[00:00:01] Speaker A: You're listening to ptc point of view brought to you by preferred trust company, the preferred custodian for all alternative investments. We're here to provide retirement savers like you with the tools you need to succeed. Need a confidence boost when it comes to investing outside of the stock market? Do you want the power to build a tax sheltered Nasdaq that will last through your golden years? You've come to the right place. Turn up your speakers and turn off cruise control because we're taking you on the alternate route to investing with your IRA.
[00:00:38] Speaker B: Well, welcome, everyone. My name is Carrie Cook. I'm the CEO of Preferred Trust. And today with me, I have Martin Papp with Nova House. Welcome.
[00:00:50] Speaker C: Thank you, Carrie. I appreciate it. I'm happy to be here. And let's have a good conversation.
[00:00:55] Speaker B: All right, first things first. Who are you? What are you about? Why Nova House?
[00:01:03] Speaker C: I'll give a little bit of background on who I am, and I think that explains how I came to be at the Nova house. But my name is Martin Papp. I'm the general partner and co founder of the Nova House. It is a short term rental luxury real estate fund. What we do is we build, develop and operate short term rentals overseas, specifically in high growth markets. So we're talking about emerging markets like Costa Rica, Colombia, Thailand, Bali, places where you're going to get really good ROI, higher yields than what you would get stateside. So if somebody's looking for that geographic diversification, looking to chase that higher yield, 1015 percent annual yield per year, that's what investors come to us for. A little bit about me, about where I come from is I grew up in Colorado. I then went and moved to China in 2008. And I would spent ten years there running a business. I also got married there to a chinese woman. And we have a beautiful son. He's seven years old, living now back in California. So after the pandemic, we kind of made the decision to relocate and stay here in the US.
But all of that overseas experience of running businesses and investing in real estate led me to create a syndication with another partner of mine. His name is Tyler Jordan. He also is a international real estate guru from Australia, does multifamily, and we hit it off. And we decided to create the Nova House fund last year. And we've started developing properties in Costa Rica this year. So in 2024, we're doing twelve properties that will be all for high end short term rentals in Central America.
[00:02:54] Speaker B: Okay. And so this particular fund that you currently have available, is it specifically related to Costa Rica.
[00:03:01] Speaker C: It's specifically related to Latin America.
[00:03:04] Speaker B: Latin America.
[00:03:05] Speaker C: So what we're really focusing on is grouping our developments into buckets. And so fund one, which is for 2024, is twelve assets that are across three countries, Costa Rica, Panama and Colombia.
[00:03:21] Speaker B: Okay.
[00:03:22] Speaker C: We found that these places have the highest.
Well, it's really a multi pronged kind of approach, but these countries are experiencing very good levels of rental demand, growth in the hospitality sector, coupled with excellent property rights. So as a foreigner entity, you can own freehold property in Costa Rica and you can own it just as if you're a local costa rican and you get all the same benefits. And you have the added benefit of having much lower cost of build costs. So, building in the United States, I did builds in southern California.
We were easily hitting 600 $700 per square foot. And we can do the equivalent amount of luxury quality. We're talking about ocean view properties with stunning amenities for as low as $200 per square foot.
[00:04:27] Speaker B: Wow. Big difference.
[00:04:29] Speaker C: Yeah. That margin there is really where this becomes an attractive investment for us is because we can build out amazing places. Resort, boutique type of villas, where you get all your amenities and you can charge premium rates for that. You can charge $3,000 a night for a massive villa on the ocean. And you can do that in California too, or in the US.
[00:04:51] Speaker B: Sure.
[00:04:52] Speaker C: Your costs are equally as high.
And so we get much better margin in these developing markets. And we have built, over the last few years, teams in place to make this a professionally and safe vehicle to invest. So you don't have to go do this all yourself. It might be a little intimidating to go down to Costa Rica and build property there, but that's what we're here for, is that we make all that possible. We have contractors, architects and legal firms with thousands of properties collectively that they've done. And we are basically just putting the pieces together and making this a safe investment vehicle for people that are looking to diversify their portfolio.
[00:05:38] Speaker B: Perfect.
Do you mind if I kind of dive into these properties a little bit further? Like, how do you identify location? You've identified for obvious reasons, but how do you determine what you're going to build? Is this ground up? Are you acquiring some properties and doing some fixing? What does each of these properties look like, or is it a variety?
[00:06:02] Speaker C: Absolutely. Good question. We focus on chasing high yield. So every decision we make is about how can we get the highest ROI while staying in bounds with safety. So in order to generate the best ROI, we found that doing ground up builds is going to be the optimal way to go. So we have a two year development period where we identify land.
And this is multiple reasons. One is you're going to get better cost savings by doing it yourself, but also because we want to dominate in the short term rental space. And to do that, the Airbnbs, the single family homes that are kind of retrofitted to fit the short term rental, it's really sometimes like, what do you say? Put a round peg in a square hole kind of thing? Exactly where that property wasn't designed to be a short term rental. That property was designed for a single family.
[00:07:06] Speaker B: That's right.
[00:07:07] Speaker C: And so by going ground up, we can create stunning properties that create immersive experiences for people looking for a special experience. And so we build. For example, our Manuel Antonio property has a podcast room. It's got an executive meeting room on the second floor with glass walls that you can look out into the ocean. So when we do podcasts, like know the oceans in the background or the jungles in the background with monkeys, cans and sloths, and it's not a green screen, so we create those environments. Fourth floor, rooftop, we have a hot tub with a fire pit as well. We have a canopy, which we call it a canopy. What is it? Is, it's a hanging garden that goes over the entire property. It's 8000. It's got all these vines and flowers that grow up, that grow on these steel cables to create this amazing effect like that. You're in the jungle, in the canopy. You can't do that on a typical home.
[00:08:10] Speaker B: You can't.
[00:08:11] Speaker C: So that's why we take the extra effort to create that amazing experience, those amazing properties.
So anyway, that's the long answer to why we do ground up, heading into a little bit about how we identify which pieces of land to buy, where to build. Why Manuel Antonio? Why tamarindo? Why Santa Teresa?
We use a data driven method, so we are highly sensitive to market data. So we use, for example, enterprise level Airdna, which is an online service that gives us basically all the information you would need to know about the short term rental market. And that's global. So hats off to Airdna.
You can learn so much about places if you know where to look. And we then do everything from a top down approach. And what I mean by that is a lot of people, when they go and buy property, especially abroad, it's usually because you visit some vacation place that you love and you're like, this is an amazing spot. And you walk by a realtor shop that's got photos up of nice places, and you're like, oh, yeah, I'd love to see that.
Which is okay if you're just buying a house for yourself.
But if you're approaching it from an investment standpoint, buying the property is actually the last piece of the puzzle for us. So what we do is we go out and find comps that we like, properties that we see are doing really well in the short term rental space. And we also then look at properties in the area that have been built that already have proof of concept, and we find out who built them. Then we go and ask about who are the best legal partners that we should work with, who are the best property agents that you do the best deals with. So you build your entire team first, only after the team is in place, and you know exactly what you want to build, and everybody has given you their feedback on, okay, I see what you want to is I have the perfect place. You should go to Santa Teresa. Make sure that it's connected to a public access road. Make sure you don't spend more than this, make sure you talk to that person, and then the properties are presented to you. And it becomes such an easier process because you've eliminated all 90% of the headache up front. Yeah, that is the process. Probably longer than I needed to explain of how we select a property.
[00:10:45] Speaker B: No, it's good, because when you're talking international, I think from an investor's perspective, it's scary. There are so many nuances that need to be checks and balance across the board.
And you're entering these markets, you understand what it takes to enter markets like this. I'm assuming your investors do not, which is important, to relay these messages so that they understand everything that's going in behind the scenes. For you to even determine the property that you are going to acquire later, build on, and then ultimately, the revenue generating from it are what investors are investing in, but they're also investing in the people behind it, which is you and Tyler. Right. You ultimately are going to determine the fate or the success of those properties and the timeframe in which it takes to deliver. So I want to kind of move on to that. Now that we know location, the inner workings of the dynamics behind it, how long does it take to build a property from the international side of things? And is that where some inherent risk is involved, the timing, or is that not a risk at all?
[00:11:58] Speaker C: I think with any real estate development, whether it's international or domestic, delays and timing is part of the game and always a risk. So I would say on average, it's going to take us around 18 to 24 months from acquisition of the property to completion. That's based off of a myriad of different factors, and it can vary from country to country, region to mean, and it's no different than in the United States. In fact, it's a slight tangent, but I found that building in the US is by far the most difficult.
I'm serious, I'm building a house right now.
[00:12:38] Speaker B: I get it. A custom home, and it's a nightmare.
[00:12:41] Speaker C: Everything's very specialized and all the regulation is all very specific, all the way down to the city.
In, in a lot of emerging markets like Bali, Phuket, Costa Rica, Colombia, these are countries that have less red tape. They're looking for foreign direct investment. They want the hospitality industry to grow there. And so they kind of roll the red carpet for you in a lot of ways. And so yeah, you might have to jump through some hoops here and there, but I find it easier jumping through those hoops than jumping through the ones in the United States. So having had experience doing both, it's been an easy sell for me to be like I'm sticking abroad because not only is it less of a headache, but I'm also getting better ROI. But anyway, time frame, 24 months. And the way the investment works from the investor standpoint is we do the funds every year in batches. And so for this year it's twelve properties or less, depending on how much funds are raised. But it's whatever amounts raised by the end of the year that's capped there and that's it.
[00:13:47] Speaker B: Okay.
[00:13:48] Speaker C: And whatever we build in that time will be a two year development period. Once the properties are operational, the investor receives quarterly dividends. We then do a cash out refinance on the properties in year three, meaning that we pull out equity of the properties to return to investors. So investors get a targeted 100% return on their capital. In year three, you can take that money, invest it wherever you want, and everything after that is pure passive income. So year four, year five, year six, year seven, quarterly dividends yields. If we're not accounting for any of the debt from the refinancing, you're looking at easily 15%.
[00:14:35] Speaker B: Okay.
[00:14:36] Speaker C: Then in year seven we have an exit, we do a sale, and that's where we get the IRR numbers coming in around 20% to 30%. That is dependent upon what investors want to do at the year seven, if there is enough interest, if the properties are just crushing it and people just want to continue to own in the fund, we'll most likely have a buyout clause where we'll actually let investors that want to stay in the fund continue to reap those rewards because we'll just then buy. Investors that want to get out will buy their shares back. So targeted exit of year seven with full cash return by year three with the potential of continuing on beyond that if you wanted to.
[00:15:18] Speaker B: Okay, so I'm going to break that down a little bit further, if you don't mind. So we've got current fund. Is the current fund 36 million? I think I read that, yeah. It'd be capped at 36, 36 million cap. Twelve properties intended. Could be less, could be more. Depending upon where the acquisitions are occurring. Approximate two years before dividend payments begin. Once dividend payments begin one year later, there's a cash out option. Do they have to take the cash out option or do they stay in at that point and continue to receive dividends? Or is it one or the other? Just want to clarify that.
[00:15:59] Speaker C: Yeah, that's a good point. So they stay in. What we're just doing is providing return of capital. So they're not cashing out, isn't selling their position, they are just recouping all the capital. Because the way our waterfall provision works is before any dividends go out to anybody, first and foremost, 100% of capital is returned to investors.
[00:16:22] Speaker B: Great.
[00:16:22] Speaker C: So first, everybody receives the money that they put in. They still own the assets. Nothing's changed. You just got your money back now. And then from there, the dividends pay out based off of the free cash flow.
[00:16:36] Speaker B: Okay. And that's a quarterly basis averaging somewhere between ten and 15% annually.
[00:16:42] Speaker C: That would be pre refinancing. After refinancing, you'd most likely be more in the range of six to 9%.
[00:16:50] Speaker B: Okay.
[00:16:51] Speaker C: After the cash out.
[00:16:53] Speaker B: Perfect.
[00:16:53] Speaker C: Which is still great. Yeah.
I sometimes get in my own head where I'm like, oh, I wish I could give him more. But then I compare that to a deal I just saw in Texas for a multifamily, and it was like 6%. And I'm like, we easily get that.
[00:17:07] Speaker B: Yeah, absolutely.
How do you manage these projects once they're completed? You had talked about putting all the pieces and the team in place. I'm assuming the property management is a huge component of that to make sure that the success and the return on these investments are there. But it sounds like you're also dealing with locations where you're booked out a year or so, potentially in advance. So how does the property management side of things work? Because that's a huge component of the return to the investor.
[00:17:37] Speaker C: Sure. There's three layers of oversight or management. First is the very local level. Every property has its own host, own property manager. These are, generally speaking, professionals that own multiple properties or manage multiple properties in the area.
That's all outsourced at the local level. From there we have a project manager and their job is to oversee an entire territory. So they'll be responsible for site visits and they're the ones that drive around a couple hours there, here or there to go visit the different properties.
And then at the top level you have Tyler and myself, the gps, that are also very hands on in terms of making sure that the properties are running efficiently because we see all the numbers coming in, if anything, doesn't seem to be working right. And we also encourage. This isn't really answering your question directly, but we encourage people to go visit these properties. So if you invest, take pride in the fact that you own now some really sexy real estate down in some really cool areas. So go visit.
We host events, investor events. So sign up for one and come and stay at these properties for a couple of nights.
It's not a timeshare by any means. It's not what I'm saying. Yeah, but this is a bit more fun and enjoyable than just having invested in an elite or something where you'd never have any tangible component to it.
[00:19:11] Speaker B: How often do you visit the properties?
[00:19:14] Speaker C: At least every quarter.
I'm in Costa Rica every quarter. Thailand maybe once a year. We always have somebody in our team there daily, but I'm. There is a different story and it really just depends. And for me, it's more of a luxury to be able to go do those things.
So I love it when I get my opportunity visit.
[00:19:38] Speaker B: Yeah.
Talk to me about your investor base. Where do your investors come from? Who and what demographic are you looking for in order to invest?
[00:19:49] Speaker C: We have a wide gamut. So we know some working professionals, like doctors, but we also have some crypto.
[00:20:00] Speaker B: Our.
[00:20:01] Speaker C: One of our best investors spends half his time in Bali, half his time in the UK. And so he gets it. He's a remote worker, he's a digital nomad and he's like, God, I always looking for these kind of places to stay is. It is a bit all over the people, generally speaking, it's people that understand the allure of these type of markets, people that have traveled to Costa Rica, people that have been to know, they know what it's like, these properties. Yeah, this is great. So I would say that's usually a good customer.
From a more technical standpoint, I would say we definitely want investors that are okay with having their capital locked up. This is not something where you put it in and want it six months later. There's at least a two year hold. So it needs to be something that you're willing to part ways with and let it sit. It's great for people that are looking for that cash flow. So a passive income, there's very few products that can beat what we're doing that's still based on hard assets. So, for example, you could go invest in a crypto fund and they'll give you 20, 30% return. It's like, yeah, maybe, but shit could also hit the fan and it could turn.
[00:21:14] Speaker B: Exactly.
[00:21:16] Speaker C: At least with us, let's say the fan, at least it's in the hard property that can be liquidated, that has value, that holds value. If you invest in real estate, you know this. But I think a lot of people that maybe have less experience. This isn't like investing in a VC kind of enterprise where it's like they've got a million dollar cash burn and it's million dollars in the marketing, and if they don't get a certain amount of users, the business fails. That's not how real estate works. Right.
I'm just managing assets. So you're not actually spending money, you're just putting money somewhere, and I'm taking a fee to just make sure that money is doing good.
In that sense, I think anybody that has an appetite to be willing to park money away for the prospect of passive income, where you're going to get those checks in the mail every quarter, this is a great option. And doing that through retirement, self directed IRA is obviously one of the good paths for that and why Kerry is here with me today to say, hey, like, this is an option. The tax advantages still apply for foreign assets as well, so we can still do depreciation. Cost segregation. The only thing you don't get is the bonus depreciation. So the depreciation that you get with foreign assets is linear. So you're not going to get the huge depreciations that first year, but over several years, 3% to 7% depreciation or whatever that number comes out to be on a K one.
That's free money in a sense.
[00:22:59] Speaker B: Yeah, that's huge. And absolutely. I mean, you've kind of led into that. And the reason why I was asking about your investors is there's about $15 trillion in self directed IRAs that are looking for investment vehicles, having one that's collateralized by real estate, there's not a lot of that out there anymore. There just isn't.
And having the opportunity in a foreign asset, you just don't hear about that. A US fund investing in foreign assets in these pristine locations that are just chomping at the bit for more access for these international trips, travels. I mean, I just planned an international trip the other day, and I know how much it cost me. Right. And I know what I was looking for, and it was all the things that Martin was describing. Right. I'm looking for those panoramic views. I'm looking for all of those things. So obviously you are looking for that higher end client. You're looking for a client that is adaptable to seeing all of these different properties outside of the United States.
That's definitely the investor group that you're looking for. Self directed IRAs leads very, very well into that, for obvious reasons. And when you start talking about the appreciation, the equity that's being built in this, and investing in a tax sheltered environment, whether it's through the passive side or whether that's through the equity side, it's a no brainer. It's absolutely a no brainer. So we appreciate you working with preferred trust. Now our clients will know a little bit more about the opportunity with Nova House. So thank you so much for introducing that. And at the end, I always like to ask just some random questions just to get to know you a little bit better. You up for it?
[00:24:56] Speaker C: Of course.
[00:24:56] Speaker B: All right. How many properties do you personally own internationally, outside of the funds?
[00:25:02] Speaker C: He's counting four. It's not that many.
[00:25:07] Speaker B: Four.
[00:25:07] Speaker C: But not including the funds. Right.
[00:25:09] Speaker B: Not including the funds, just personally.
[00:25:11] Speaker C: Okay. Yes, four.
[00:25:12] Speaker B: Four. Okay.
Do you rent those?
[00:25:16] Speaker C: Yes.
[00:25:17] Speaker B: Oh, of course he does. He's an investor, people. Of course he does.
[00:25:22] Speaker C: I have a couple of apartments in Beijing.
Those are a little bit more difficult. But long story short is that I got a lot of experience working in different countries, understanding some places work really well, some don't, and having the experience of being in us, Costa Rica, Thailand and China, all with real estate, it occurred to me just how much more money there is to be had and less difficult than you think sometimes if you've picked the right locations abroad and so open your horizons to realizing that there is so much more growth outside the US. U. S. Is an advanced economy with property prices are going up, no doubt, but it's an advanced economy, meaning that the growth expectations are less awesome.
[00:26:09] Speaker B: And where can people get a hold of you.
[00:26:11] Speaker C: I think the easiest thing is just to go to our website, thenovahouse.com.
We also have preferred trust LinkedIn on our website as well if you want to go the self directed IRA route. But they're basically a portal there where you can say, hey, I'd like to know more. You do need to be accredited, and once you fill that form out, somebody from our team will send you an investor packet as well as an opportunity for you to get on a call with our capital advisor and they can run you through everything that you'd want to know.
[00:26:44] Speaker B: Awesome. And what's the minimum investment?
[00:26:47] Speaker C: 100,000.
[00:26:48] Speaker B: 100,000 accredited investors.
International luxury rental properties. Your website said massive passive income, and we're going to end with that, if you do not mind. And thank you so much for joining us today. We truly, truly appreciate it and we hope to talk to you soon.
[00:27:09] Speaker C: Thank you, Carrie.
[00:27:10] Speaker B: All right, thanks. Bye bye.
[00:27:12] Speaker A: Thanks for joining us for another episode of PTC Point of View where retirement savers meet alternative investments. Know someone who's struggling with a retirement strategy? Tell them about our show. Can't wait for the next episode. To learn more, visit our
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