’ve done, I believe two funds at this point, do you do a new fund every year? How does that work? And what’s the plan going forward? 

[00:34:46] Sief Khafagi: Yep. So we definitely do launch a new fund. each and every year. And the reason for us is we build a new diversified portfolio, right? And if we were holding forever and evergreen fund or something along those lines could certainly be attractive.

[00:34:57] Sief Khafagi: And we may eventually at some point in the future, consider those types of options. But for us, it’s about launching a new offering, a new portfolio, new diversification, perhaps new markets in each and every one of those type portfolios. And it’s really what our investors are looking for, right? It gives them a little bit of diversification across the board.

[00:35:13] Patrick Donley: See, this has been awesome. I’ve really appreciated your time. It’s great to learn more about TechVestor. Super interesting concept. How can people learn more about you, more about the company if they’re interested in potentially investing or just out of curiosity, want to learn more? 

[00:35:28] Sief Khafagi: Yeah, folks can head over to TechVestor.

[00:35:29] Sief Khafagi: com. We’re on LinkedIn. We’re here to educate. On TechVestor. com, you can hit that big, nice purple request invite button and chat with us. learn a little bit more about what we do. And if we can be a resource to you, we’d love to, and if it makes sense for you to invest, we’d love to have you. 

[00:35:43] Patrick Donley: Cool. Thanks.

[00:35:44] Patrick Donley: See if this has really been fun. I appreciate your time. 

[00:35:47] Sief Khafagi: Yeah. Thanks so much, Patrick.

[00:35:49] Patrick Donley: Okay, folks. That’s all I had for today’s episode. I hope you enjoyed the show and I’ll see you back here real soon.

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