Saturday, January 28, 2017

As a new independent angel investor, how will I find new companies to invest in?

I can set you up with some hotels. 

For example, get onto Loopnet, and look at some Microtels. A Microtel in good condition is a good quality, if modest, mid-market hotel product. But they have historically been marketed and promoted as 'economy' properties - even in areas where they could easily command a higher rate, where the only nearby hotels and motels that charge approximately the same for a room are older and of much inferior quality. Wyndham Hotel Group is now getting away from that, but the franchisees aren't catching up.

So, Microtels tend to be undervalued.

I love them because I can walk into a typical Microtel and if not right away, then just over the few months it would take me to gradually tap up its room rate from $69.00 per night to $82.00 per night, I can increase the value of it by 19%. (The most common metric for evaluating a hotel or motel at that tier is a multiple - three percent, more or less - of its gross annual room revenue.) So, even if all you want to do is buy them and flip them, it can be worth doing (although I feel that there are more respectable and responsible things can be done with a hotel - or with any other piece of real estate - than just buying and flipping it).

Hotels are not as sexy as a tech investment (unless you're part of a group that owns a big-box Marriott or Hilton, and many of those aren't wildly profitable). On a smaller one, returns are steady if managed properly (let me remind you, it is a business, not merely a real estate investment, and must be managed accordingly; but if managing one is a problem you don't want to be bothered with, call me, that's what we do...), but more modest: you won't score twenty times your investment within a few years. If you're into venture capital, private equity or investment banking; then I'd consider doing it to hang onto a reserve, if you want to hold back a reserve, or hang onto some profits from another venture. Or it works well for an investment from which you want to milk steady income rather than to sell it for a big profit a few years down the road.

Like Robert 'Rich Dad' Kiyosaki (Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!: Robert T. Kiyosaki: 9781612680019: Books ) says, make money in business, keep it in real estate.

Originally appeared on Quora

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