Today’s guest is Farhan Abbasi.
Farhan is the Founder, CEO of Nue Holdings, a real estate private equity and management firm offering investors capital-protected capital growth and income in multifamily, single‐family, coliving, and vacation rental real estate. Join Sam and Farhan in today’s episode.
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Lease Types [00:10:08]
Future of the Industry [00:06:35]
Background and Business Launch [00:01:04]
Approaching new markets [00:12:30]
Challenges of scaling [00:17:25]
Investing in yourself [00:18:41]
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Connect with Farhan:
Linkedin:https://www.linkedin.com/in/farhanabbasi/
Web: https://staynue.com/
Email: farhan@staynue.com
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
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Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f
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Want to read the full show notes of the episode? Check it out below:
Farhan Abbasi ([00:00:00]) – And so what we do is we have a three tier system where the revenues, like I said, it’s typically over two x what the regular release would be, right? So the revenues first go toward the operating expenses, including the management fee. And then we have some sort of a rent hurdle, which is not a rent guarantee, but it’s it’s it’s it’s a next priority after OpEx. And then once that rent hurdle is met, then there’s some sort of a profit split. Welcome to the how to scale commercial real estate show.
Sam Wilson ([00:00:32]) – Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big. Farhan Abbasi is the CEO and founder of Stay News.com. That’s stay in. They specialize in vacation rentals. Farhan, welcome to the show.
Farhan Abbasi ([00:00:52]) – Thank you, Sam. Great to be here. Absolutely.
Sam Wilson ([00:00:54]) – The pleasure is mine. Farhan, There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there?
Farhan Abbasi ([00:01:03]) – Yeah, totally.
Farhan Abbasi ([00:01:04]) – You know, I spent seven years at Ernst and Young as an accounting nerd, left as a manager and serving Fortune 500 asset management firms like State Street, Charles Schwab, hedge funds, etcetera. And in my final year, I actually lived out of a suitcase staying at five star hotels in New York, San Francisco, Kansas City, London. When I left the firm, I lived out of a backpack in youth hostels for a year. So I began to understand the spectrum of hospitality. And believe it or not, the most memorable times were not necessarily the ones in luxury, but in uniqueness of experience. And so that inspired me to launch Stay. Newcomb Stay. And which was my Boston trip at the time with the mission of offering shared experiences and personal choice. So the growth of that business led me to launch my investment arm, new holdings and new holdings where I partner with sponsors as code to offer investors access to multifamily, single family and of course, vacation rentals. We also dabble in early stage ventures using our own capital.
Farhan Abbasi ([00:02:03]) – But meanwhile, you know, Stay Nu continues to grow. We’re entering new markets and we deliver higher income and lower vacancies to owners and developers.
Sam Wilson ([00:02:11]) – That’s really cool. So let me get this right. There’s two two sides to stay new. It is one is a management company, so it’s where you guys go in third party manage for other short term rental owners. And then there’s also you guys buy and operate your own assets.
Farhan Abbasi ([00:02:27]) – That’s right. And on the investment side, it’s typically with developers where we help in some way advisory due diligence, raising capital. On the management side, it’s asset light and we offer, you know, revenue share agreements, profit share agreements. Sometimes we do master leases, but the whole idea is to offer guaranteed or incremental income to owners and with with developers, it would be to shorten the lease up process.
Sam Wilson ([00:02:58]) – That what what is the explain that to me, because I’m not sure I completely understand what is the missing what is the missing piece or what is the advantage that developers get by working alongside of you? And I’m going to tag on to that question as well.
Sam Wilson ([00:03:13]) – I’m assuming this is development specifically for a short term rental.
Farhan Abbasi ([00:03:18]) – It would be a multifamily asset. Typically it’s mixed use. It would generally it would be a residential property. And the idea is, you know, the future of of living is not going to be one type of living. It’s going to involve long term leases. It’s going to involve short term leases, flexible stays and elements of hospitality and different elements. I’m not saying a hotel condo, but I’m not saying a, you know, a short term rental only building either. But I think the future involves flexibility and choice, and that’s what we should all like, look for to strive for. So in other words, you know, imagine a multifamily 200 unit where perhaps ten or 5 or 20 of those units have some sort of flexible stay element where people can book for their relatives. You know, you don’t necessarily always want your brother in law or a sister in law to live in your apartment. But you know what? Hey, I’ll book one for you just down the hall or whatnot.
Farhan Abbasi ([00:04:22]) – It’s that type of thing. And yeah, I mean, it’s you know, I think that essentially answers it kind of delivers an unmet demand think in many neighborhoods around the world, around the country as well.
Sam Wilson ([00:04:34]) – Absolutely. That’d be really great. You know, I can only imagine how great that would be, especially and I’d imagine there’s a certain a certain class of apartment where that would work or multifamily property where that would work, where it’s, hey, my brother in law is going to the town or their family’s coming to town. Let’s rent one of the furnished units. They can take that one for the weekend. Right, Right. So tell me. Yeah.
Farhan Abbasi ([00:04:54]) – And that was just one use case, right? You have all kinds of other use cases as well. And you do have different, you know, high end, low end type of options, you know as well.
Sam Wilson ([00:05:04]) – That’s very cool how when you when you thought through this kind of idea, you know, I guess living out of a suitcase saying to yourself, okay, people are looking for experience, people are traveling differently, staying differently.
Sam Wilson ([00:05:17]) – How did you synthesize this into a cohesive business?
Farhan Abbasi ([00:05:22]) – Right? Yeah. You know, it all it all came down to the value, to the different stakeholders, right? So with the, with, with, with the guests, they want a flexible stay experience. They want cleanliness, they want, you know, kind of a good value. So, you know, depending on the market with with owners, they they are looking for either guaranteed income or incremental income. And so you kind of just kind of put those two needs together and deliver a product that meets those needs. Of course, you know, neighborhoods want some a place that’s safe, you know, and and calm and clean. So you kind of have measurements for not having parties and that sort of thing to kind of keep it clean. But yeah, I mean, you know, it’s really about finding those unmet needs and putting together a service. And yeah, we have over a decade of experience, you know, doing this where top ten in Boston and we’re ready to expand outside as well.
Sam Wilson ([00:06:25]) – That’s really cool. What what would you say the future of your company is like? Where where is this Where is your company and the industry as a whole going?
Farhan Abbasi ([00:06:35]) – Yeah, totally. So, you know, the the the industry is generally it’s growing. First of all, you know, there’s a crazy statistic that I read someplace that said 70% of bookings around the world are still done offline. And what I mean by offline is that there, you know, perhaps, you know, they’re done by cash or cheque or they show up and they swipe the card, but they’re not booked on the website prior to arrival. And what that tells me and by the way, that number is shrinking. It’s shrunk a lot in the US, but it’s still I still speak to people that only take cash or maybe they get mailed cheques. Believe it or not, they still exist. So, you know, that spells an opportunity for me to like, modernize the industry and and feel like, you know, we’re at the forefront of that.
Farhan Abbasi ([00:07:30]) – What we’re looking to do is enter into tier one and two markets across the country and then the world. We have a plan to franchise. We’re building that up as well. We want to offer entrepreneurs the opportunity to land and expand in their own markets anywhere in the world and along the way, we we plan to build some some tech that would support all of the different stakeholders that had mentioned. Right, creating a guest care, property care, client care for our property owners and then, you know, spin off potentially to build a service for the vacation rental of managers in the world.
Sam Wilson ([00:08:13]) – Right. Wow. So you think I mean, not do you think, you know, that there is just still an incredible amount of untapped potential in this in this industry? Oh, yeah.
Farhan Abbasi ([00:08:23]) – It’s growing. And as you know, you know, asset classes around, you know, around the world or I guess in the US especially, you know, multifamily is kind of almost priced to perfection. And there’s a lot of shakeup going on right now.
Farhan Abbasi ([00:08:36]) – But, you know, perhaps there’s opportunities in office and retail, but it’s it’s kind of like a one of those uncertain environments. Vacation rentals, on the other hand, you know, of course, it certainly has its its impact in terms of global recession. And the pandemic was a tough one. But generally speaking, it’s for yield chasers, right? If for people who are seeking yield and higher return with some capital protection, a reasonable level of it, it’s a really good deal from a risk return perspective. So yeah it’s it’s think it’s it’s just compared to all the other asset classes it’s think it’s just a great one.
Sam Wilson ([00:09:21]) – Oh absolutely. Absolutely. From a from a yield standpoint it’s been in the right, the right places and the right markets. And I think you mentioned that you said tier one and two markets. It’s been you know, I’ve got some some friends in the business and I personally am not in it, but it’s we’re doing very well. We’re doing very well doing. I think that’s that’s one of the cool, cool parts about it.
Sam Wilson ([00:09:42]) – Was going to ask you what was it We’re losing my train of thought here. I don’t know. Let’s let’s jump to this one. Here’s another one I had for you. You had mentioned this early on on your kind of the different types of leases that you guys are.
Farhan Abbasi ([00:09:58]) – Yes.
Sam Wilson ([00:09:59]) – Owners. And there was there was a whole bunch of them that you mentioned there. How do you know which one is right for each particular situation? And can you explain? Yeah, man.
Farhan Abbasi ([00:10:08]) – Yeah, totally. Sam So, you know, leases are higher risk, higher return. They also don’t have the best rep in the industry. But, you know, hotels have been doing it for the longest time. They take on master leases. So, you know, there’s a term called lease arbitrage, right? You know, we typically look at leases as a almost as a way to enter a market and also opportunistically where if the deal makes sense and the owner is on is not interested in and sharing in that higher return.
Farhan Abbasi ([00:10:48]) – Right. They just want to fill their their units and get a guaranteed amount that will look at that as a way to, you know, and you know, typically, you know, kind of open kimono right here. You know, a good rule of thumb is if the the revenue is about two X or more of what the lease cost would be. And then, um, so anyway, if you think about that, like, you know, for the owners, we try to generate an incremental income of 10 to 30% or more by sharing them, sharing the profits with them. But again, you know, there’s actually a third there’s a hybrid. So we talked about a lease guarantee. We talked about a revenue share where they share in that upside. There’s a third that we do. It’s a bit of a private equity concept that we’ve incorporated into old world property management, which is waterfall. And so, you know, and you know, as an investor, you know about it. But essentially what.
Farhan Abbasi ([00:11:52]) – This, this this meets the need for an owner that says, hey, I want some of the upside, but also want some downside protection. And so what we do is we have a three tier system where the revenues, like I said, it’s typically over two x what the regular lease would be. Right? So the revenues first go toward the operating expenses, including the management fee. And then we have some sort of a rent hurdle, which is not a rent guarantee, but it’s it’s it’s it’s a next priority after OpEx. And then once that rent hurdle is met, then there’s some sort of a plot profit split.
Sam Wilson ([00:12:30]) – That’s really, really cool. I haven’t heard of people employing that method yet. I think that’s. That’s a lot of fun. How do you approach when you’re going into a new market? Like what’s the what are the steps you you are taking to scale your company in a new market?
Farhan Abbasi ([00:12:46]) – Yeah. You know, it’s like said, we’re looking at building a franchise system that’ll really scale.
Farhan Abbasi ([00:12:52]) – Think right now we’re in the expansion phase where we are looking at we’re having conversations with developers that have a need to fill, you know, 100, 200 units. And we can we can probably, you know, reduce their sub timeline in half by taking over a portion of their properties that gives them generates income right away, hits the ground running. We can actually set up a unit in about 2 to 4 weeks time frame, whereas typical developments look at a 1 or 2 year time frame to fill up. So as you can imagine, you know, we can we can take over vacant units like with the snap of a finger almost. So you know that those are the kind of conversations we’re having now with with building communities and also, um, also targeting individual owners that have, you know, 1 to 40 unit portfolios that also are looking for vacancy management. But perhaps they’re interested in that waterfall that I mentioned where they want some upside. They also want some downside protection. They own single family homes, condos or small multis that are, you know, duplex triplex type of stuff.
Sam Wilson ([00:14:15]) – So let me just get this right. You go to a developer and you say, Hey, Mr. Developer, you’ve got a 200 unit property that you’re developing. We can cut your lease up time in half. Right. And you do this by taking on how many of those? 200 units. How many of those do you take on and say, Hey, we can turn these into short?
Farhan Abbasi ([00:14:34]) – Yeah, that’s right. The answer to that depends on the developer’s appetite and the zoning, you know, in that area. Right. And by the way, this is not all short term rentals where, you know, we’re talking medium term rentals one month or more. We’re talking co-living units where they’re annual leases but split up on a permanent basis. Um, we, we employ all of these strategies to ensure that the property gets its highest and best use and think that resonates with developers. And so when they hear that, they obviously have some questions and from from that conversation we’re able to kind of bring it down to how many units make sense.
Farhan Abbasi ([00:15:21]) – But I would say that it typically part of the overall portfolio of a mixed use asset where first floor is retail. You know, then you have like floors 2 to 5 being long term rentals of which we could take half a floor, for example. It could be a section, it could be sprinkled around. So we’re flexible on the way we enter into a building. It’s really kind of a partnership, obviously, and we make sure that there’s value for all parties.
Sam Wilson ([00:15:47]) – Got it. That’s really, really interesting. How how do you go about locating or finding those developers that you want to work with? I mean, it’s got to be a unique probable problem. Imagine a unique conversation and a unique developer that is, you know, willing to have these conversations with you, right?
Farhan Abbasi ([00:16:05]) – Yeah. So I would say that, you know, I have two advantages. One is I’m part of the Harvard network. And I you know, I did an advanced real estate program there. I made 33 very close friends from my class, all of which who are very well connected to the developer networks around the world.
Farhan Abbasi ([00:16:25]) – I mean, some of these guys that I’m personally hang out with are building $100 million buildings on a per building basis. And and then and then the second piece is that, you know, we you know, I involve my my new holdings my private equity arm is partnered with with syndicators. And in these type of multifamily syndications, they’re not necessarily developments, but they’re also syndications that perhaps have a bit of a of a they have a mandate to to to force higher income. Right. And so as a as I form these partnerships, I’m able to involve stay Newcomb as an option for as part of their business plan.
Sam Wilson ([00:17:14]) – Got it got it. I love that. Let’s talk about this. What’s one of the biggest challenges maybe you have faced in either scaling your company or that you guys are facing right now? And how do you plan on overcoming it?
Farhan Abbasi ([00:17:25]) – Yeah, you know, love this question. I would say it’s to balance the multiple stakeholders needs, right? So we flex properties to its highest and best use.
Farhan Abbasi ([00:17:34]) – We have to deliver above market income to our property owner, clients and investors. We also have to provide a flexible experience to our guests and residents and then of course, our neighbors. We join them to make sure that the communities are safe, calm and clean. Um, and then finally, you know, have to offer growth opportunities to our global staff around the world. So it’s like walking a tightrope to ensure value for all stakeholders, right? But when done right, the view is great.
Sam Wilson ([00:18:05]) – That’s really, really cool. Yeah, it’s funny. Who was it? Somebody came on the show a long time ago and they said. They said it’s not. It’s not when you scale or when you. When you grow your company, the problems go away. They just change. And so, you know, it sounds like for you, these are it’s just the iterations of your company and going, okay, now we’ve got to take care of everyone involved in this picture. Yeah. And that’s maybe something earlier on that you didn’t have to deal or handle or even think about at that point.
Sam Wilson ([00:18:32]) – So that’s very, very cool. Thanks for taking the time to share that. If somebody wanted to follow in your footsteps, what would be some of the things that you would tell them to do now?
Farhan Abbasi ([00:18:41]) – Yeah, totally. You know, so it I remember having two pieces of similar advice like this where one was, uh, one was someone. It was from someone that I admired but didn’t like the advice. And then then the opposite is somebody who didn’t like and didn’t admire. But looking back, man, I love, love the advice. And and so the so, so here we go. The good advice was to invest in yourself. You know, you have 30,000 in savings. Invest in yourself. You have 40 hours a time, invest in yourself. You have a cucumber in the fridge, eat it, and then invest in yourself. You know, launch a business, you know, stay with me. Invest in yourself. Right. Um, but and then the worst advice, by the way, was to, you know, don’t take risks in your 20s, be heads down, make moves in your 30s.
Farhan Abbasi ([00:19:32]) – But, you know, as an entrepreneur, you know, I have to disagree with that advice. Right? So so I would say long winded, Sam. Like my my advice is to don’t listen to advice and just fucking do it right and question who you admire and try everything you desire. And if you have the time to make it right.
Sam Wilson ([00:19:51]) – Got it, man. Absolutely love it. Foreign. This has been absolutely enlightening. I love the way you guys are tackling this. It’s a it’s a unique, a unique approach, I think, to the space. You know, we’ve had lots of people come on and talk about short term rentals and they get pretty kind of streamlined into doing just that. But you found a way to scale your management company, to scale the types of assets that you’re turning into short term rentals. I think that’s that’s one of the coolest parts about this conversation is that it’s not just the single family home with six bedrooms in the Smoky Mountains. And this is what we do not there’s anything wrong with that.
Sam Wilson ([00:20:25]) – But, you know, you’ve got a unique product to think that you’re bringing to the market and a unique way of tackling some other people’s issues. And I think that’s one of the things that some people maybe if you’re listening to this, like find a way to tackle somebody else’s problem. I think you’ve done that here for the developers and made it a real win win. So that’s very, very cool. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?
Farhan Abbasi ([00:20:50]) – Yeah, well, you know. Well, first off, appreciate all those thoughts. Man, that was amazing, Sam, to to join our effort. You know, first of all, like, as a property owner or developer, you know. Ah, my email is Farhan FA at Newcomb. And, and, and if you’re interested in any, you know, kind of we’re looking for salespeople as well. If you’re interested in joining our growing global workforce email talent at new holdings and holdings.
Farhan Abbasi ([00:21:24]) – Com and yeah like you know if you have any questions at all any clarifications to the audience I’d love to be of service You know if you’re looking to start your own business keep in touch and look out for us because we’re looking to find, you know, deliver ways to help as well.
Sam Wilson ([00:21:39]) – That’s awesome. Farhan, thank you for coming on the show today. I certainly appreciate it.
Farhan Abbasi ([00:21:43]) – Awesome. Thank you, Sam. Cheers.
Sam Wilson ([00:21:46]) – Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
