Eric: Welcome to Construction Genius. My guest today is Alex Jarbo. He's a short-term rental developer and manager born and raised in Detroit, Michigan.
He served in the Marine Corps for four and a half years, where he was stationed in Washington, D.C., a part of the Marine Corps Honor Guard. He left the Marine Corps, 22 years old, to pursue his career as a real estate professional. He is the founder and CEO of Sargon Investments and has a goal of developing 650 cabins. In the next three years, he holds an MBA with a concentration in real estate development, and is currently finishing a doctorate in business with a concentration in leadership. He's also the host of the YouTube channel, Alex Builds, where he teaches the ins and outs of short-term development and management.
You might be saying, “Wait a minute, Eric. Why are we talking short-term rentals on Construction Genius?” There is one simple reason. You might have some cash burning a hole in your pocket at the moment as the owner or leader of a successful construction business. Stock market, as of September 2022, date of recording, is not so hot and you may be thinking about how to deploy some of your hard-earned wealth. Short-term rentals may be an option for you. [01:05.0]
I'm interested in talking to Alex because of his perspective on running short-term rentals and building wealth through that particular vehicle. I think you'll have some tremendous insights that you'll find useful. We also dive a little bit into his Marine Corps story and what he learned from being part of the Honor Guard, specifically about staying in the moment in times of extreme circumstances for others.
Enjoy my conversation with Alex. I know you'll get a lot out of it, and if you like this conversation, feel free to share it with other people. You're listening to Construction Genius.
This is Eric Anderton, and you're listening to “Construction Genius”, a leadership masterclass. Thomas Edison said that genius is one percent inspiration and 99 percent perspiration. If you're a construction leader, you know all about the perspiration, and this show is all about the one percent inspiration that you can add to your hard work to help you to improve your leadership.
Eric: Alex, welcome to Construction Genius. [02:09.8]
Alex: Oh, thanks for having me on, man.
Eric: You know what's interesting, I was checking onto your bio and you started off life as a Marine Corps enlistee. Is that right, as far as your career? Tell us a little bit about that.
Alex: Yeah, I served four and a half years in the Marine Corps. I was a part of the Marine Corps Honor Guard. I was mainly stationed in-- I was an infantryman by trade, but I was selected to go to Washington, D.C., to be a part of their Honor Guard there. That's usually a two-year duty station, but they decided to keep me for four years.
I was in charge of any type of dignitary, any type of anything that would come to the United States, traveling with the presidents. We would come, essentially, greet. I didn't travel with that detail, but that's essentially what we did, handled all the funerals at Arlington Cemetery. I was in charge of the 21-gun salute team by my last couple years while I was there. Just a really humbling experience that was, where I probably did 350 funerals, just stood guard at on 21 gun salute by the time I got out of the Marine Corps. [02:58.2]
Last six months, last eight months of my enlistment, I sort of decided I didn't want to reenlist, so I started looking at different avenues, whether it be real estate, stock market, crypto. Real estate really caught my attention, just in general, just because I enjoyed the investing in real estate. I enjoyed the control over real estate compared to some of the other asset classes, so I joined a flipping mentorship while I was still in the Marine Corps.
What I realized was the person that was in charge of that flipping mentorship, that all their long-term wealth was tied into short-term rentals. They would flip and then they would essentially use that excess capital to invest in short-term rentals, back in 2015 and 2016. But I got them on a call and I asked them different questions regarding how to choose a market and how to choose a good short-term rental. He helped me decide on the market that I'm currently in, which is Asheville, North Carolina.
Eric: I do want to go back just real quick. The Honor Guard process, what was it about you that qualified you to participate in the Honor Guard?
Alex: You had to be a certain height. I know that's one, and, two, you had to be willing to do it, so they would pull you straight from infantry school. They would interview, so the way this was--
Eric: What's height, by the way? [04:01.6]
Alex: I think it doesn't exist anymore. At the time, it was 6’1”. 5’11”, 6’1”. It's just if you look at the ranks, because we used to do all the Friday night parades and stuff as well in D.C., which, for anyone who doesn't know what that is, the Marine Barracks Washington parades, it's like 5,000 people every Friday in the center of D.C. It's really cool. I think they're free as well, but just to maintain the ranks and the order, it just made sense to keep it, and I think there was a height limit as well of 6’7” or something just to keep everyone pretty uniform.
But you also had to be willing to do it, because a lot of guys-- I mean, some guys were voluntold, like, Okay, yeah, we'll take your opinion into consideration, but we want to take you. You had to sort of be willing to do it as well because a lot of guys just wanted to go to the operating forces and deploy and do their own thing. I guess those were the two biggest things.
Eric: Okay, interesting, and what would you say is the number one thing that you took out of the experience?
Alex: It's difficult to boil it down into one thing, but, I would say, the biggest thing is just the importance of having good mentors in your life, just strong people to help you. I just understood the importance of having structure in your life. I mean, the military is the definition of structure. Everything is structured to a point where it's almost negative. [05:09.8]
But having some sort of [structure], especially with being on your own, if you're on your own or being a business owner, some people talk about financial freedom, but a lot of times, I mean, it's difficult to motivate yourself. With having a structure in your life or some sort of structure that you adhere to, whether it be a schedule for your day, you can lean on that structure if you're not motivated or if you're just not, I guess-- The structure has been super helpful. That's what I took from the military.
Eric: What about just the fact that you attended so many funerals, did it become just routine for you? Was there any aspect of that that brought us sort of sobriety to your life or an understanding of the significance of death or anything like that? I'm just curious.
Alex: Yeah. No, I mean, I’ve never been asked that before. I think it almost made you, because, yeah, it got to a point. Hope I'm not offending anyone by saying this, because, again, I’ve never been asked this before, but it did get to a point where you catch yourself. It wasn't like we lived, went on about our days, but you catch yourself where, some days, if you're on the 21 gun salute team and it's your week to do the funerals at Arlington, some days you would do five funerals in a day. It's very difficult to just not get caught up in that, “Okay, this is just another funeral. [06:13.2]
With that being said, you almost have to catch yourself at every single funeral and live in the moment and understand that it could be such a pivotal moment in a lot of people's lives, especially if there's kids, grandchildren at the funerals. They will remember this for the rest of their lives, so that's why I was understanding that and sort of, I guess, living in that moment and just understanding the importance of that.
I’ve never really actually thought about how that sort of translated to what I do today, but I guess taking it one day at a time would be really important, in terms of what I need to focus on today to help me get through this week, this month, and my goals and stuff.
Eric: It’s interesting, though, when you think about how you were playing a sort of a part in a ceremony, and if you're not careful, it can become sort of rote, and like you said, because it's so unique for obviously the families participating, there is an intentional grounding of yourself that you probably had to go through in order to stay in that moment. [07:07.6]
Alex: Yeah, no, absolutely.
Eric: Okay, so you got out of the Marine Corps. You go to a flipping workshop, right? As soon as you say flipping workshop, I'm thinking, you're sitting at home watching TV at night and Shark Tank is on, and then the flipping workshop commercial comes on.
Alex: Yeah, yeah, that’s true.
Eric: You know what I'm saying?
Alex: Yeah. I mean, it wasn't necessarily like an infomercial, but it was like, I mean, obviously, I saw the stuff online through some free content. I learned a lot in that world because, I mean, I just like learning about different real estate assets, in general. I try to read off different, like self-storage, multi-family, single-family, everything, because at the end of the day, it's just numbers. There’s different ways of evaluating different types of properties, but those things bleed into each other, so understanding different real estate classes has been very, very helpful in what I do.
Eric: Again. I just want to go back. Prior to getting to the Marine Corps, were you thinking Marine Corps and then something else? Were you thinking I'm going to get into business for myself? Did you have that mindset as a child? [08:01.0]
Alex: Not as a child, but definitely out of the Marine Corps. I never thought I was actually going to go to college. I don't know, I thought I was going to stay in the Marine Corps, retire, 20 years and retire. I didn't leave the Marine Corps because I hated it and I think a lot of people will leave the military because they despise it. It wasn't necessarily a grass is greener on the other side type thing. It was just more I felt like I wanted to do more.
When I got out on top of starting everything, I got my undergrad in business. I have an MBA in real estate development and then I'm finishing up a doctorate here in business. But I just wanted to go to school and just do my own thing, and with that being said, when I say my own thing, I had a plan. A lot of people say, “I just wanted to do my own thing,” and that doesn't mean I live day to day. There was a plan there that I wanted to get into short-term rentals. I just didn't know what that was going to look like.
Eric: Let's just walk through that. Why BA, MBA, doctorate? Why are you doing that?
Alex: Yeah, we're getting deep here, man, which I love. That was, honestly, to just fill my schedule, initially, because I went from working 70, 90 hours a week to essentially nothing. I forgot who, it must have been one of the senior Marines or someone that had recently gotten out that was like, find either a hobby or something to keep you busy initially, if you don't have a job or something lined up, because you'll lose your mind, which was true. [09:11.2]
When you're used to a certain tempo and then you just cut that off, people don't realize that. Maybe you don't want complete full control of your time or maybe, like I said, the structure piece where it was structured to a point where it wasn't detrimental, but it was like you didn't realize how much of your day was actually structured. You don't realize how much of your day is actually structured in the military. That kept me busy and it also paid my bills, because a part of the G.I. bill, they, they pay for your housing while you go to school.
Eric: It's interesting, because when I work with my clients, you get guys or gals who come out of college. They have their construction management degree. They may even have a more advanced degree and they walk onto the job site and--
Alex: Nothing.
Eric: Right, and they're clueless, right? But they think they're not. How do you balance your academic knowledge with the real-world knowledge? How do those two things play together in terms of how you run your business? [09:59.7]
Alex: I had development experience before I went into that MBA, in terms of my first two projects. Again, that's not a lot, but I looked at that as just I wanted an MBA and then Liberty University online offered a concentration in real estate development. I was curious what that world looked like. That was more, honestly, looking back at all the classes for the real estate development piece, there were probably a couple real-estate-specific development pieces where you got a textbook on real estate development, which is really cool. I love reading textbooks on real estate development compared to a book written by someone. It's way more technical. It's way more technical.
Eric: Okay, and you're comfortable in that world. You like that sort of data--
Alex: You have to. I mean, you have to understand your numbers in construction, for sure. But, honestly, the real estate, the MBA and real estate development was more of a real estate financial analysis degree, which [was about] how do you value a property outside of just how to read a budget or whatever? That was super helpful outside of the multi-family books I read. I learned a lot about internal rate of returns, IRRs, and stuff that the novice real estate investor doesn't really get into, like net present values, future present values, all that fun stuff. [11:11.4]
Eric: Take us a little deeper dive here. We have this idea of short-term rental. I know many of the guys and gals who are listening to the show, they run construction companies. They make good money. They have perhaps excess income. The stock market is not looking so hot right now, etc., etc. Why short-term rentals versus long-term rentals?
Alex: We can get on the good and the bad of that, but the reason I got into short-term rentals over long-term rentals was just the cash flows. I mean, for example, this property I’m about to talk about was built prior to Covid, but we've built properties after Covid. My very first property was an A-frame 800-square-foot. It was just what I could afford at that time, back in 2016, 2017, around there. I think ’17 was when I started renting it out, but ’16 is when we built it.
That one, in the last two years, last year, it did 84,000 in gross and it netted 46,000 after all bills were paid. That was the power of it. If that was a long-term rental, I probably would've cash-flowed maybe $300 to $500 a month off that, maybe 1,000, if I was lucky. I'm cash-flowing four to five grand a month off that one rental alone. [12:10.8]
That was the draw. There was a massive amount of upside, if you did it right. From a development piece, there was really not really a big difference between if it was a long-term rental or a short-term rental. There was no difference.
We develop our properties with full kitchens and full bathrooms, permanent foundation, stick-built houses, so that also plays into there's a built-in exit. If it doesn't work out as a short-term rental, you can sell it. You can sell it. Before Covid, we were able to underwrite them as long term rentals. That was a backup before selling it, but, obviously, everyone listening knows the higher cost of everything now. The exit is to sell it to a couple or a family, if it doesn't work out.
Eric: This is fascinating. What is the biggest hassle in short-term rentals?
Alex: I mean, it is more tedious and there's more day to day, right? Instead of having a long-term renter in there that, maybe besides a couple maintenance issues, you don't really hear too much about people who are constantly coming and going. [13:03.4]
Now, with that, we've automated almost all of our management side of the business, so the three biggest things are going to be messaging, dynamic pricing, which I’ll talk about in a second, and then just your cleaning crew. I've gotten away with not hiring an operations manager, because what I realized was my boots on the ground was my cleaning company. My cleaning company is going in there anytime between one to three times a week to clean the property, but they're also inspecting the property. The downside of short-term rentals is there's just more management, but there are tools to help you manage that piece.
Eric: Take us a deeper dive. Give us more on this messaging, dynamic pricing, cleaning crew, all that kind of stuff. Tell us, because let's say I’ve got a chunk of cash and I'm thinking, Okay, how can I deploy this? I hear short-term rentals. Give me a little bit of day to day here. What's going on? What are you doing day to day?
Alex: Yeah, we'll start with the 30. My value to my business at this point, what I realize is looking at land, so I'm really good at assessing the highest and best value in the short-term rental world, like just when we're looking at raw land to develop from scratch. [14:00.2]
Eric: How much of your stuff are you developing from scratch?
Alex: I'd say 70% of it, yeah.
Eric: Okay, 70% you're building from scratch, and then 30% you're buying an existing property.
Alex: Existing property with land. There's some sort of maybe two to four acres, two to 10 acres, whatever, at least two acres where there's room for future development. We'll rehab that property, if there's some sort of rehab that needs to be done, a minor one, 10,000 to 15,000, and then we'll rent that out. While that cash flows, we build more, and, obviously, we play around with construction noise and all that fun stuff.
Eric: When you say you're building more, what size properties are you buying? Or what size properties are you building?
Alex: Yeah, anywhere between you can go as small as 500-square-foot and I don't like to build over 2,000-square-foot.
Eric: Why don't you want to build over 2,000?
Alex: It's more what I’ve found is the sweet spot for how many how. It's not necessarily size. It's how much a property can sleep comfortably. I like to stick within the four to six people, so a two-bedroom, a three-bedroom property. I mean we do the studio apartments as well or the studio-- we have an A-frame that's 500-square-foot that has a king bed and then a queen pullout couch. That's four people. It's like I haven't developed 32. The biggest cabin we have, that can sleep 14 people. That one can sleep 14 people. That one is 3,200-square-foot. [15:15.3]
That one, there's more lead time when it comes to booking a property. Nobody plans a 14-person getaway or trip on a whim compared to four- to six-person properties where people will take random weekend vacations. They'll book that same month. You'll get a lot of last-minute bookings. It's not necessarily a bad thing as long as your team can handle it. But those tend to have higher occupancies, and if there's some sort of unique aspect to them where they're designed properly, those tend to rent better.
Eric: What is the connection between the number of people in the house, so you’ve got your four to six and your 13, and the amount of hassle in terms of the cleanup and the issues, and the partying and all that kind of stuff?
Alex: With the larger ones, we try to, like the log cabin that we just purchased, we like some sort of buffer between the neighbors, because to say that you're not going to have some sort of party with 14 people is ignorant, in terms of it's a get together. There's going to be family and friends that are getting together. We like to have some sort of buffer between the neighbors. [16:10.2]
We think about the neighbors a lot. We don't want to be known as this big, bad developer, because that's the stigma, right? The big bad developer coming into the community and just destroying it, so that the bigger properties, that’s what we focus on. It’s having some sort of buffer.
Then when it comes to a correlation with parties and four to six people, obviously, trash. Cleaning crew hauls all the trash away for the larger properties. Right now, we're developing these six- to 12-cabin communities, just because there's more scale to that type of business model, these micros-resort communities where there isn't really too much of a management. There's scale when you get bigger, right?
When it comes to the messaging and everything, we have virtual assistants that handle a lot of our messaging. If all the properties are in the same area, it's easier to send a cleaning, a bigger cleaning crew out there that same day, if there's multiple turns. Same thing with messaging. The VA understands the area a little better if they're all clustered in the same area. [17:06.2]
Eric: Just right now, how many properties are under your control?
Alex: Yeah, we have 14 and then we're developing 24.
Eric: Okay, and what's your goal? What's the long-term goal?
Alex: Yeah, I mean, I have some pretty lofty goals of doing 650 units in the next three years, and the way we're doing that is, right now, we're getting under contract with two log-cabin court communities. One of them has 10 acres attached to it that we can develop. It has seven cabins on it that we can develop another 10 on. That's how I plan on getting to those bigger goals. It’s purchasing already-built properties on a pretty large scale and then developing more on them.
Eric: Okay, so short-term rentals. Let's say I get myself a short-term rental. Now, there's a couple of things here. I'm hearing that you're building and you're renting in resort areas. Am I hearing that correctly, because of the cabin aspect of it?
Alex: Yeah, cabin aspect, I always like to tell people that these little pockets, though, don't have to go out and find a brand new market. I recommend starting in your backyard, but when I say in your backyard, it doesn't mean in your same city. It might be, but I like to say that there's always an area where you live, where people to take an extended weekend vacation or even a weekend vacation. That's where I recommend starting. It’s that. [18:15.7]
Eric: So, I get started and, obviously, the default for a lot of people is Airbnb, Vrbo. What are your thoughts on that? How do you handle all of that kind of stuff?
Alex: Yeah, no, phenomenal question. Up until probably a year and a half ago, I was exclusively just on Airbnb and then I switched over to Vrbo to where I was on both of them, and what I’ve realized in the last year and a half just through my own coaching and teaching other students as well is that Airbnb and Vrbo should just be looked at as a marketing arm of your business.
Now, when you're first starting, it's fine to just be on Airbnb and Vrbo to get those reviews, cut your teeth a little bit and understand the management fees, if you're managing them yourself. But if you're looking to do bigger communities or bigger projects, or if you're looking to build a bigger portfolio, I'd recommend really focusing on treating it as a business compared to just your property living on Airbnb. Right? [19:06.2]
With that being said, that means building out a direct booking platform. Start to bring in your own business, and the quickest way to do that is there's a company out there called StayFi. What they sell is a little disk that plugs into the back of your router. It creates a landing page for your guests. I actually just wrote a BiggerPockets article on this. It creates a landing page for your guest, where they have to input their email address to get access to the internet. We capture all the guest emails that come through our properties. The guest will come from Airbnb and Vrbo. We'll capture the email, and then we remarket to them and then push them to our own direct booking site. That's one way to do it. That's the quickest way to do it.
I just saw some comments on my BiggerPockets article saying it's illegal to do that. It's illegal to take the guest off the platform, if they're trying to book with you, initially. I’ve read the terms. Someone tried to quote them at me. There's nothing wrong with taking them off the platform after it. I mean, the argument can be made, but I mean, there's thousands of people doing that now. There's not really a way for Airbnb to catch that and no guest has ever complained. We've hosted over 400 people this year. There's no guest that's ever complained about having to input their email address. [20:14.4]
Eric: What is the advantage of just staying on Airbnb or Vrbo, if any?
Alex: Just the systems, like you don't have to worry about building out your own platform or anything. I mean, that's the biggest advantage. You're looking for eyeballs. You're looking for places to put your property that has a lot of eyeballs and Airbnb is number one on that.
I'm not knocking Airbnb and Vrbo at all, but it's just like you have to understand when you do that, Airbnb controls your business. If something goes wrong that's out of your control at your property, maybe with a guest, and a lot of times they will side with the guest’s side. It's like you have no control over that in terms of if they decide to take your property off Airbnb, which I’ve seen happen to a lot of hosts.
Eric: What's an example of Airbnb siding with the guests?
Alex: Here's a really good example that I'm happy that you asked that. A year and a half ago, a year ago, I would say, because it happened during leaf season, October, about a year ago. Leaf season is our busiest season. We can charge double or triple rent-- [21:09.4]
Eric: Just tell us where you're at so we appreciate the leaf season.
Alex: Yeah, Asheville, North Carolina, so fall season.
Eric: Lots of leaves in Asheville.
Alex: Yeah, yeah, pretty leaves, right? I had this come through. They had booked, I think, four nights and our rate was $300, $400 a night. I had already known that that guest was probably going to be a little bit more high-maintenance just based off the questions they were asking.
Eric: Yeah, right.
Alex: The amount they were asking. So, they checked. We know when the guest checks in based off-- we use electronic locks that track when the specific codes are entered and blah, blah, blah. They checked in at 3:30 and then I get a notification from Airbnb and also a message from the guest that, essentially, they got their funds refunded and that they were leaving the property.
Essentially, what happened was the guest said that they walked in and the whole place was a complete mess. There were dishes everywhere there. The sheets weren't redone. The biggest thing was there was dog hair everywhere where it's like, there was dog hair on the sheets. The lady had said she was pregnant, so she was very sensitive to that smell and then she had thrown up, and blah, blah, blah. I was very, very worried about that because my cleaning crew at that time had never missed a cleaning, period. [22:17.0]
I called the manager of the cleaning company. They managed close to 100 properties now for just cleaning, and I had her go out there because the guest wasn't there anymore, and she had said, she called me and she was like, They stayed here. They brought a dog with them. We have one camera that's always facing the driveway. You're allowed to do that, just to monitor parties or anything that is happening, but for stuff like that, and we checked it and the guest had brought a dog with them. I don't allow for one-night guests. I have a minimum of two nights in all my properties. That deters parties. I think that was the way, I think that is way to .
Eric: Is that the reason you do that, the one night just to deter these parties, the two nights instead of one?
Alex: What I’ve realized is a lot of times, I would say, maybe 40% to 50% of the time, some guests are coming in at night. They'll check in at 9:00 p.m., 10:00 p.m., and then they have to check out at 11:00. It's like they already don't have a good experience. A lot of my bad reviews, honestly, come from one-night guests and it's not their fault. They're staying in the property less than 10 hours. [23:10.8]
I think that was one way they got around the one-night booking thing and then they got their entire stay refunded. They also cooked the meal on the property. They checked in at 3:00 p.m. and checked out at 11:00. They probably stayed at a hotel that was really close to that property.
But what happened, what came from that was they called Airbnb and told them, complained, essentially, what they lied about, which was what I just said. They refunded them. They took away something called a superhost status, which is what my company had, and then they also blacklisted my property. They blacklisted my property until I had everything figured out with them, essentially telling them that the guests lied. Some other stuff had happened, some smaller stuff and I'd seen with hosts, but that is where I really started to think about direct bookings. [23:54.2]
I put 12 months from finding the land to closing on the land, to developing it, to furnishing it myself, the very first one. I put 12 to 14 months into it. I didn't respect the fact that a company can control my property over something that I didn't even do. I say that. I don't want anyone to be scared and be like, Oh, my God, no, that's a horror story based off close to 1,000 guests we've had so far.
Eric: Yeah, but it happens and you're in that position. That's one of the things where people are like, Okay, I got this cash, and you're talking short-term rentals. Do I want the hassle? All those kinds of things. How do I get started in short-term rentals? If I want to try it out, I want to dip my toe in the water, is it a dip your toe in the water kind of thing or is it plunge all in, because if you don't plunge all in, you're not going to get it right? Give us something on that.
Alex: When you're purchasing a property, make sure there's something unique about it. I think unique markets, not a unique market, [but] if you have some sort of market where people are traveling to, stack it with some sort of unique property. When I say unique property, it's going to be different everywhere, depending on where you are in the country, even internationally. Log cabins in the woods tend to do very well. That's sort of picturesque. Especially, I’ve seen that unique properties are a little bit less seasonal. [25:03.5]
On top of a seasonal market, the unique properties tend to be a little bit less seasonal as well, because I like to say Instagrammable properties. Yeah, that's social media right now. People are posting. You want your guest to be proud of where they're staying at, and if they're posting it on social media, that's killer. I mean, that’s free marketing right there, too. That's what I like pushing people towards just some sort of unique aspect.
Now, if you're purchasing a property and you don't want to develop or maybe you just want to, I guess, dip your toes, when I say dip your toes in the water, when you say dip your toes in the water, I just like to say that your exit is selling the property. If you're developing it, your exit is selling a property. I mean, there's still an inventory shortage. I think there's going to be an inventory shortage for the next couple years because it's going to take some time for that to catch up. It's getting better, but you can always just sell the property if it doesn't work out. But the unique properties, the property becomes an experience in itself during the slow season and then during the high season, the market becomes the attraction, so there’s a little bit of a seasonality. [26:04.4]
Eric: Say that again. Say that again.
Alex: During the slow season, the property can become the attraction. It becomes the experience in itself, and then during the high season, the property could still be the attraction during the high season, but you're in the high season for that reason, and high season can mean different things in different markets.
Eric: That's interesting. Okay, now, you've made a conscious decision, it sounds like, to go with smaller properties because I follow some dude on Twitter and this guy is blowing out short-term rentals, but super-luxury, just mind-blowing stuff. Why have you gone with those? You've told me already with the number of people. Is that the main reason why you've gone with the smaller properties over the larger?
Alex: For some reason, the numbers don't correlate. If you have a property that sleeps seven, say, six people at a property that sleeps 12 people, what I’ve seen, at least maybe it's market-specific, but I haven't seen a direct correlation is you can charge twice as much for that property. That's the reason I think four to six is that sweet spot. It’s like there's some sort of barrier of maybe starting at 100 to 150 a night, and then going from there, depending on where you are in the season. [27:07.0]
But, yeah, that's why I do that, because there isn't a direct correlation between how many. There isn't a direct correlation between the larger properties and the smaller ones, and also with the luxury stuff, because we don't go crazy premium finishes on everything. We sort of rely on the structure, whether it be a log cabin, A-frame cottage, chalet type of property, to sort of speak for itself compared to the finishes. Honestly, the guest doesn't care if you have a standing seam roof compared to a corrugated roof. They really don't care. I know if you're looking at it as a GC--
Eric: How do you know that? How do you know they don't care?
Alex: I mean, you can just look at the reviews, the reviews we have on our properties and how much they make. Maybe if someone's a tradesman or a person that works in construction, they'll be like, Okay, damn, they spent a lot of money on that standing seam roof, but a normal guest coming in, vinyl plank flooring, they, honestly, I’ve seen they don't care.
We like to do granite countertops because they're durable, but they're so odd by the actual property itself, and you can get away with some interior design pieces, accent walls, and something that sort of speaks for itself that helps the property compared to just the premium finishes. And trying to find people to do that stuff right now is very difficult. A lot of luxury materials are on backorder. I mean, that's my spiel on that. [28:15.6]
Eric: What's your part in the business, the business that you've developed? Yeah.
Alex: Yeah, I mean, I find the land and I coordinate the financing, because I have investors that I bring on, and then I push everything to a GC. I'm usually the person who is sort of putting together about 80 to 90% of the floor plan. My GC is obviously coming back at me, telling me that's not going to work. In terms of finalizing everything, I find I put together the community, whether the look of the community, I like to go with some sort of theme. If you look at my website, cottages, A-frames, barn style type of houses, log cabin, log cabin communities, some sort of theme.
Then, for the most part, I'm choosing the floor plan, and then from there, my GC, depending on how big the project is, it’s filling in the blanks with framing plans, electrical plans and all that fun stuff, foundation plans. I’ll put together the community without having the foundation plan, without having the land, and then depending on what the land looked like, we’d put the foundation together, the foundation plans together. [29:12.4]
Eric: Oh, interesting. What if I’ve tried short-term rentals and I’ve failed miserably? It’s like some guy drives Uber for two weeks and it sucks and so he stops, but I know this is not quite the same thing. But I’ve got myself a short-term rental, been on Airbnb, and Alex has got three horror stories. I've got 12. What, what can I do to maybe reset or what do I need to focus on there?
Alex: Yeah, the days, the days of just purchasing any type of property and throwing it onto Airbnb and it’s cash-flowing crazy, I think those days are gone, especially with higher interest rates now. You really have to look at, you need to ask yourself, one, can I furnish it properly for it to be appealing to guests? But, two, is there something unique either in the land, the property itself, that is, there's some sort of draw to the property, to even the land if you have mountain views or whatever? Is there a draw to the property? [30:03.6]
That's number one, and then number two, I’ll tell you from a list. Say, you just developed a property or just purchased an awesome property that you've done your analysis on and blah, blah, blah. I think it's “the” most-- I’ve probably helped over 100 students just re-optimize their property. “The” number one thing and it's the simplest thing, it’s making sure you have good pictures, just like if you're listing a property. That is what's going to catch the guest’s eye. We love doing drone photos. Airbnb doesn't allow it. Vrbo allows for 3D floor plans, and then, also, they allow for video, so we almost shoot a commercial. If you're on Vrbo, we shoot a commercial for our properties where it's like you're advertising your property. Pictures are the number one thing.
Then, the number two thing that people don't think about is the listing description, the words that you're using for your property. Vrbo and Airbnb, at the end of the day, are just search engines. They have a search bar, so there's ways to optimize. There’s SEO parameters that you can follow to help you optimize a property better. [31:01.5]
Those are the two biggest things when it comes to the management piece. It’s good pictures and then optimizing for SEO, for Airbnb and for Vrbo. I use Fiverr for that. I don't write my own listing descriptions. There's people out there that can write them for you for 100 or 150 bucks where they'll write. They'll write your captions to your pictures and everything, and it's optimized for the specific website.
Eric: Okay, tell us a little bit more. Obviously, you're developing your own properties, Alex, but what else are you doing that can help people listening and may want to get into short-term rentals?
Alex: Yeah, I recently put together or I spent the last six months putting together, on and off, a short-term rental development course. It's over 120 videos. There's group coaching in there. There's templates, checklists. There's furnishing templates, furnishing checklists of what I use, item by item. I, essentially, took a construction checklist and created a furnishing checklist, so that's a big thing that's in there of all of my properties. There's workbooks where you can follow along with the videos. I take you from A to Z. [31:59.3]
I think a huge benefit to your audiences, you guys are going to understand maybe the first couple sections already, because you guys are going to understand some sort of the development process already, and then there's also three sections at the very end. There's 10 sections total, but there's three sections at the end that dive into management. It's like, okay, I understand how to develop a unique property or whatever, but I don't know how to manage it, so there's a management piece in that as well.
Eric: We're talking A to Z as far as short-term rentals are concerned? Everything is included.
Alex: Yes, I tried to create a course that I wish I had when I started six years ago. I mean, I did it yesterday. It's also become a hub for me, because I'm using these templates every day. The templates and everything that I teach, I'm using these checklists every day in my business.
Eric: Excellent. That's excellent. If people want to get more information, learn more about the course, how can they get hold of you, Alex?
Alex: The easiest way to do it is just go on my personal site, which is AlexJarbo.com, A-L-E-X J-A-R-B-O [dot] com. If you want to go directly to the presentation, the video that sells the course, that's going to be EDBSTRMasterclass.com, or I'm sure it'll be included in the show notes, but, honestly, the quickest way to do it is just to go to my personal site. [33:06.0]
Eric: Excellent, excellent. Alex, we'll put that link in the show notes. You've been very generous with your time. Let's just end it with three action items. What are three action items I should take immediately if I want to get into short-term rentals?
Alex: Yeah, number one is understanding that access to the property can be just as important as the property itself, so you’ve got to think of the whole guest experience. Working with a real estate agent, I recommend working with a land agent. That, specifically, deals and selling and purchasing land for the sellers and buyers. That's number one. It’s understanding that the guest experience starts with the drive to your property, so making sure that your guest isn't going 30 minutes up on gravel road to get to your property. That's number one.
Number two is just hopping onto Airbnb and just looking at what-- Airbnb recently redesigned their website, and here in the last three months, they showcased the most unique properties in the area. That's a very quick way to figure out what's unique to your market. It’s just putting in the address to your market or your city, and then seeing what comes up. [34:07.2]
Then, number three, honestly, would be really just doing your research on just how to manage a property. There's a lot of really good free resources out there on just short-term rental management, in general, BiggerPockets has really stepped up their game with that. That was one of the reasons they brought me on as a blogger.
Eric: Last question. You're in Asheville, North Carolina. If I'm out there, what's the one restaurant I’ve got to hit?
Alex: Gosh, yeah, this is phenomenal. Surprisingly, for how small it is, it’s a really good foodie city. It's a restaurant on a property. You have to go to the Grove Park Inn and the Sunset Terrace. Those are primo. That's sort of like a hidden gem in the city. Everyone knows the Biltmore Estate, the biggest privately owned house in the country, but people don't know about the Grove Park Inn, which is a beautiful hotel.
Eric: Okay, Grove Park Inn and the Sunset Terrace at the Grove Park Inn?
Alex: Yeah.
Eric: Excellent, excellent. Alex, you've been very generous with your time and your insights. I appreciate you joining us here on Construction Genius. [35:00.5]
Alex: Appreciate you, sir. Thank you for having me on.
Eric: Awesome.
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Eric: This is Eric, and before you bounce, just want to thank you for listening to Construction Genius here today. Feel free to check out Alex's website, AlexJarbo.com, and also his website for the course that he's developed on how to invest in short-term rentals. The links are in the show notes. If that's something you'd like more information on, go and check out those links.
Feel free to share this interview with other people that you think would benefit from it. Let me know if you liked this interview of a topic like this, which is not directly construction-related, but has something to do with using your funds wisely. If you liked this episode, let me know. I'd really appreciate it. Feel free to share it with other people. Give us a rating or a review, wherever you get your podcasts.
As always, thanks again for listening to Construction Genius. [35:48.8]
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