245: Buying Castles in Spain: The Smart Way to Invest in Boutique Hotels
LISTEN AND SUBSCRIBE
Apple Podcasts | Google Play | Stitcher | Spotify
Welcome back to another episode of The Richer Geek Podcast! Today, Mike and Nichole break down how U.S. investors can tap into Spain’s booming tourism market, including opportunities to buy historic boutique hotels and castles at surprisingly accessible prices.
If you’ve ever dreamed of owning a cash-flowing property you can also vacation in…this one’s for you.
In this episode, we chat about…
Why Spain beats the U.S. in current hotel economics
The hidden world of affordable castles and estates
The challenges of buying overseas (and how to solve them)
How the fund model protects investors
Turning investments into bucket-list experiences
Key Takeaways:
International hotels can outperform U.S. assets in today’s high-rate market
Spain’s boutique hotel space is undervalued and gaining major tourism traction
Local experts are crucial for navigating regulations & renovations
A fund approach gives flexibility when competition scoops up deals
Lifestyle investments create stronger community and long-term retention
Refinancing later unlocks investor capital while keeping the property
Yes…you can vacation at the castle you invested in (CPA-approved trip)
Resources from Mike and Nichole
LinkedIn | Gateway Private Equity Group | Barcelona Hotel Fund | Nic's guide
+ Read the transcript
Mike: Hey everybody, it's Mike at The Richer Geek Podcast. We're back for another episode with my beautiful wife, Nichole. And we're going to talk a little bit about going international. Some of the things that I'm doing over there. Nichole, it's all yours.
Nichole: So I think this is really interesting. I think a lot of people kind of don't understand why are you looking at hotels in Spain? And then also how do you even do that? That seems really complicated. So this will be a good episode to talk through that overall process. Maybe just tell us first, like what inspired you or where did the thought process come to start looking at hotels in Spain?
Mike: A great question. You know, if you listen to episode one, I told you about my great partnership with Vik. Well, Vik is one of those guys that is always open and he contacted me. He has an apartment in Spain and he knows a lot of people on the team, hotel people in Spain, and he reached out to me, he said, "Mike, we need to look at hotels in Spain." I'm like, "No way."
I was like, "I love Barcelona. I love visiting there." But I had all these negative connotations about Spain and some were correct but a lot of them were not. So I was like, "Alright, you know what?I'll go over," and this was two years ago.
"Let's look." When we talk about hotels in Spain. I'm not talking about the Marriotts and the Hiltons and what you think about in the United States and other parts of the world. He took me over there and showed me these 10th century estates, these castles, and I'm like, I'm looking at these. I'm like going, "Oh my God, this is like a storybook Disneyland-type of properties."
Immediately, I was like, "We can't afford this." I mean, my God, a castle? but you know, backing up a little bit, what Vik told me is several decades ago Spain realized, especially Barcelona, because Barcelona is a more capitalistic side, they had all of these castles and old estates that were just kind of, they call them 'macias', old country farmhouses that are absolutely beautiful, stunning.
They had some grant programs to revitalize them because they didn't want these castles in the states, these properties going into ruin. So they came up with a plan that allowed ownership to revitalize them, but then do something for the people, like tour license or hotels, boutiques and things like that.
So, fast forward. You have second or third generation now, you have the kids that are running them, or you have the elderly owners, and either they don't have the gumption or the energy to do it anymore. The kids like, "I don't know anything about hotels. I don't want this." So we looked at these and I was like, "Wow, you know, this is something that we could do that really cash flows." We can get them, not very much money. I couldn't believe it. We can get into that, you know, that's kind of the why but just some fantastic properties.
Nichole: How does this fit into your overall investment strategies? You're still buying properties in the United States as well. Mike: The hard part with buying things in the United States is you know, interest rates are high, expenses are extremely high. And it's hard to find hotels. You have to really, really dig. Sellers want 2019 prices. The buyers say it doesn't work that way. You know, we have this thing called DSCR, the debt service coverage ratio where the NOI, the net operating income is at or less than what my debt service would be. And I'm like going, "Who? Who buys that?"
You know, who would ever do that? And then the brokers have this issue of trying to sell something like that. So they go, "Oh, well the pro forma, you know what could do if you know all the stars aligned is, you know this." And I'm like, "Well, if it could do this, why isn't the seller doing that?"
You know? So it's just, it's more difficult. We're finding things, but very, very difficult. And the expenses are outweighing what we can charge, you know? Our ADR goes up 5% a year, but expenses are going up 10 to 12%. So it's very hard. Spain, by the way, is a lot different. The estates in these castles are not very much money. You know, we get into them. Even some of the second or third generation people even do seller financing 'cause there's no debt on the properties. The mortgage rates in Spain, if you can believe this, are around 2.5% to 2.8%. And I'm like, "Okay, don't want 7% or 8% here or 2.5% on a castle, or 2.8% on a castle over there. So that was one of the big things that was different.
Also, the salaries are a lot different over there. They're not very much. You can get the caretaker for you. The minimum wage for a caretaker over there is 16,000 euros a year. And you don't have unionization, you know. It's just different over there. The workers just wanna work, do their job. They don't complain. All they want is enough money to take their holidays, have their apartment, and that's it. They don't want to get promoted. They don't want to do anything else.
They just want to do their job. It is more of a lifestyle country. They wanna go to the beach, but just make enough money so that they don't get taxed more. And that's why they're happy. So I'm looking at, "Okay, I could build a hotel here," and you know, it's gone up to, it's around $260,000 key per room if I wanted to build a nice hotel here, or I could bypass Spain for pennies, you know, less than that. The expenses are low, labor is low. It's opened my eyes up, you know, for that boutique, if you look at it, we live in Arizona, Sedona.
A lot of you know, Sedona, that exact same amount of rooms, exact same type of low boutique.
It'd be $200,000-$250,000 a key or more in Sedona and we can get something just as charming, overlooking the ocean or the Mediterranean Sea in the mountainsides North and northeast of Barcelona. And it's the Costa Brava region of Catalonia and it's just phenomenal.
Nichole: Now you've been working on this for almost two years. What has taken so long? What's been involved in that process?
Mike: It's just difficult because Spain is not an entrepreneurial country and the government really doesn't want their people to be entrepreneurs and think outside of that more of a socialistic type atmosphere.
They make it very expensive to get there. It's called an SL. It's what we call an LLC. You know, I can go online and get an LLC, get my EIN, and it cost me like $80. It cost us just for the LLC, the spend, LLC, around $10,000-$12,000. Notaries, $800 I can go to the bank and get it free here.
I can go to the UPS store and it's like 10 bucks a signature, $800 a signature over there. Setting up bank accounts, you know, is just extremely expensive. I think I spent probably around $13,000-$15,000 total just to get a business started over there.
And that takes time. You know, you have foreign currencies. You just have all these different things. You have notarizations. I had to get what's called NIE, which is like a tax ID over there. It is very expensive. It takes a long, long, long time. And something that I found out, we had a hotel set up a year ago, it was absolutely beautiful and what I found out is just, I did it just like in America. I put an LOI on and we put money down and we're in the process of finalizing the syndication raising the money, and all of a sudden the seller sold it up from under us. And I was like, "They can't do that."
You know, we will assume. It's like you can't break an LOI and it's a contract, or, you know, not LOI but the contract for sale over here.
It's a binding document. Well, in Spain, as long as they pay, let's say you put $50,000 down, the seller comes in, "I want this hotel, I want this boutique." All they have to do is pay us double what we put down. So $50,000 turns into $100,000. The new buyer probably paid that and they scooped it up from under us, you know, because someone offered them more money than we did.
And that kind of soured me on it. It's like, "You know, I need to dig in and really find some of the obscure laws and rules in Spain."
But now we're back at it. We have an excellent teamstation based in Barcelona and it's been a long, long road, but we're finding some really, really good opportunities over there.
Nichole: What approach are you taking this time with the syndication?
Mike: Last time I did a regular syndication. So I had one asset, right?? You know, we started the syndication. This is what we're going to buy. This is the one hotel that we're gonna buy. And when it was sold out from under us, I was like, "Well, that syndication's kind of done because it was a one asset syndication." So we changed it and we're going to do a fund now. What I'm doing is I'm showing people videos. I'm showing pictures of some of the pictures that we took of these assets, but I'm not identifying one single asset. So we're gonna raise money saying, "Look, this is what the type of asset that we're gonna buy, and this is the region that we're looking at."
We will raise it as a fund, do it as a fund instead of syndication so that we have different options. If they get sold out from under or they're sold before, we can put 'em under contract and raise the money.
Nichole: Because you mentioned that you've got a really strong team on site.
Tell us about how you went about building that team and what's been involved there?
Mike: You know, it's Vik, of course. He's there, probably six months out of the year. I'm going to be over there, once or twice a quarter and Vik found this guy.I can't believe it. His name's Jordi.
He has 40 years experience in the hospitality space and commercial real estate space. He is an engineer, architect. He did 30-35 projects like Blackstone and some of the very, very large reaps out there. He retired. He just kind of has his own little consulting group now and he joined us.
So, he's extremely important for the team 'cause he knows. He's from Barcelona, he was born and raised there. We can take him to an asset and say, okay, he kind of does the architectural inspections. He knows what to look for, he knows all the boilers and all the electrical systems. He knows the regions. You know, I'd say, "Hey, what about this asset?"
And he goes, "No, no one ever goes there." So it's really nice to have someone born and raised there that does all the types of inspection work on the different assets 'cause these assets, you know, some of them were built in the 1600s, you know, or the 1200s. They'll never go away. I mean, these, they're rock, you know, they're like carved into a mountainside. So they'll last another thousand years but how were they renovated? Is it something we need to worry about with plumbing, electrical, all those different types of things. The different types of roofs, the soil, the regions, he's just an extremely important part of the team. And then we've met several different caretakers you know, one care taker, husband, wife, they're running a high-end boutique in Mallorca. They wanna move back to the Barcelona area.
And they know of these assets that we're looking at and they said they'd love to be on site and run them.
Nichole: That's great. You've kind of described some of these, but any of the, that you haven't already described, biggest hurdles so far?
Mike: When you look at the American investor, they're very used to, here's a choice, hotel, Wyndham, you know, Marriott, here's three years, P&Ls. Here's blah, blah, blah. You know, just I can give them financials. And there's two things with the American investor. Number one, they're like immediately go, "Well, Spain isn't that blah?" You know, this and that and why Spain? And number one Barcelona is, number one right now, tourist destination in all of Europe. They supplanted, Germany, England, France. This is where people are going. Number two, because a lot of these are generational family owned. They don't do the P&Ls that we're used to. So I'm looking at this castle and, you know, went and toured it, took some wonderful videos and contacted the broker, say, "Okay, you know, the last three years, year end P&Ls and expense reports and blah blah."
And she's like, "I'll try." And you go back to 'em and because these are opportunities for us to excel and bring these full blown, you know, into boutique hotels. We're finding out that we rented out for weddings and things when we're not using it. So, right now if we use it a lot, it does, 250,000 euros a year.
But when we're not, go up to 300,000-350,000 but we just kind of have a website and just people book it. If they don't, we will just stay there, you know, so that's really the biggest thing is I can't get these types of P&Ls that we're used to in the United States. It just doesn't exist. So what we have to do is we have to look at comps, you know, if there's any type of comps and how do you do a comp set on a castle on the coast of Brava where there's Gerona area? But what we can do is we sit there and say, okay, when they kind of think about it, they're doing 350,000-400,000 and this other asset, they kind of do it. They do about 500,000-550,000 euros a year. We know that we can come in with our expertise, market it globally, market it in Europe, hire specific wedding coordination type event planning teams throughout the world and just really, really market it because we're not going to stay there 80% of the time and rent it out 20% of the time.
This is 100% a business asset. So we kinda look at it that way but it's hard for us to convince the American investor that you have to trust us with these types of things, and this is the type of returns that we think that we can do, because we don't have those type of financials.
Nichole: Yeah, it's super interesting. As this deal closes, what does that mean for you, for future international and actually say deal, but as the fund closes, what does that mean for you? Mike: We have to prove ourselves that we can do it. To the current investors that are interested and convince everyone. You know, this is a little bit different. No one ever told me when they invested in, let's say, the quality end or the comfort ends. I can't wait to go visit that small town. I just can't wait to go my quality that I invested in
Nichole: or your Super 8 motels
Mike: or the Super 8 motel, no one ever.
Nichole: Yeah.
Mike: Has said that to me, it made me reimagine doing the funds and syndication and the investors that have the number one question, people say, "Okay, I'm in. When can I go visit or how can I visit? Do I get a discount? Do I get a week? Da, da, da."
You know, this has become a lifestyle investment and I kind of reimagined what that fund and syndication was because before it was just, here's the comfort end.
It's going to say this, it's gonna be a five year hold, and we're going to sell it and then we're going to do this. You know, they might reinvest it and go buy another one. A lot of the investors that are in this fund say, "Well, what if I don't want you to sell it? You know, can I do it to my children?"
It's like, why can't we buy 5 of these or 10 of these,because I want to go visit it. And we're very quickly going to return the investor's money, the capital, and then we will refinance. Let me backtrack a little bit, it's hard to get financing on a commercial project, because we don't have anything right now.
So we're gonna pay cash for these assets and then in three years when we have actual P&Ls. Then we can go back to the bank and say, "Okay, you know, I want50% down, we're gonna refinance it at 2.5% interest. Cash out those investors that wanna be cashed out, give the other investors a big watt of cash and then keep it."
The goal is to have a website, the boutiques of Europe, whatever we call it, and have a dropdown box, Spain. Portugal, Croatia, Italy, and you have a choice of these types of historic states and castles. Where do people wanna stay? And all our investors for a we have different levels of investment for X amount.
You could stay there as long as you hold the investment, you get to stay there for X number of days or weeks, and then we have another tier that you get you and even more stays out of it. So even as the investor, as we start having these assets, you'll be able as an investor to click that dropdown box.
It's like going, where do we want to vacation? Not only are we on vacation overlooking the sea, but we're vacationing at my castle. And another thing a lot of people don't realize is ask your CPA about it. I'm not a CPA or financial advisor, butmost likely yourairfare to Europe would be paid for because you're actually going over to see your asset.
So that's another big, big, big benefit is everyone wants a paid for business vacation to Europe to look at your asset, which happens to be a historic castle or in the state.
Nichole: Really cool. Where can people learn more about that, since that's currently an active fund?
Mike: Oh, website. It's gatewaype, PE as in private equity. gatewaype.com or you can look me up on LinkedIn under Michael Stohler. And I'll answer back. I think on the website there's an invest now or there's a little tab that says Barcelona Hotel Fund. Click on that. It'll take you to the portal. Go through all the information. You do have to be an accredited investor and that's how you can learn.
Nichole: Wonderful. Thanks for talking us through that exciting opportunity.
Mike: Yep. Absolutely. Everyone stay tuned for the next episode. This is Mike Stohler, The Richer Geek Podcast. Take care.
ABOUT MIKE STOHLER
Mike Stohler (STOW-ler), the co-founder of Gateway Private Equity Group which is a hotel real estate investment firm. When the multi-family market shifted in 2016, Mike pivoted into hotel investments for higher returns and better value-add opportunities. As Mike added to his hotel portfolio, Mike he found ways to scale his real-estate business through hiring virtual team members in Mexico. Soon other real estate investors started asking him to help them find similar qualified personnel which led him to start Gateway VA. Through Gateway VA, Mike helps other business owners enhance productivity by hiring highly qualified virtual team members.