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