Hummingbird Flats: Why a $6.5M Recap on a 21-Unit Mid-Term Rental Build Didn’t Close

Imagine if you spent millions building an apartment complex and then realized nobody wanted to buy. Well, that’s exactly what happened to the founders of Hummingbird Flats. — Our expectation was that we will finish the project with $5 million in total construction cost. So far, 10 million has gone into this in this project. — What unexpectedly drove up your cost by double. — Lumber prices went up about 5x. So then we pivoted to doing steel framing. And steel was cheaper than lumber at that — at that point. But when we started building, the lumber came down sevenfold. Steel doubled. — And you’re going, man, if we sold this right now, I mean, that’s a massive loss. We can’t do that. Now, the founders pivoted though in a very unique way. — We are making three times as much on a mid-term rentals. — Short-term gave us less than 800 for the mid-term rental. We are getting 1,800 to,950. — We cannot meet demand. My question is, can the pivot work? And if so, I might offer to invest on the spot. I want to buy the whole property for $7.5 million. — How are you guys? I’m Nathan. — Hey, Nathan. — Good to meet you. — Dash. — Dash. Really good to meet you. — Meet you. — Venkott. — Venkott. Venka and Dsh. Good to meet you guys. When did you break ground on where we’re standing? — 2021. — Venicious. — Tough year to break ground. — Absolutely. — Do you have a room you can maybe show us or — Absolutely. up. You have 21 units. This is a two-bedroom, two bathroom. This is the second floor. So, we’ve got 10 units on this floor. We got 10 on the third floor. We got one ADA unit on the bottom floor. — Okay. So, in So, there’s 21 including the ADA. — Yes. — Okay. 21. And you broke ground. And just say one more time for me. In what year? — 21. — And how long until completion? — We got this co after 5 years and 3 months. — Wow. I’m non-developer so I don’t know actually if that’s a short or long period of time. — Very long time. — Very long period. should not be more than 3 years. — And how do you know that? Do you guys come from the development construction space or give me more of the background there? — Uh we started developing uh right about 2016 first with small homes and and now we are up to 4 to6 million homes. Single family luxury custom homes. — Okay. And how many of those single family deals did you guys do together? — We we do about two to three a year with single family. — So I mean that’s not just like a passion project. That’s a real business. — Oh yeah. Yeah. We about 14 so far on single family. And what’s the average sale price on those? Typically, — our leftest listing is 4 million. — What was the first one? — 400K. We made probably 10K on this one. So funny. But yeah, so then on it it improved. — Do you have full-time? Have you have full-time employees to do, you know, all the work and the buildout and — so we hire GC’s actually. We are developers. So we we involved in everything from design to all the way to the finish. But we those let those builders do their jobs. Did you guys grow up with sort of families in construction and development or — I spent all my life in technology working with Ford, GM, Chrysler, MercedesBenz and uh you know Honda kind of companies implementing their product life cycle management system. — So I’m an engineer and a scientist. So I have been in semiconductors for uh since my undergrad days. What gave you the idea to sort of meet up and get into construction? — I’ll tell you a very interesting story here. 20 friends from the neighborhood, all the people who are in the corporate world. Every Sunday morning we used to have uh discussions and everyone presents a different topic like one presents what is 401k, retirement planning, other one stock market and he Dh presented real estate — in that in that group. So all 20 got excited said we need to move into real estate and we took the lead rest is history. So how much money did you guys raise from that? — We did our first deal a few months later and we actually we started with acquisition of multif family properties. Okay. — So it was called Cordiera Cordiera condominiums in Phoenix in Arizona. — So we acquired that. It was a 78 unit about $9 million deal. Okay. — So we acquired that. We raised money 3.5 million. That was the first deal. — 32 million of equity. — Equity. — The rest was debt. — Okay. — And we exited in 3 years we’re about 78% return. So since then we did many of those multif family meetings. — Since we started working together we have raised over 40 million and sold over uh uh 50 million total so far. — So your investors are very happy. — We have given 20% plus annualized return to all of them. — It’s pretty good — consistently. — That’s better than some VCs and most VCs don’t don’t make that. So that’s pretty good. This though that we’re standing in, I don’t believe you guys bought this. I think you built it from scratch. Is this your first build from scratch? — This was the first multif family from scratch. For us, we have never built like 20 unit or 40 unit. So something like that. We’ve always acquired those uh which were you know running properties. We added value to those and sold it at a profit. This one was the first one. We said let’s give it a shot. Expectation was that we will finish the project with $5 million in uh in total construction cost. uh when we finished it was 6.1 million in construction cost plus other soft cost and all that total about 10 million went into this one. — Let’s just talk about that for a second. What unexpectedly drove up your cost by double — 1 million was because of co um lumber prices went up about 5x — from when we had planned for it. So then we pivoted to doing steel framing because it allowed us a better construction and steel was cheaper than lumber at that at that point — lumber went up sevenfold — steel came down to half. — Yeah. — That is design time which we went back to the city made redesigned the whole thing from lumber to steel. — But when we started building the lumber came down sevenfold steel doubled. co the supply chain challenges that they that came up along with the if you remember you know everything got shut down from China — so we got caught into that — there’s 4 million I’m still missing though so 6 million construction cost where’s the other 4 million to get to the 10 million — land plus all the design engineering up to permitting is 1 and a half million — okay so where’s the other 2.5 million — okay rest of the 2 million is the time delay cost — it’s like interest expenses — it’s just expensive — really — so cost of money. — Cost of money. So what how big was the loan you took? — About five and a half of uh of debt. — Are you comfortable sharing the interest rate you pay on the 5 million? — And at the time when we raised when we got the construction loan from Verizon Bank, it was 5 and a quart%. — That’s not bad. — No, that’s not bad. But the notes that we later on we needed money those are 14%. — The interest that is due about a million. — You know, — it’s a million a year in interest. — The terms are is accumulating. — You finally finished building, design, construction, land interest payments. It’s 10 million all inish and you’re going man if we sold this right now we’re going to sell it for like 5 million 6 million that’s a massive loss we can’t do that — about 7 million is what uh if we were to sell it at 7.3 7.5 is what we um retail price — there’s 21 total units we’re standing in one is this the same thing repeated 21 times — that two bedroom two bathroom this is the biggest one — this is the biggest so we’re standing in the biggest 1200 ft — five units of this five twobedroom two bath six onebedroom one bath and 10 studio audios. — This is the bedroom. Um — Oh, it’s a pretty good size bedroom. You’re not You’re not Yeah, it’s a king-siz bed for sure. You’re not stuffing people in here. — And for furnished, uh we provide everything over here. The from television sets to art. — Oh, wait. It’s it’s I sign and I’m in. This all comes with it. — Everything. Everything. — Uh and u you can see jetted showers and tiles over here and a large very large closet. This is the second bedroom and the second bathroom. — That was the intent. That was the design and build intent to give spacious, vibrant, lots of energy kind of a feel. You know, — the place looks beautiful. I want to learn more about though the pivot and sort of how you transition the performer in the middle of the thing and what you plan to do over the next, you know, year with the building. — Our first lease was on June 12th, 2025 for one of our studios. Some of these out for short-term rental like this was running as a short-term rental through a third party company. — And what was the lease price on the studio? — So, the short-term rental is floating, right? They they do whatever the revenue they make, they take that cut a third party and they give you the money. What percent do they keep? — More than 50% is retained by them for various reasons. — We lose from a short-term rental. Uh what comes into the owner’s hand, our experience is uh 40 to 50% max, 40%, less than 40% at times. — So your best month in this building doing the short-term stuff through a third party was how much revenue — for five units? We got $5,500. That was our best. So they could never fill it more than five units at any one time. — Well, we gave them only five. — Oh, okay. — To try out rest. We were doing long-term rentals and then uh someone had mentioned try midterm because they’re a traveling nurse and all and we tried it and it just it exploded. short-term gave us less than 800 for for that unit for this and the long-term it gave us uh 1,200 — and for the midterm rental we are getting 1,800 to,950. — Most of you watching right now what you know is the Airbnb short-term thing. You’re going somewhere on a weekend. You also know the long-term lease, right? Signed for 2 years and it’s a thing. What you’re saying is the short-term stuff didn’t make a lot of money through the third party, but the longerterm stuff more than a year. I could only list it for 12 $1,300 a month and we didn’t get any volume. But when we shifted to things under a year, all of a sudden they were selling out at 1,800 bucks a pop. — Yeah. 1,800,950. And we have 10 of those. So we knew we were on to something. It just exploded. We have two fivestar review, three fivestar reviews now. But just one was enough that we started getting so much volume. We have now data over 10 units and the average vacancy is only 3%. cumulative vacancies. — Are you going list on a website somewhere? — Burnish finder. It’s our Austin based headquarters and they’re the largest midterm rental platform where people can look for um midterm rentals. — Mhm. What finder fee do you pay them? — It’s very inexpensive about $49. If you list multiple, it’s about 129 time fee only. — Is that the only way you’re getting deal flow right now is furnishfinder.com. — We have only listed so far and we cannot meet demand. We have to turn back every day. But this one is empty that we’re sitting in. So are you — This is a short-term rental. — Oh, but you’re getting out of that contract. It’s already terminated. — What will you list this unit for on Furnish Finder for for a lease under a year? — $3,200. — And we already have hits. — What is the max monthly revenue potential if you’re fully booked? — Close to $50,000 a month. — How much revenue did you do last month total? — Last month our revenues were $26,000. — And so you believe the the opportunity though is almost double that performance. Yes. Get it up to 50. Then what? Let’s say you guys do you book it out. Do you keep running this as a cash flow or do you s do you take it back out to investors and say look now it’s making money you want to buy the whole thing for 12 million. What we want to do is we want to go ahead and acquire multiple properties like ours or or newer built 20 to 30 40 unit large you know in in different pockets in Austin around the city where there’s a need for midterm. So we want to assemble a portfolio of enough properties and finally the phase three will be national level and sell it as a portfolio or go even IPO as a RE. — So you don’t think you could sell this individual building concept just by itself. You want to build out and take this model to a bunch of other properties — there. The thing is we could could do it but I think we’re on to something. This asset class does not exist. — What I’m trying to figure out though is how do you get out from under the really expensive interest rate you’re paying right? You don’t want to sit on that for 3 4 5 years. This this is where we like to raise some funds like and we’ve done the math 6.5 million which lowers some of our debt burden which gets rid of some of those 14% notes and then we will be cash flow positive. — So so how much is out on the 14% right now? — A total about 3 million. — Okay. So — including the including the interest uh I would say no 3.4 million. — 3.4 million including the interest. So you’re looking right now to go find an equity investor to write a $6.5 million check to take out all the debt effectively. — Yeah. And what percent of the company or portfolio are you willing to give for that kind of — 88% and I have all the numbers here. — So it’s a majority recap effectively. — Absolutely. And you know what the what we retain is 850,000 of our equity. We live we have skin in the game. We leave it there. — Money is money but like that’s not like you don’t have to make it work. If you lose 800k you’re going to survive. — That’s we’ll survive. There’s no building which is doing owner operated MTR at all. There’s no asset class like that. This is what we are creating. Have you built software that will power this MTR strategy to find like someone to replace the light? — We don’t need to will because they exist and they’ve exist for decades. Like we have a 384 bed student housing, a $40 million uh project there. We’ve had it for 4 years and we use those kind of systems. If you a house and you want to rent it as midterm, you don’t have those efficiency. You got to pay your manager who’s doing one or two of yours, you got to pay them 10 or 15%. You pay a managers 2.75%. So what so what look I do I do the show because I want to meet really interesting entrepreneurs with a great idea and try and figure out if like my money plus their ideas can generate a big return obviously right um — so but I but I but I don’t want to be a majority shareholder right I want to be a minority player I can’t add a ton of value from like a marketing and sales perspective I’ve never sold real estate before so I don’t know that I’d be very strategic for you in that regard but however like I am sitting on a fund I am trying to deploy capital um I want to get a return um — I just I I don’t want buy a majority stake, right? I own a lot of real estate, so I see the market opportunity. I also travel a ton and I love staying in places for, you know, a month, three months, and then moving on. So, I get it. I think this potentially the future, MTR, I don’t want to write those $6.5 million check for 88% of the business. I I could potentially do a million-doll deal for a much smaller amount of equity. It has debt-like properties, but the way I get paid back is a percent. I’m effectively, you’re saying all of our lease agreements equal a million per year or a million per two years. I say, “Okay, I’ll buy it at 10% discount. I’ll give you 800K today or 900k today.” And I make back a million over two years as you collect the leases. That way, my collateral is the actual it’s a sale. It’s a true sale of the leases. It’s not necessarily debt. I don’t know the language though in the collateral package that you have with the bank. Would they allow me to get a carveout on the lease agreements as collateral or no? — No. — Okay. So, that would be part of their collateral. — Okay. I’m trying to get really You guys can feel I’m trying to get really creative here. Um, — do you have any ideas? So the other one which is not a good great idea is to buy one unit like but but that’s gets complicated. — No, I don’t want that. I like the MTR vision. I can see myself going and staying in your places for 3 months and then moving. — I want to do things that I would use. — Yeah. Yeah. Yeah. — There is a By the way, there is a very clean way to do this. — I want to buy the whole property for $7.5 million. — This would be the clean way to do something. — 7.5 million will not work because we’ll be about 25% underwater. What we like to do is the system that we have in place, we want to use those systems now in the next three months and then roll it out to the 10 properties that we want to buy next. So this is where this becomes a foundation of of uh using our people and our systems what we want set up setting up procedures that we have learned in long-term to squeeze out even more. — You don’t see a path where I could write a million dollar check to get something like 15 or 16% like fixed returns over the next couple years. There’s no opportunity for that. fix will be very difficult because because of the we are trying to reduce our debt. But if we get equity like that and then we have three or four equity owners, I think we are off to the races. — Well, look, here’s where I’m at. Um gosh, man, you guys really know what you’re doing and you’re like successful entrepreneurs. I’d love to figure out a way to get involved. Um but like I would have to be secured on the debt side and you have a really great deal right now with an unsecured friends and family round. I can’t take security cuz you’ve already given the bank the full security package, right? So there’s just no option there and I don’t want to be a majority shareholder at 88%. Let me ask you a question from my side that you know if — let us say we come back in next 30 days that $7.5 million is okay and we’ll take the hit of 2.5. So would you be open? — Mhm. You would take the loss of the 2.5. — Okay. How would you structure that? — Nothing. The entire building at 7.5 is transferred to you ownership. — Why would you be willing to take that hit knowing you’re about to tap into this MTR model? I I think for that so here’s the that’s why the raise is 10 million is what I’m going for 6 and a half is to buy this 88%. So at least somebody has a clean asset which they bought in a distressed time of market. — Mhm. — Well look because I can’t see a path to having my capital secured in a debt-like structure and I don’t want to have 88% equity exposure. I don’t think we need a deal done today but I think people are going to want to buy from you and use this model. — You want to go fullblown in this one. Well, the vision’s exciting. Dash, it’s great. Great to meet you. Thank God. Great to meet you with you guys. I’d love to still see the deck. I mean, I’d love to be involved. — I’d love like 500K to a million of exposure somehow. If you’re looking for capital, go to founderpath.com and create an account for free. Then connect your profit and loss statement so I can understand your cash flows and revenue. Then my AI agent will write a 10-page memo for you all in under 2 minutes. And it will include a capital offer at the end. If you like the offer, just type yes in the chat. Tell me what bank you want to swear the money to and we’ll get a deal done together.