Latest / Financial Survival Network / Exclusive Hacks to Profitable Vacation Rentals - Alex Jarbo #5894

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Exclusive Hacks to Profitable Vacation Rentals - Alex Jarbo #5894 · Financial Survival Network

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  If you look at the trends, especially in the last year, the rural
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  markets are doing better than a lot of a lot of the metro markets.
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  A lot of that goes into regulation of just cities banning short term oils completely.
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  The rural markets are rural mountain markets are doing really, really, really
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  well right now and I see that continuing in the next five years. You
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  are listening to Carrie Letts's Financial Survival Network, where you get valuable information you
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  just can't find anywhere else to thrive in today's trying times. You need the
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  Financial Survival Network now more than ever. Go to Financial Survival and Network dot
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  com and get your free newsletter and gift. Financial Survival Network now more than
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  ever, And welcome. You are listening to watching the Financial Survival Network.
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  I'm your host Carrie Lutz. Hey who are in the first week of September.
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  Are to believe time flying by rates keep going up? Will they keep
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  going higher or will they fit capitulate that? Eli's is the question. When
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  you're talking about higher rates, You've got to look at the real estate market.
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  Is that going to cause a crash? Is it going to cause a
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  correction? Maybe not a crash, but softness in the market, even in
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  places like Florida where the market is still really strong. I mean, my
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  neighbor's houses going in three days still, but nonetheless sales are down, but
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  inventories down. With us expert on the topic, Alex Jarba. Alex,
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  you've been doing short term vacation rentals for seven years now, so probably what's
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  going on in the marketplace isn't a surprise to you. How many units you're
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  currently running out there. Yeah, so we have sixteen luxury units and then
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  we're in the process of purchasing a twenty million dollars I call it like a
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  micro resort essentially here as well. Yeah, oh very cool. Hey,
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  so what do you see as the pitfalls, especially with higher rates? I
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  mean, in theory, as long as the demand is still there, you're
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  still getting RRS thirty forty percent, right, So so we just we just
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  underrote a deal on that. Yeah, we're just underwriting a deal yesterday with
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  a partner. I was like, those numbers don't look real, like people
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  aren't going to believe them and whatnot. Yeah, but but hey, but
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  you have to understand, it's not like you know the audience you you out
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  there, our community. You have to understand that running a luxury rental vacation
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  rental is not like renting out a home or a condo on an annual basis.
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  There's a lot of active management that takes place. There's cleaning required,
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  there's restocking because your towels, you know, your glassware, your stiverware disappears
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  over time, all these things and keeping it at the right standard because right,
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  Alex, you're a luxury vacation told people don't expect a ring around the
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  bathtub, do the right. So so really to get an RR it's more
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  akin to what you might in a small business as opposed to real estate.
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  But the vacation short term vacation rental market is rumored to be hitting saturation.
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  What's your experience with that? Yeah, so that the Airbnb bust thing,
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  that's sort of that became popular. That term hashtag Airbnb bust had become popular
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  in the last like six to eight months. I'm a writer for I'm the
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  main short term rental vacation rental writer for Bigger Pockets, and I'm pretty sure
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  that came from one of my peers, and I for Forbes had picked it
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  up and then it just it just went crazy. And it's exactly what you
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  just said. It's it's more like a business. And that's what I've coached
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  over five thousand students in vacation rentals in the last couple of years, just
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  through group coaching settings and whatnot, and the exactly what you said that you
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  have to treat it like a business. The people that it's like a combination
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  of like people are saying it's saturated, but those are the same people that
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  sort of got into short term rentals. When they got into they call them
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  Airbnb's, they just they bought a property because the rates were low, they
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  threw it on Airbnb and they're like, okay, I'm good to go,
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  like I'm done. And what's evolved in the last I would say six months
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  is and it started to happen before there. But it's the people who are
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  utilizing the strategies that I'm going to be talking about now now is are doing
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  way better than the people that are just like thrown up a property on Airbnb.
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  The biggest thing is just going multi platform. So like when someone tells
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  you I'm in Airbnb's that that's not necessarily the right thing to say. I
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  like to think that I'm in hospitality exactly what you said. It's like I'm
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  in vacation rentals for sure, But like when I first started, there were
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  no vacation rental Airbnb books out there. I lean very heavily on like hospitality
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  textbooks that were like taught in universities and whatnot that I would just purchase on
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  Amazon. And just like any other business, you're building an email list,
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  but you're also going multi platforms. So Airbnb, Vrbo, Booking, dot
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  Comic, Spedia and there's like two three. Expedia owns two hundred channels under
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  them, and I look at those as more of marketing arms to my business
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  compared to just where my properties live at. Those platforms are always going to
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  be a part of my business, but the eventual goal is to get the
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  guests as contact info. And the way we do that is we use a
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  service called stai Fi, which is a little disk that plugs into the back
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  of your router and it creates a landing page for your Internet. And just
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  like you're on a Starbucks you're going into the airport, you have to put
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  your email address into get access to the Internet. Same idea, accept it's
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  branded to your company and then we collect everyone. So so like we have
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  luxury rentals that can sleep up to sixteen eighteen people. Outside of just getting
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  the guests email address, we get everyone that's staying with us, and then
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  we remarket to them through a direct booking site. Direct bookings is sort of
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  where the feature of short term is going anywhere. And it's interesting because it's
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  practically going full circle because back in the day before Airbnb v RBO existed,
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  you had to pick up a phone to book a vacation rentals, so it's
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  gone full circle. Yeah, gotcha, all right, So obtaining your clients
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  info very important because when you use the platforms, whether it's Airbnb or vrbo
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  or what are the clones out there, you don't get that. It's kind
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  of like the same thing putting your your podcast up on YouTube. You know
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  people are watching it listening to it, but you don't know who they are
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  because YouTube, the RBO, Airbnb consider them to be their clients, not
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  yours. So you manage to get it by various means, and then you
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  create a mailing list and then I guess, if if it's a little quiet,
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  you do a special right different times of the you know, we send
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  season all emails leading into high season and whatnot, or what if in the
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  summer is coming up, sending emails a month or two before and whatnot.
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  Just the same top of mind. Yep. But like the person renting and
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  doing the short term rental, there's a certain measure of protection that they feel
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  they get from Airbnb and v orbo. If they're not satisfied, how do
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  you bypass their concerns there? How do you overcome them? Yeah, by
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  by taking them off of the platform. So like they're all the guests that
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  we have stayed with us initially have come from the platform. So that's the
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  key there, is to make sure that they have a good experience with us
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  when they're coming from and say, if it's an Airbnb guest, there's nothing
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  against another like people have said, like I've said that before about like taking
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  them off the platforms, there's nothing against terms of service of capturing their info
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  and remarketing to them after they've stayed with you, it's against their it's against
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  terms of service. If they're trying to book with you initially and you're like,
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  hey, here's my direct booking, just do with that, that's an
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  no. But most of the people that are staying. All the people that
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  are staying with us have had a good experience. Who are booking with us
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  again have already stayed with us through one of the OTAs, the online travel
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  agencies, and they've already had a good experience with us. So it's it's
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  a very easy sell, especially send an a seasonal email out that's like,
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  hey, you can save on your service fees or at least partially save on
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  your service fees if you book directly with us. And like I said,
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  they've already had a good experience with us. Hopefully they've had a good experience
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  or it's a it's a pretty easy transition to get them the book with us,
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  Okay, So I can see that and been you're totally compliant, which
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  is important, all right, So going direct, going the different platforms,
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  so you're on every platform out there that exists for short term rentals, yeah,
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  and I mean beyond short term rentals, like and that's the other trend
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  that's happened as well. I said, like you're in hospitality because Marriott has
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  their own platform now four like villas, they're on the luxury side. Booking
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  dot Com obviously got into the business. I forgot when, but they really
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  ramped up their platform on the vacation rental side. Same thing with Expedia.
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  I mean Expedia was never in it. So all these bigger players are getting
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  into it, especially seeing Marriott Marryott was like sort of the Ahama went for
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  me a couple of years back, and just the amount of work that they've
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  put behind that. Yeah, it's just it's it's really interesting to see that
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  evolve. Okay, so so you got choices, you're not just locked in,
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  but how to how to customer complaints get handled to here Alex in terms
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  of on the direct booking side or just when you directly booked them yourself.
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  Yeah, right, So the biggest thing is the insurance pieces Like Airbnb vrbo,
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  the online traveling chiefs they cover, they have a blanket insurance policy.
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  And there are companies out there. I mean I can plug a couple right
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  now, like Safely and superhug that essentially offer not essentially they offer the exact
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  insurance that Airbnb vrbo uses. So that's number one. Other customer complaints.
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  I mean it just goes directly through the platform. So like we use a
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  property manager software called host Away. There's twenty thirty different softwares out there,
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  just like any other if your multifamily or whatever, the snow manager, emailager
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  softwares. Yeah, all all of those complaints are all those things are fed
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  through either through a phone number or through the direct booking site or through email,
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  and then it's fed through our property manager of software, which is then
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  handled with our team. Gotcha all right? Well it sounds interesting, So
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  hey, we're the best markets to be buying now. I like to invest
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  in mountain markets that aren't ski resorts like Ski Resort area, so they mountain
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  markets tend to be a little bit less seasonal. You're looking at the Blue
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  Ridge Mountains, the Spokey Mountains. I want to do something on the West
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  coast next year, or at least a larger project on the West coast,
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  but right now I'm tied to like the mountain markets where they're not historically known
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  as like ski resorts, because they tend to be a little bit less seasonal.
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  Cabin in the woods in the winter is pretty picturesque, but you also
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  have your high season in summer in full. So I love mountain markets.
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  And there's hundreds of these pocket markets throughout the whole country. It's like a
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  lot of times there's smaller towns, they're a little bit more rural. If
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  you look at the trends, especially in the last year, the rural markets
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  are doing better than a lot of a lot of the metro markets. A
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  lot of that it goes into regulation, like of just cities banning short terminals
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  completely. The rural markets are rural mountain markets are doing really, really really
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  well right now, and I see that continuing in the next five years and
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  whatnot. So a unit in a rural market, how much would it cost
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  to acquire and what kind of what kind of cash flow can you get on
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  it? Yeah, so let's talk about my first one. So my very
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  first real estate project slash own like own. I mean, I'm I'm a
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  licensed real estate agent here, I don't practice anymore. But my very first
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  real estate property that I own was an eight hundred square foot a frame that
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  was a ground up development from nothing, which apparently is not normal to have
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  your first investment be a ground up development. But that very that very first
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  one that we built, uh six seven years ago. Now that one cash
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  flows after death service and everything. Last year at cash flow of fifty four
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  thousand dollars. So that's just one and then we ended up building multiple ones
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  of like almost practically the same house. So, I mean, the cash
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  flows are absolutely ridiculous. How much there to cost? How much did that
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  cost to buy? Or how much we yeah goodbye? Now, prior to
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  COVID the construction costs, so I attack like thirty to forty percent to the
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  numbers that I'm about to say right now, all in land cost. We
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  did get a second home construction loan to build that that was only ten percent
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  down out of pocket. It was about forty forty five grand out of pocket.
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  Total it was about two hundred and fifty grand with furnishing, land and
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  everything to build that first one. Wow. So technically my cash on cash
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  if you if you look at the money ironed tested, has been one hundred
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  percent I mean technically infinite at this point, but it's over one hundred percent
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  every after that first year. Yeah, very cool, all right, Yet,
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  how do you find management to keep these places clean in the clean and
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  shining. Yeah. So the biggest thing was I had the management company for
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  the first seven years. I did this so up until very recently, and
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  the most important piece to that is finding a vacation rental cleaning company that you
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  can grow with a company that specifically specializes in vacation rentals, not just like
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  cleaning someone's house, because they need to be there at a specific time and
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  be out in a specific time, so that that step number one is that
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  because that the cleaning company can also handle your maintenance or not your maintenance,
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  your inventory and whatnot, which which they did for me, and then having
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  like a just a maintenance person and just making sure that those people can talk
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  to each other just through their system. So an other side to that is
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  also have virtual assistance, like overseas assistance that are ex. Marriott, Airbnb
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  employees that are used to dealing with guests on a regular basis, and if
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  I can't answer a question or whatnot, like I'm not in the day to
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  day when it comes to the management, but the virtual assistants handle all the
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  messaging if there's something damaged. Usually the cleaners are the first boots on the
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  ground to see if something has damaged that they're either reaching out to the maintenance
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  person or they're reaching out to the virtual assistant. If it's something like really
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  serious, Yeah, okay, that's the biggest concern often is the management and
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  the cleaning services. That's what my friends have said they've had us, so
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  yeah, cleaning servisus it. Like I said, a cleaning service that you
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  can grow with that that's very important, right yeah, all right, Hey,
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  well I think we got some good insight here. We'll have you back
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  on again to go more in depth. Maybe show us a couple of year
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  units and show us some spreadsheets because we love numbers on this show. You
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  got a question for Alex or myself, shoot me an email kl at Carey
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  Leutz dot com. The link to Alex's site is in the show notes to
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  Financial Survival Network dot com. Just tell us your site, Alex so people,
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  Yeah it's all yeah, it's open Atlas dot Investments. No dot com
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  just open outless dot investments. Yeah, that's our current offering right now.
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  Great, all right, link is in the show notes. Like I said,
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  on Financial Survival Network dot com, make sure you sign up a fear
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  free newsletter. Alex's been a pleasure. We'll look forward to speaking with you
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  again, and good luck through this tough environment. I appreciate you. Sorry,
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  thanks for listening to carry Lets's Financial Survival Network. Your solution to today's
• 15:43
  trying times For the latest, go to Financial Survival Network dot com. Financial
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  Survival Network now more than ever