165. Short Term Rental Development and Management with Alex Jarbo

Average Joe Finances: 0:00

Hey, welcome back to the Average Joe Finances podcast. I'm your host Mike Cavaggioni and today's guest is Alex Jarbo. So Alex, super excited. Thank you for joining me today.

Alex Jarbo: 0:10

Oh, thanks for having me on, man.

Average Joe Finances: 0:11

Yeah, absolutely. Hey, I wanna start things off the same way I start every podcast episode, and we wanna know more about you. So if you could share a little bit about yourself, tell your story who is Alex Jarbo?

Alex Jarbo: 0:21

Yeah, man. So I'm the CEO and founder of Sargon Investments, which is a short-term rental development and management firm. And where I got started at, if we wanna go all the way back, was coming. I served four and a half years in the Marine Corps and I was coming on the end of my enlistment and I just had decided that I didn't wanna reenlist. I was stationed in DC at the time and I just started diving last year of my enlistment. I started diving into a lot of different, like just looking at different asset classes, whether it be stocks, crypto, real estate, and M&A just, or overall business stuff. And real estate had really caught my eye and just cause I liked the complete control you had over it. So I dove really deep into that. Learned flipping multi-family. Any self-storage book that was out there at the time, mobile home park books. And I originally landed on flipping and I had joined a flipping mentorship while I was still a part of the Marine Corps. And what I realized was the gentleman that ran that flipping mentorship, all of his long-term wealth was tied into short-term rentals. And so I got him on a call. And I was like, this is awesome. I love the unique aspect of it. I come from a hosting family, so I was like, I love the hosting piece to it as well. And he had showed me his like cash flows and his numbers and they were just insane compared to like long-term rentals. And so I like, at that point I had decided, okay, I want to get into short-term rentals. And he had helped me decide on a market. And then once we decided on that market, the day I got out of the Marine Corps is when I drove here. And I had some money saved up and I had a place set aside cause I had visited prior to that. But the day I got out of the military, moved here, got my broker's license, my real estate license, and then I started looking for a short term rental for myself. And what I realized really quickly at that time was everything was either even back in 2015 and 16, everything was either way out of my price range. Or it was in my price range or it just wouldn't have done well as a short-term rental. It maybe would've done well if I would've pulled like a long-term tenant in there, but not a short-term rental. So my very first real estate investment was a new construction ground up development that we owned to this day, it's an 800 square foot a-frame and one turned into two really quickly, two turned into four, brought on some investor capital, and today we're developing 10 million worth of cabins and hoping to triple that next year.

Average Joe Finances: 2:32

Man, that is fantastic. So you started off so while you were still active duty in the Marine Corps, you like, okay, I'm gonna go to this flipping mentorship. I wanna learn about this, I see a lot of people doing things with these flips. And while you were there you learned that the guy was doing short-term rentals. That's where most of his wealth was actually coming from. So that's fantastic. Was it more they were doing flips just to build capital to buy more short-term rentals?

Alex Jarbo: 2:55

I don't even, that's what he was doing. Okay. And I was like, let me just skip that piece and just go straight into the short-term rentals.

Average Joe Finances: 3:02

Nice. Nice. Yeah. So you know, the funny thing is man yeah. I don't know if this is just something that you got from your time in the Marine. or this is just something that I find with so many people that are entrepreneurs and just go-getters. But you got out of the Marine Corps, right? You had some cash and you said, this is where I'm going. This is where my market's gonna be. I'm moving there. We're gonna make it happen and you did, you got out. You went straight there and got yourself a place and said, all right, we're gonna make it happen. But then you ran into some hiccups, right? You ran into okay, some of this stuff's outside of my price range. What did you do to get around that?

Alex Jarbo: 3:36

Yeah, I realized that there was nothing on the market that was in my price range. And at that time it was, it still is cheaper to build than buy cause they're still an inventory shortage. But I mean we just, I was like, okay, what is the smallest property I can build that is still livable, but at the same time still feels spacious? And that was the floor plan we had decided on. It was like, if people hop on my website, they can like just go straight to the Airbnb link, but it's like an open floor plan, full kitchen, full bathroom, two bedroom, or it's one bedroom with a loft. But that can sleep six people. But it's a very spacious, so that, that's how we got around that was just optimizing the floor plan on that first one, because there's no wasted square, not, there's not one square foot that's wasted in that property. And every, even 10 square foot will set you back two grand or whatever that number is. So it's like just optimizing the square footage was very important compared to just purchasing an already built property.

Average Joe Finances: 4:28

Okay. So you right off the bat, got right into development. Then it wasn't even.

Alex Jarbo: 4:31

It took about six months of me, like bidding on properties.

Average Joe Finances: 4:35

Okay.

Alex Jarbo: 4:35

Losing out and blah, blah, blah. So about six months of frustration. Yeah.

Average Joe Finances: 4:39

Okay. That's fair. So what were you doing in the meantime while you were figuring out how to get this capital to buy real estate.

Alex Jarbo: 4:47

Yeah.

Average Joe Finances: 4:47

Or do these developments.

Alex Jarbo: 4:48

Yeah.

Average Joe Finances: 4:48

What were you doing for cash flow during that time frame?

Alex Jarbo: 4:51

I love that question and it's funny cause like that question's only gonna come from a previous military person as well. Is. So I had half of my bachelor's completed when I was in the Marine Corps, a little over half. So I went to school online through finished up my bachelor's relatively quickly, moved into a master's and I'm finishing up a doctorate right now. So school kept me busy while I was going through all that. And then obviously like the military will pay for your housing while you're doing that. But then I was also a licensed broker. Like most of my money came from doing deals as well.

Average Joe Finances: 5:20

Okay, great. So you were getting that basic allowance for housing that you get when you're using your post 9-11 GI bill, so that's fantastic.

Alex Jarbo: 5:28

Yeah.

Average Joe Finances: 5:28

And then of course, yeah you had mentioned that you, when you first moved there, you got your broker's license and you were doing that, so that's great. The good thing about that too is, most people, when they get their real estate license at first it it's a struggle. I know that from when I got mine, right?

Alex Jarbo: 5:40

Absolutely, men.

Average Joe Finances: 5:40

It's a struggle when you're trying to figure it out and you don't have a job and you don't have an income. So to see that you've stuck it out and be, to be able to do what you did and build what you've built so far and to see where you're going is just absolutely amazing, man. And that's why you're on my show, because.

Alex Jarbo: 5:57

Oh, I appreciate that, man.

Average Joe Finances: 5:58

You're the kind of person I wanna talk to. I just got out of the Navy, this is one of those things that kind of motivates me to get off my button Yeah. And keep doing what I'm doing because I know. It's gonna be profitable in the future. It's gonna work out, right? So you just gotta keep going. You gotta stay the course. That's awesome, man. Now I understand that, you are having trouble finding deals, right? At least in your price range. What made you come up with thinking that, buying cabins or just or developing them. Would be more cost effective than just going out and finding a deal that's already made. I feel like there's so much more involved in the development side versus, and plus that wait time too. So what made you decide to just go that route instead of maybe even trying to find off market deals?

Alex Jarbo: 6:39

Yeah, so the, a couple things with that. So a lot of people ask me like how were you so confident that was gonna do well? And it's I wasn't, I just had backup plans put in place, I always like to think of the exit in mind. And with real estate investors, that's pretty easy to understand, but when you're putting together like a business, it's a little difficult to think about your baby, your business ending one day. But you always need to be thinking no matter what you're in, you need to be thinking the exit in mind. Outside of marriage, I would say. And so I had underwritten that property as a long-term rental initially, and then the second exit was just selling that property. All of our properties are permanent foundation stick-built houses, so like anybody can get a loan on our properties if we ever sold them individually. So those were the two exits I had in mind was I was like, okay, if this doesn't work out as a short-term rental I'm just gonna either rent it out mid-term or long to a long-term tenant. Or I'm just gonna sell it off. Where it came to comparing the numbers to answer your original question I had a GC friend of mine that I just asked him what the price per square foot was and site costs and everything like generally. And I had an idea that it would rent better or it would, it was just cheaper to build than it was to buy. And to put it in perspective, I always like to use that first one as a good example. We built, we purchased the land and there was a separate land deal that happened that we made some money on that too. But we purchased the land, turnkey, built the property. It was about 250 grand turnkey. I probably put about 30 grand of my own money, 35 grand of my own money, withholding costs and furnishing and everything that property last year grossed 83,000, 82,000, and then it netted after debt service, 46,000. So it's like my ROI on that property, again, that's prior to Covid, but my ROI on that property has been over a hundred percent an annualized, which is crazy. Every year. And if you factor in covid, Cost of labor, cost of materials, you're still looking at like a 50 to 70% return on your money, which is crazy. So that, to answer your original question, that's what I look, we looked at the numbers and it was just, if it looked like it was cheaper to build cause we had complete control over it, even if we had to wait another 8 to 10 months for the property to be fully done.

Average Joe Finances: 8:48

Yeah. Wow. That's insane when you actually put the numbers out there. Now, this was back in 2015, right? 2015, 2016.

Alex Jarbo: 8:56

2017 is by the time that first one was fully built. Yeah.

Average Joe Finances: 9:00

Okay. Okay. Right on.

Alex Jarbo: 9:01

Yeah. And then we started development on other ones while that was like almost completed as well.

Average Joe Finances: 9:05

Okay. Yeah. Now So I'll get back to the reason why I asked the timeframe. But I wanted to ask you something else too, like with when you, after you developed that first one, or actually before you even developed it, how did you figure out where you wanted to build? What was.

Alex Jarbo: 9:19

I love that. Yeah.

Average Joe Finances: 9:20

What was the things you were looking at, some of the KPIs and things like that.

Alex Jarbo: 9:23

Yeah, so it's KPI, so it's not really a number to put on it. It's more like there's two things that come with that. One is if you're just starting off brand new and you're like, I'd have no idea where to invest. I live in a busy metro market. Most of my properties are in a more rural setting, about 15 to 25 minutes away from downtown. So that's number one is I like to go a little bit further out than the city, land prices are cheaper. People are now used to driving, compared to just Ubering everywhere, like to these, like I invest in mountain markets, mountain and wooded markets, so people already understand they're driving to these areas. I like to say to people who are just starting that live in busy metro markets that want to get into this is no matter where you live, there is a community or a pocket or a city, or it might be multiple cities that people like to vacation in your city, that people like to take weekend extended vacations to, like extended weekends vacations to .That market might be anywhere between one to three hours away. I like to use the two extreme examples. You have New York City. On one side of the country, people will drive to upstate new. all the time. And then on the other side of the country, you have San Diego, people drive to Big Bear Lake all the time. So the, those are the two extremes I like to use. And those, there's hundreds of those cities throughout the whole country that people can invest in that are close. So that's number one, is identifying that pocket market or that pocket city that you can build these properties in. And then the second thing is, and this goes for any property you're developing. You want to be thinking about the you want to be thinking about the entire guest experience and what that means is not just the experience of the guest staying at your property, but also the drive to and from the property. So access is very important, and when I say access, you don't want your guest to be driving 30 minutes up on Gravel road to get to your property. A lot of times the guest is gonna be driving at night. A lot of times the guest. New to the area and maybe their cell phone reception just cut out for some reason. You don't want your guests to be annoyed and scared or scared by the time they even get to your property. So a outside of market selection and property selection. When you're looking for land access is probably the most important to thing to think about. We like to be off of some sort of paved road, even if we have to put our own driveway in.

Average Joe Finances: 11:27

Yeah, that's fair. And a big key point to take away there too, access it might not be something you think about, especially if you're building or developing in like rural areas. Like you said, very common to see like dirt and gravel roads. And if you have people that are traveling from, Florida City or, yeah. Or just even driving pretty far, right? And they're used to paved roads or they're driving their nice car and they don't wanna. Get the rocks, chipping it up. So that's huge that, it's funny that you mentioned those two extremes, right? Because I know people that live in San Diego that invest in Big Bear Lake.

Alex Jarbo: 11:57

Yeah.

Average Joe Finances: 11:57

I know people that live in New York and invest in upstate New York because it's just, that's just where people go, right? That's where people migrate to.

Alex Jarbo: 12:05

Yeah.

Average Joe Finances: 12:05

Especially like certain times of the year where it gets really specific. People traveling upstate New York not only. You have of course your busy summer months and everything too, but the fall, like you get a lot of stuff. Especially.

Alex Jarbo: 12:17

Fall huge where I'm at. That's our busiest season here. Yeah, for sure.

Average Joe Finances: 12:20

Especially yeah, in the mountains, right? You said you invest in mountain and wooded areas, so that's huge. So knowing like when your busy times are gonna be is also pretty important too, right? Because you're probably gonna be getting more calls, more bookings, more questions being asked during that timeframe. Actually let's talk about that for a second too. How do you manage, your actual time when it comes to putting this all together during your busy times, during your down times, what is something that you would do during, I guess maybe off peak season?

Alex Jarbo: 12:48

So let me say something into the seasonality piece. So usually I like to say we're building Instagramable properties is what I say. It's properties where people would be proud to put on their social media. With that being said our high season is summer and fall, like I just said, but we're building a frames, we're building log cabins, we're building cottages. We're playing around with tree houses and stuff like that. These types of unique properties. There's some sort of seasonality, they're not as seasonal is what I'm trying to say. And the reason being is nothing gets outside of, again, the summer and fall, busy season. Nothing gets more iconic than like a log cabin with a mountain view. With a hot tub right. In the winter.

Average Joe Finances: 13:25

Yeah.

Alex Jarbo: 13:25

So the unique cab, the unique properties tend to be a little bit less seasonal. When it comes to the management piece, I like to keep a pretty lean crew, and there's three or four parts to the entire crew. Number one is automating most of your messaging and you can use an automated messaging tool called Hospitable that syndicates about 60 to 70% of my own messaging. My pre-check in message, my check-in message, my check-out message, my pre-checkout message, and my checkout message. All of that's automated. 60 to 70% of that's automated. The other 20 to 30% that doesn't get automated is then pushed to a virtual assistant. And the virtual assistant we source them from places that. The virtual assistant has either worked with Marriott or Airbnb in the past, and we not poached them, but like they have hospitality experience, so they handle 20 to 30% of the messaging. The third piece is gonna be a third party cleaning company that specifically works with short-term rentals. There's a big difference between a cleaning company that just takes care of people's houses and then short term rentals. So the third party cleaning company, we handles our inventory, they handle everything. They take our linens offsite, clean them, bring them back and they handle a hundred properties in our market. Outside of our stuff, all of our calendars are synced, so I don't have to talk to anyone when it comes to that. And then I like to say that the cleaning company is also. You can avoid having a COO or boots on the ground manager because they are going through your property at least one to two times a week. So they're gonna be telling you if something is broken, they're gonna be able to handle your lost and found if their guest decides if the guest decides to leave their wallet at the property, stuff like that. And then if like the wallet is left or anything, they also know to talk to my virtual assistant and my virtual assistant knows to talk to them. And then the last piece is gonna be or there's two more pieces, a dynamic pricing. That adjusts pricing based off of the market every single night or every single day. That we use a tool called Price Labs. And the very last thing is when you get over three to five properties, I recommend getting like a part-time maintenance person or a maintenance person on retainer is what we do right now. And then we pay them hourly based off the work that they have to do and then everything else. Gets covered by those 5-P, The three main pieces is the virtual assistant, the cleaning company, and the maintenance person for the boots on the ground stuff.

Average Joe Finances: 15:34

Yeah. That's huge. You have a very good system put in place right. With you being hands off.

Alex Jarbo: 15:39

Yeah. Like for the most part, I like to think about it like this. If you had to step away from your business right now, could it survive like right now, like if I just got up and left and had to go visit family in Michigan or whatever, Could I be able to do that? And it's like the answer right now is yes, but like for a while it wasn't. And it's like I put those, I sought the right mentors. I put those systems in place, the right knowledge to be able to do that. No matter what business that should be, your goal is to be able to step away from it if you need to.

Average Joe Finances: 16:04

Yeah. That's huge. That's huge. I find myself outsourcing more and more every day because it's super helpful and it also shows that it shows growth when you're able to do that, right? And when you're more comfortable passing the reins off to someone else to allow them to also grow and develop. But I think the key thing here is the systems that you put in place. Essentially automated this all the functions, right? And what I think is really neat too is that your calendar syncs up with your cleaning company's calendar, right? So they know when you have somebody coming and going when they have to get in there and, change the linens and clean the place. And that's fantastic. Having the right systems in place is also important, not just any system but the right system. So you named a couple good ones here. So for my listeners that are thinking about getting into short-term rentals or if you're already into short-term rentals and looking to do something different look at what Alex is doing, man, this is fantastic. Now, I wanted to to ask you something about the the virtual assistance, cause I use VAs too. Absolutely love them. You'd said probably about 20 to 30% of your messaging is coming through VAs. And you kind of did, but didn't poach them. So how are you finding and I don't do short term rentals, so this is more for my listeners, but how are you finding VAs that are in the hospitality space that are available?

Alex Jarbo: 17:17

Yeah, the platform that I feel like everyone uses that we use is Upwork. Upwork, Airbnb uses Upwork. Okay.

Average Joe Finances: 17:23

Yeah. That's fair. I use Upwork. That's how I found my VA.

Alex Jarbo: 17:24

We just put a job posting out there. We like to confine it to the Philippines because that's where all their VAs are at. And then I'm not a huge fan of actually looking for VAs, like the job posting things way easier, have people to come to you based off of the stuff that you're putting out. And for people who don't know what I'm talking about, you can either look on, look for VAs on the website, on Upwork, or you could put your own job posting out there. It's like similar to Indeed and they'll just filter themselves through, and it's not necessarily that they're like, it's cheaper labor like, They know what they're doing. Like they, they have worked in the space, they understand the platforms, they understand what needs to get done, if there's a guest issue. And it's, the labor is way cheaper, but you're also paying them almost triple what they would make in their own country.

Average Joe Finances: 18:05

Yeah, no, that's, and that's a great point. And just want to say that's exactly what I did when I hired my VA as well, cause the first one I hired, I went out and looked for that was a mistake. The second one I hired, I put the job posting out there. And as a matter of fact some of the people that actually helped me with this was another real estate investor that I know, and also another short-term rental guy. He was actually the one that told me, Hey, just go put the job posting on Upwork. Let them come to you. and filtered them out. And I said, okay. And that's what I did. I put the job posting out there, filtered it out to the top five. I looked at those five even harder, took one more out, and then I interviewed four people and picked the one. And that particular VA has been absolutely fantastic. As a matter of fact, I pulled her off of Upwork and I now pay her a monthly salary instead.

Alex Jarbo: 18:50

I've done that, I've done that.

Average Joe Finances: 18:50

She's absolutely awesome.

Alex Jarbo: 18:51

Yeah.

Average Joe Finances: 18:51

And that's great advice.

Alex Jarbo: 18:53

Yeah. For people who are looking to do the VA thing I have nothing against taking them off the platform because you can essentially pay them the same thing if you take them off the platform. Except they'd be making 20% more.

Average Joe Finances: 19:03

Yeah. They're not losing.

Alex Jarbo: 19:04

They'll be even happier to do that. Yeah.

Average Joe Finances: 19:06

Yeah. Now, and Upwork was great though because one of the things I liked about it too was like, how about actually tracked hours and tracked time? It was very good about.

Alex Jarbo: 19:13

Once you get a feel for, okay .This person knows what they're doing and they're not gonna screw me over, that's where you can take them off the platform. Yep.

Average Joe Finances: 19:20

Exactly. And that Yep. And that's.

Alex Jarbo: 19:21

Absolutely.

Average Joe Finances: 19:21

Exactly what I did. I just want to second what Alex said that's fantastic advice. So definitely check out Upwork. Okay. Awesome. Now I wanna get back to the whole thing that I was talking about with the dates and why that was important to me. Excuse me. So you did that first one back in 2017. And now, a lot has changed since 2017, we've had a pandemic since then. We've had all these, shortages and supply chain issues and all this kind of craziness going on. Are you finding right now that short-term rentals are still profitable?

Alex Jarbo: 19:52

The unique ones are for sure, man. Like we're at. We keep raising our prices on our unique ones, like on the ones that we mainly own. And they're still book. We have a cabin that sleeps 14, usually the luxury, bigger cabins. Tend to have a little bit of lower occupancy, but a higher average daily rate. But like our ones that sleep anywhere between four to six people, those are booked out 90%, 95% plus on occupancy. What Covid did was it pushed people out of the cities into the more rural setting, and people got comfortable with that. If you look at. The National Forest and the National Park numbers for the last two years since Covid happened, they experienced record numbers cause that's all people were allowed to do, was just to be outside. So that people, we got more comfortable with traveling. And then the unique property piece, like we talked about, people are not getting more high maintenance, but they're expecting more from what they're seeing. Especially with now, like we're going through a correction recession, whatever you wanna call it. People are gonna be a not penny pinching, but they're gonna be more specific on what they book. So if they can book this beautiful cabin or this beautiful a-frame compared to a hotel room or maybe a boring looking house, they're gonna do that all day because it is just, they're gonna get more bank for their buck here.

Average Joe Finances: 21:03

Yeah. No that's a great point. And other people that I know that are also doing short-term rentals at least the ones that I've seen that are doing super well, are very unique, like you said. And that whole thing that you mentioned earlier, like even in the wintertime that, an amazing mountain view and a hot tub would make anybody say, ah, okay, that's somewhere I can go in the wintertime. So it's the little things like that just make it different than just a standard home. Right in the mountains, you have something that makes it a little bit different. Something that makes people say a weekend there would be nice. So yeah. That's huge. So that's great to know, my big thing is I know like short-term rentals has been like the new hotness now for a while and, a lot of people started getting into it and you're starting to see a lot more regulation and that's like the biggest thing that I feel is maybe holding some people back, is the regulation, like I know where I live at, out here in Hawaii. It's almost.

Alex Jarbo: 21:52

Oh, it's intense. I know it's intense in Hawaii.

Average Joe Finances: 21:54

Make it happen out here, right? There's specific areas and then you have to have a license, and then they only let 30,000 people have a license and they're all given away, right? So it's it's hard. So now you gotta find a property that you know is in one of those zoned areas. There's a license with the property that, that could transfer over to you. So it's crazy, like I've worked with a couple clients that are like. Yeah, I wanna buy a short term rental in Hawaii. And when I explain to them, this is how you have to go about doing it, I don't hear from them again.

Alex Jarbo: 22:19

Yeah, for sure.

Average Joe Finances: 22:19

It's rough, but that's one of the things to pay attention to. So that's one of the things I wanna point out for the listeners is just pay attention to what's going on in your specific area where you're thinking about investing, because change in regulations or law can get passed and it can kind of mess things up. But the reason why I bring this up because Alex, you had mentioned having multiple exits, right? You had mentioned that, okay, if this isn't gonna work as a short-term rental, will it work if I rent it out monthly or midterm rentals and things like that. So that's just the things that I wanna put out there to get people thinking that, it doesn't necessarily have to be just a short-term rental. Think of make sure that it'll cash flow other ways as well. cause you never know what absolutely gonna happen. All right. Awesome. With everything else that happened. So actually, because you're on the development side too, I want to ask you this. How has the supply chain shortage and like lumber and everything else like that, how has that kind of affected your operations? I know you're in the middle of trying to build more cabins, right? So how has that affected you in your specific market?

Alex Jarbo: 23:14

Yeah. So when all that stuff started to happen it didn't necessarily happen right off the bat with the lockdowns it, it was delayed for probably three, probably the first three to six months, I'd say Closer to six months when things really started to, and it, they go up quick and it takes a very long time for them to come down. We did hold off on building for a while cause we had some budgets that were cut in the middle of all that. But all of our budgets now are done to today's numbers with contingencies built in as well. When it came to those, we've always, even to this day, like even with the new budgets that we're doing for all the other cabins that we're building we like to go with like mid-tier finishes and then if something goes wrong, that's where we can go down a level if we need to. The structure of the house really sells the property for the most part, and the colors and the design and everything. So we can, instead of tiling the bathrooms, maybe we do something different and stuff like that. Same thing with flooring options. Instead of going with engineered hardwood, we go with vinyl plank flooring and blah, blah, blah. So that's one way and then when it came to supply chain issues, when we started picking back up again I was a huge believer in terms of the finish work or some of the smaller things that can like. I remember specifically like a sink being, have to reorder, like we have to reorder a sink like three times that held us up. When you're looking at like Lowe's, home Depot Builders, first Source 84 Lumber, trying to purchase stuff that's o only in stock has helped us a lot. It might not be exactly what you're looking for, but at least it's in stock compared to a number that a lot of times was like made up during Covid was like, oh no, it's in stock, but it's when delivery date comes, it's not in stock. Or like maybe the delivery company lost it or something, which has happened multiple times to us. Building stuff that's in stock, people who are starting now. Are going to be dealing with today's prices. So don't let that scare you. The only thing you gotta deal with now is interest rates and that's a whole different conversation, but when it come, I'm a writer for bigger pockets for their short term rental content, and one of their, so I write for their blog and one of the first topics I wrote for them was when interest rates really started to go up in June of this year. And they're only going up, they're only, they're continuing to go. And they're projected to go up even more. And what I say to people who are scared of that, outside of all the stuff we talked about, market regulations and blah, blah, blah, is do not throw away real estate investing entirely during this process. We're seeing some phenomenal deals hit the market right now because of interest rates. So go through your underwriting even if the interest rate's seven and a half, 8, 8 and a half percent, yeah, it sucks that it's at that, but you don't know when it's gonna go down. You don't know if they're gonna continue to go up. So it's do not completely disregard real estate investing right now while we go through this correction. So there, there's phenomenal deals out there, right.

Average Joe Finances: 25:50

Yeah, that is a fantastic point, Alex, because one of the things that, with being a licensed realtor out here as well is I talk to many clients who are scared about interest rates. Especially military folks that are coming here for a three year period, and the biggest thing that I tell them is if you could find a property where the numbers work.

Alex Jarbo: 26:06

Yeah.

Average Joe Finances: 26:06

At the current interest rate, just think about what's gonna happen when the interest rates go back.

Alex Jarbo: 26:10

Crazy.

Average Joe Finances: 26:10

And at the same time.

Alex Jarbo: 26:11

You're gonna be more than set.

Average Joe Finances: 26:13

Yeah. And if you're gonna be here at least three years, you're gonna be okay. Because the market out here in Hawaii, consistently, even before Covid goes up 3% to 5% every year. It's insane even during a correction. Right now, we're not seeing home prices drop. Maybe small drops, but that's because the listing agent probably.

Alex Jarbo: 26:30

You're not getting 20 offers in the first three hours that's not normal.

Average Joe Finances: 26:33

Yeah. Now we're back to one or two offers, after an open house.

Alex Jarbo: 26:37

Yeah. Which was considered a seller's market in 2017, 8 and 15. Like it is just like we got so used to the low interest rates for two years.

Average Joe Finances: 26:45

Yeah, the thing is inventory's still low, right?

Alex Jarbo: 26:48

Yeah.

Average Joe Finances: 26:48

You still have the inventory problem, and that's why you're not seeing these prices drop, like everybody who's thinking that they were gonna drop will there be a dramatic drop in prices or a crash maybe? I don't have a crystal ball, but at the same time.

Alex Jarbo: 27:00

If you build these properties the way we're talking about.

Average Joe Finances: 27:03

Yeah.

Alex Jarbo: 27:03

400 square foot to maximum 1500, 1600 square foot. That square footage is always going to be desirable. If you're looking to sell that, like that's a starter home for someone. If they're built like an A-frame, a couple's gonna move into that in a heartbeat. Outside of even renting it out as a short-term rental, just like people are gonna wanna live in something like that, I back consider that price range, like affordable housing.

Average Joe Finances: 27:25

That, that goes back to the having multiple exit strategies. Because you never know where things need to go. Like I said, the market can correct even more, who knows, right? But at the same time, just pay attention to the market that you're in. It's gonna be very market specific, like out here in Hawaii, I don't see, the million dollar house price dropping down to 800,000. I just don't see it happening. Maybe it'll drop another 50,000 but then it's gonna go right back up. If you look at history, right? You look at the 2008, 2009 timeframe. Yep. Which is what I did. Yep. Out here. It dropped maybe 10% and within that next year it came back. Just pay attention to where you're at, the specific areas that you're at. Alex, I really love what you're doing, man. You put out so many like great golden nuggets here. So I think now I want to transition this into something that I call the final round. That's where I'm gonna ask you the same four questions that I ask everybody that comes on the show. And I think I have a good idea of where your mind's at with this, but this is gonna help us see how Alex is under pressure or when putting in a tough situation. So if you're ready to go, we'll we'll get this party started.

Alex Jarbo: 28:18

Let's go. All right.

Average Joe Finances: 28:19

Let's do it. All right, Alex. So the first question I have for you, What's the biggest mistake you've ever made in real estate?

Alex Jarbo: 28:25

Yeah, so the biggest mistake goes back to the first one. There was a couple big mistakes, but I hadn't verified utilities. Like to the property. So we actually had built that first a frame with a generator essentially, cause none of the neighbors wanted to give us an electricity easement. So making sure that you're ver and that, that almost cost us 200 grand because the property was built with no electricity and no access to solar as well. So that was probably, that could have been the biggest mistake. And the second mistake that I've had before was pitching a deal to investors that ha I hadn't fully gotten under contract yet. I had verbal yeses. But it's it's really easy to jump the gun and get excited over a deal when people have verbally agreed to terms, but you don't have a contract was a little embarrassing that I wasted people's time on that. And then the other end was the first cabin, which not verifying utilities, almost cost me 200 grand.

Average Joe Finances: 29:12

Wow. Alex, I appreciate the transparency there, and that's, I think that's a new one for that question. Most people say, oh, I wish I would've started when I was younger, type deal.

Alex Jarbo: 29:20

I started when I was 22,

Average Joe Finances: 29:21

Yeah, there you go, man. But I like how, you didn't hesitate to tell us like some of issues that you ran into? I, yeah, I can see the not getting an easement from your neighbors for electricity could be a huge problem. And then also the embarrassment with the not having the deal completely under contract yet. That's tough stuff, man, but, it's things like that you learn from that make you better. And look at you now, man. Just crushing it.

Alex Jarbo: 29:43

Yeah. I appreciate it.

Average Joe Finances: 29:44

No worries man. So the next question that I have ties into this one and it's what is something that you've learned that you wish you knew when you first started?

Alex Jarbo: 29:51

Yeah, and this goes back to the military is and I'm mainly speaking to military people here, but I'm sure a lot of people can take some nuggets out of this. So I think, I see it with a lot of my friends, but also just in general, people who leave the military. I think the biggest thing that we struggle with is we don't realize how big, we might realize it, but the military gives us a structure. We can lean very heavily on the military structure to, to get us through our days or whatever. And I think what guys or anyone who gets out of the military struggles with is that structure is then gone. And it's a little difficult to sometimes keep yourself accountable cause in the past you leaned on the structure and the people that you were around. I wish I would've take. I have multiple mentors in my life at this point. Outside of the military. I wish I would've pursued a mentor in the first, like the first three years I had nobody helping me and I wish I would've paid it, even if I put it on a credit card. I wish I would've paid into a mentor earlier on after me getting out of the military cause the mentor gave me that structure that I was used to.

Average Joe Finances: 30:46

That's fair and I think this could also be tied to anybody, outside of the military as well. If you just graduated college, right? You had that whole structure of going to school and then now you're getting out into the real world. Or if you had a really good career field and you got out of that, right? So it's things, it's change, right? It's big changes that we have in life that you have to deal with. But yes, I can definitely relate to the military piece. After being out for a little over two months now, it's been it's been very different because I don't have anybody telling me what to do.

Alex Jarbo: 31:15

Lot of times it's the reason you get out, but then you're like, there's it's a double-edged sword.

Average Joe Finances: 31:19

Yeah. It's which is nice, right? But at the same time, it's kinda oh, if I don't do this on my own, it's not gonna.

Alex Jarbo: 31:25

Absolutely.

Average Joe Finances: 31:25

So that's huge.

Alex Jarbo: 31:26

But you need to sit down every night and be like, okay, what is my schedule today and for this week?

Average Joe Finances: 31:30

Yep. And that's literally on my calendar is make tomorrow's schedule your calendar or, to look at your calendar for the next day. And then on Sunday it's to review the entire next week and move stuff around if needed. Yeah. That's huge, man. Definitely appreciate that. All right, Alex, the third question of the final round is, do you have any tips or tricks that you would recommend to someone that is just getting started today?

Alex Jarbo: 31:52

Yeah. And the getting started in anything. One of the best books I've read on this topic is the One Thing by Gary Keller and J. Papasan that will give you the framework that you need if you can't like, afford a mentor or something. But the tip I'd give everyone is, Literally sit, no matter how busy your schedule is, you have an hour to spend, whether it be take it away from your sleep or something put one to three hours into something that you're really focused on and do that for the next, like two to three years. And that sounds boring as hell, but that's the secret to success is doing very boring things consistently.

Average Joe Finances: 32:23

That's fair. That's very fair. And that's a great book recommendation, which is actually gonna be one of the next questions I ask you, but that's fine. Yeah I think when you put it in that perspective, it's, I feel like you just gotta get out there and make it happen, right? Get out there and do and don't let nobody hold you back. The only person that can really hold you back is yourself. So definitely appreciate that, Alex. Okay, now the final question, and you already mentioned a really good book, so now you're gonna get a chance to tell us another one that you like.

Alex Jarbo: 32:47

Yeah.

Average Joe Finances: 32:47

But do you have a favorite business investing or real estate related book or podcast or both?

Alex Jarbo: 32:52

Yeah, so it's gonna be a, just a general economy book. The Creature from Jekyll Island is the best book I've ever read. Some people might classify it as a conspiracy book, but it has a hundred and something pages of references in the back. And every successful person that I've studied that is alive today for some reason, if you go through their social media or something or ask them that exact question you just asked me, that book kept coming, was the creature from Jekyll Island. So I think it's very important to understand how our money system works. And it was very interesting. I had read that book prior to Covid, right when I got out of the military. And it's, it was very interesting to see that play out with how Covid played out, like with how our money system was handled and stuff like that.

Average Joe Finances: 33:32

Yeah. That is bonkers. Okay. I just wanna say that I've done a lot of interviews, right? And I've asked people this question a lot. The first time I heard this book recommended, I said, okay, cool. The second time I heard it recommended, I was like, oh, okay that's more than one person recommending this book. Then the third time, which was actually recently I said, this is the third time somebody has recommended this book, and now the fourth time. Which is funny because so many people would mention other books, there's so many other books that I've had repeat offenders. This one has just been trickling in there. And now I feel. This being the fourth time it's been mentioned, it's becoming more of a solid recommendation.

Alex Jarbo: 34:08

Yeah. It's a thick boy though, man.

Average Joe Finances: 34:10

Yeah, I heard.

Alex Jarbo: 34:10

Get Ready, it's 600 page book.

Average Joe Finances: 34:11

Yeah.

Alex Jarbo: 34:12

But.

Average Joe Finances: 34:12

It's not a easy read, but it's like one of those must reads, right?

Alex Jarbo: 34:15

Yeah. It's like the goggles, like you put the goggles on and you're like, oh, like this is how our money system works or the you it's a really good predictor of what happens next. If our government starts printing trillions of dollars, inflation's gonna go up. Federal Reserve has to tame that. So it's very easy to predict what's gonna happen next. After you read that book.

Average Joe Finances: 34:32

Yeah, so you have a better understanding of what just recently happened and what is currently, happening as further on.

Alex Jarbo: 34:38

I was too young for 2008 and nine for me to be investing in real estate.

Average Joe Finances: 34:41

Yeah.

Alex Jarbo: 34:41

I dedicated like three months to reading just general economy books. And that was the number one book. It's just understanding how market cycles work.

Average Joe Finances: 34:49

No, that's great, man, because my first property that I bought was in 2007, so you can guess how that went, right?

Alex Jarbo: 34:54

Yeah. Perfect timing.

Average Joe Finances: 34:55

Yeah man that's great stuff Alex. Great recommendation. Definitely gonna add that to the list. It's actually already on my list, but it's moving up now, so I appreciate that. Now Alex, that is it for the final round. However, I have one more question for you, and it is the most important question of all because people have listened to this interview and they're like, Hey, Alex, put out some fantastic information. The host did pretty good too, but we wanna know more about Alex and where we can find more information about them. Alex, if you could share where people could find more information about you. Do you have a website, social media anything like that?

Alex Jarbo: 35:27

Yeah I have a free YouTube channel that I document most of the stuff that I'm working on through that and it trickles down. Sometimes I'll post three times a week. Sometimes I'll post one time a week. But the YouTube channel's Alex builds, it's a little logo of a blue treehouse, essentially. That's how people can find it. And then my personal website as well, I recently put together a course. Detailing everything that I've learned in the last six years. Essentially I created the course that I wish I had when I started six years ago. If I would've had this course, probably would've saved $300,000 at this time in a whole bunch of headaches. But that's gonna be on my personal site, alexjarbo.com. That's where all my interviews live, that's where that course lives as well. You guys can like, click on the little thing, sign up for it, and then if you guys wanna purchase it at the end, feel.

Average Joe Finances: 36:06

All right, fantastic. And I know you're also a bigger pockets contributor.

Alex Jarbo: 36:09

Yep. I write for the Bigger Pockets blog, if you guys hop on their social, if you hop on the, their free blog, like I'm the short-term rental guy, or at least one of the short-term rental people.

Average Joe Finances: 36:18

There you go. Hey I'm gonna make it easy for everybody. I'm gonna have all those links in the show notes so you guys can copy and paste or click away. Just don't do it while you're driving. Alex, this has been a real treatment, a real pleasure. Thank you so much for joining us.

Alex Jarbo: 36:29

Thanks for having me on, man.

Average Joe Finances: 36:31

Yeah, absolutely. And hey, to my listeners, thank you so much for joining me and our special guest, Alex Jarbo, on the Average Joe Finances podcast. Go leave us a five star review and tell us what you liked about today's episode with Alex. Aloha from Hawaii and have a great rest of your day.