JJprato

The big news to share: -My partners and I are selling our real estate portfolio - 2 STRs and 1 MFH - in Central NH. -STRs are live listed on Rabbu right now. MFH will be listed in a couple of months on MLS. -We are getting out of the STR game indefinitely.

First snow storm of the year coming tomorrow on Thanksgiving Day. Tuck Home Services internal team and subcontractor partners will be clearing snow for 8-10 hours starting at 2pm. The fact it's a holiday doesn't matter - snow is falling. Definition of essential workers.

Getting there

The business plan: convert a secluded, 2000s built 3 BR single-family home with stunning views and a great location in Thornton NH to a premium 4-Bed Airbnb that sleeps 12.

@TennisonEddie @Aldigity Really, we just like pain and suffering

@Aldigity Sounds like you're doing a lot of things right.

When my partners and I bought our first short-term rental in Central NH in 2019, we had a lot of trouble finding competent maintenance and construction providers who would give us—the inexperienced newbies to the market—the time of day. So as control freaks who wanted partners who would do business how we wanted to business and on our timelines - that necessitated us to find a local provider who was young and hungry like us and really get involved: 1. first in our own projects and maintenance work, and 2. second in helping him build and manage his business. To date, this has probably meant that our costs have been marginally higher and our headaches have been much higher than if we had worked with an experienced GC and established service providers. On the other hand, four years later, we truly understand how service businesses operate, how construction work is priced, and conceptually how it should be planned and executed. Ideally, in the medium run, our costs should be lower, we should be able to scale and handle more volume in the next 2-3 years in our market, and the work should be done at a higher quality than if we had never gotten our hands dirty and had always worked with arms-length providers. In the long run—if and when we expand beyond this market—we are still fundamentally finance, operations, and marketing guys and probably should never self-GC our own work. However, by knowing how to vet potential partners and speak the language of construction and maintenance, we will hopefully have a competitive advantage over the eggheads for whom opex and capex are just inputs in a spreadsheet model.

@Aldigity Hit the nail on the head!

Am I missing anything here, @JessePrato?

In August 2023, we launched a hot tub maintenance business that we believed fit with our larger thesis and strategy of vertically integrating a property services business and a real estate business. A year later, we shut it down. Below are the main reasons we got out of the hot tub business and why the hot tub business is very different from other recurring maintenance businesses, like weekly trash pick-up: 1. Scheduling and service unpredictability - sometimes you get to a hot tub and it's fine and you are in and out in 30 minutes. Other times, you are there four hours for a drain and refill. 2. Lack of expertise - unlike grabbing trash and throwing it in the back of dump truck, ensuring hot tubs remain clean and safe requires knowledge of hazardous chemicals and chemistry. 3. Gross margins and pricing - for the business to work, we needed to find a way to get the average visit to 20-25 minutes and even then the price to customer was higher than the competition and our gross margin was 20-30%. We could not do consistently get visits sub 40 minutes so that meant either: A. operating the business at breakeven or B. asking customers to pay even more, which they did not want to. 4. Opportunity costs - managing all of the above issues meant that we were spending 10 hours / week on dealing with a breakeven, sub-scale, high headache business when we could spend that time chasing real estate deals, managing properties, consulting for other small businesses, etc. 5. Last but not least - sometimes these things are just NASTY Big-picture takeaway: the hot tub business was undoubtedly a failure but there is nothing wrong with a failed experiment, initiative, and investment in your business, so long as you are clear-eyed about the risks going in, are able to measure and understand whether you are failing or succeeding, and then know when to cut your losses and move on!

Three years ago, I sent out the first quarterly Pothos Capital Family, Friends, and Partners newsletter. Since then, my partners and I have: -Acquired two properties - one 7 unit MFH and one “mini resort STR” - and have a third under contract -Become the best STR operators in our market (Central NH White Mountains) -Raised money from a JV partner for the mini resort STR deal and provided first class reporting and investor experience -Completed a cash out refinance on our MFH after doing significant value add and incurring significant brain damage in the process -Launched a property management company and a trash pickup service now at $100k run rate -Started and shuttered a hot tub maintenance business -Helped our local home service partner, Tuck Home Services, go from $500k annual revenue to $2 million and more importantly, build the systems and capacity to scale with us -Have tons of operating data and many connections now to do deals opportunistically and underwrite accurately. All of this was built from ground zero one small step at a time. We arrived in this market in December 2019 with no connections, no track record, limited experience, and even less capital. We still have a long way to go but I couldn’t be more proud of our progress. If you have any interest in getting added to the newsletter, feel free to DM me or fill out the form in the link tree in my profile. Not interested now? No worries. I’ll be sending this newsletter for the next few decades.

@BrettDeas Or that you need a dashboard 🙃

@seandsweeney @AcquiredFM does an awesome job of connecting history to great business stories

I’m bored of my current rotation of podcasts. I need to spice things up with some new ones. What are some of your absolute favorites?

@Wildlaw406 Our strategy is to strategically strategize around the sound strategic trends.

The more frequent the use of variants of the word “strategic” in a pitch, the worse the investment will turn out to be.

@Aldigity And validation for the great work - 3 five star google reviews mid storm!

In case you ever think things like "finding real estate deals" or "growing sales" or "hiring" is truly hard work, here are some stats from the THS snow removal team this past weekend: Storm and service scope: -25 inches of snow in 21 hours during a ski weekend -192 properties plowed -87 of those shoveled -Serviced 2-3 rounds throughout the storm What it took: -10 guys working 30 hours over the course of two weekend days -Which put most of them at 60+ hours for the entire week -We were down two drivers (one flaked and the other had a family emergency) so the owner of the company - Jake - plowed for practically for 33 straight hours from 5am Saturday morning through 2pm Sunday -9 times trucks got stuck which mean 3 calls to a tow truck WOOF

@Aldigity Andddddd it’s over. HOLY

Apple Weather saying 20+ inches. National Weather Service below. After weeks of average 45+ degree temperatures, Winter is taking one last shot at us: -Slow moving storm - 24+ hours -Weekend storm when everyone is at their homes and is coming to and from and will have special service requests -Freezing rain and ice to pack everything down nice and create treacherous conditions We tempted the Plow Gods by taking the sanders out of our trucks last week so this is what we deserve.

@BrettDeas How many one-off STR investors are there that purchased a property and aren’t even making a 10-20% margin including debt? Essentially “working” for less than a market management fee. Based on transactions in last year or so in my market, the number is def too high!

A quick rundown of folks I have met and done business with from connecting on Twitter: @patrickdichter - hired me as an SMB consultant when I was in the wilderness in mid-2022 and gave me invaluable skills on how to sell and run consulting engagements @danthewolfe - built a great website and helped my contractor company dominate SEO in our market @SMB_PeopleOps - helped out with some messy HR issues and built a great employee handbook and some awesome templates @Wildlaw406 - helped put together legal docs if and when the time comes to raise some capital for RE deals. Maybe more to come in the future. @lesohara - we are using Les's Build12 CRM for our contractor business. He is a fountain of knowledge on contractor businesses. @NoahBudet - the insurance GOAT. Not just STR insurance either. An investor partner who will remain unnamed who JV'ed my group's mini resort STR deal. There are others I am probably forgetting too. And this list is in addition to the people who I have connected with directly/ built a relationship with / traded notes but have never done business with. Getting involved in ReTwit / SMBTwit the last few years has been one of the best decisions of my life! Big thank you to everyone who engages and makes the community what it is.

@Oh_My_Gos Electric

@TheKelseyMcR @StudentRentPro 9/1 is a wild day in Boston. Most apartments have move out 8/31 and move in 9/1. Everyone scrambles to get their landlord to allow them to stay until 9/1 morning, maybe gets a hotel, maybe cleans. Experienced this as a renter and a rental agent and was always quite the experience

@StudentRentPro How do you balance labor costs with all your rentals starting at the same time. I imagine that the turn on these homes is no small thing and it all needs to happen within the same one to two week period for your entire portfolio. How do you manage that?

I love frozen pipes on a Saturday

Just closed a trash pickup contract for a small apartment building. Our largest customer to date. With that, we are officially over $50k annual run rate. It took 18 months to get here. First year was an absolute slog sales-wise and operationally, but in the last six months, things are getting easier. Our pickup guy is young, hungry, communicative, and embraces the work. We know how to manage the typical issues. Our route is getting denser and more efficient. Lots of organic inquiries - about 1x week - and closing 2.5 customers a month on average. Most notably, June 2023 is when @JessePrato took over running the service. And he is an infinitely better operator than me

@Aldigity Yea these places were cool but likely the first to go vacant when demand softens!

Here are some pictures from very intriguing but middle of nowhere NH properties @JessePrato and I have looked at as STR investments but ultimately passed on because location was a nonstarter. Towns were Alexandria, Groton, Danbury, and Canaan.