From Airbnb to Boutique Hotels: Mastering Hospitality with Matt Barge

Multifamily Strategy

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When you're on right, you want to stay locked in. It's a focus game. You need to be thinking, not grabbing. Hello, and welcome to another episode of Multifamily Strategy. I'm Christian Osgood, your host, and welcome to another episode. I actually have a friend here today. I'm very excited to have him on, Mr. Matt Barge. This guy is actually a hospitality guy. Why is he on Multifamily Strategy? Well, you're about to find out.

Matt, welcome to the show, man. Great to be here, Christian. Conversation uh yeah excited to do this podcast with you i am very happy to have you here uh matt's matt's a very interesting guy when i first met him he was actually reaching out with questions on uh what our course mentorship program looks like a multi-family strategy as i got to know him in that process um he's like well you know i was like where do you live he's like oh i'm kind of a nomad i live i live wherever um you know sometimes california sometimes texas i do projects in both I'm like, okay, what is your goal? And he's like, well, buying hospitality. I'm like, interesting. Reaching out about multifamily, a multifamily mentorship, talking about hospitality. Already interested. So the entrepreneurial nomad, hospitality, boutique hotel master, Matt is here with us.

Matt, I always like to, we'll talk about where you're at. I gave a little hint to it. You do boutique hotels. We'll talk about them. I like to know everyone's starting point. Before you were in business, before you were an entrepreneur, before any of it, tell us a little bit about Matt's origin story. For sure. So I think I'm going to be described as a monopoly kid. So I'm really good at math, love math. And that was my favorite game, you know, growing up and grew up in Southern California, went to school up north and ended up coming out to Texas 10 years ago. I got offered a job out here and stayed. I like it here. So I actually used to be a software developer. So I wrote iPhone code for MoneyGram. And so I was a pretty typical W-2 earner. I played tennis, enjoyed a bit of traveling and things like that. Everything sort of changed when I bought my first house. And I bought my first house in the colony, which is actually near there. You're going to be right next door.

At the time, that was seven years ago. So there was very little development. moment actually i remember riding my bike i drove up with my bike and i rode around where they were going to build the new toyota headquarters and we're gonna there i had heard they were going to build the liberty mutual headquarters and whatnot i was kind of riding my bike around getting the lay of the land and i had you know so i bought there and a tennis buddy came over and it was just me living in that house and he said hey you should put them in these spare bedrooms up on Airbnb. And I thought about it. I was like, ah, I don't know. I decided to try it out and it just took off. And before I knew it, I found myself, you know, opening another bedroom, another bedroom, another house, another house, another house, another house. I scaled it slowly. So I, I bought as a primary residence once per year, but, and I found that I really enjoyed the business. So that was starting small from a single bedroom. I learned how to market that bedroom. So, you know, good photo, good, clean, you know, clean appearance, you know, nice photos. I was doing them initially with my iPhone, but then hired a photographer quickly to, you know, get nice photos done. I was picking out pillows at HomeGoods and just found that I really enjoyed kind of the design aspects. I had a little Roomba who would help me clean the bedroom, room. Take me five minutes now to knock it out.

Yeah. And so really started at the nuclear level. And then just grew it piece by piece. I used my software developer background to slowly but surely build a lot of infrastructure to run that small portfolio. So that's kind of my origin story. I used to be a software developer and I use that today, bought my first house. And that's how I got started with real estate, just doing Airbnb by chance. What I found is that the W-2 can only take you so far and you've got out of the software thing. How much do you think someone realistically needs to make to not have a side hustle and actually like Dave Ramsey method, save your way to wealth in today's economy? How much do you think someone would have to make to not have to do another side adventure?

This is a great question. So I think you optimize to hit 100k. I feel like 100k. We live in a skills world, which is you need skills. So before you even get to what the outcome of those skills are going to be, how much income that is, or whether it's going to be active or passive, I would focus on skills. So if you're out there and you're thinking, hey, how do I get to my next milestone, my next real estate milestone? I would start with skills. The skills translate Translate to every opportunity. So whether that's photography skills or digital marketing skills or storytelling skills, could be financial skills, spreadsheet, you're gonna reuse those things. The rest of your journey. And so I would start from a place of knowing yourself, getting to know yourself and really ironing out what you're great at, what what you can be best at. And and then identifying skills are going to, you know, advance things you're naturally good at things that you naturally enjoy. And which skills did you develop in work, like in a job that you had? What skills did you develop the most that you feel move you forward the most?

So in software development, it's all about reusability, which is when you create a class, you can reuse that class in all kinds of ways when you're developing software. And in Brass Tax, what that means and how it applies to my business is when I first onboarded my first client for property management, I realized that I needed a way to get all the information about their property to be able to manage it effectively. And so I didn't just meet with them and write down a bunch of things about their property. I first created a form that would allow me to ask all the things about their property and they could fill that out. And then as I onboarded more and more properties, I kept adding to that form and kept reusing kind of like the genesis of that form, even in other ways. So like I ended up having like a property features set within that. And I would reuse that. Say if I was doing a kind of a comp analysis on, okay, what's the next, what's a feature that I could add to my Airbnbs that would give me the best return? Like would check, I could use my onboarding for check. What are all the features that I could analyze? Yeah. And use that as a list to then start analyzing. So all that to say that it's just big and small, that reusability mindset and application that you learn in software development is just so amazing. The other thing is with running a real estate business, you really need digital skills to stay organized, stay structured, and sort of like contain the business. And using all these tools, whether that's like analysis tools, data tools you know marketing tools you know video i mean the podcast you need digital skills so that's really helpful when you're writing code using all the tools is like a natural thing so it's been a great thing for me when was it time to leave the job when was it time to do you built enough business where you're like okay software development you have a reasonable. We'll call it a reasonably high paying job stable job when was it time to leave that so So the year was 2020. It was September of 2020. And I was happy at MoneyGram. I was doing great. I was a team, I was the iOS lead developer. And I enjoyed my job. Although what had happened was. We were actually, the app was booming and we weren't getting more teammates on board. And simultaneously, I was asked to become a technical manager and they wanted to prepare me for promotion, which is to say they wanted me to do the elevated job for six months, not pay me for doing that job. And then I would start doing that job. And I kind of doubted, you know, I might get like a 20% bump in pay. I had been matching my employment income for a full year up until that point. And so it was kind of a combination of things. It was tough to leave money ground side. I do. I love writing code. It's really fun. It's really creative, but that it was just time to go.

That makes sense. I, the best banker I've ever worked with, I would let this guy manage all of my money. He is fantastic. His bank, after years of being the guy, they offered him a promotion that would pay him a mighty $1.20 an hour more than he was making. I learned later he was making less than I pay some of my older, very mediocre employees who no longer work for me. I was paying some people in property management more than he was making as the most valuable person on my team being paid by the bank. That is the fastest way to lose people. I have found if your business is don't align compensation with goals. I've seen this on both ends. I have tried to fix things by promoting people and giving them raises too early. And it changed their expectations of what they should be getting. And they left and it failed because I over rewarded. So I'm not saying just everyone deserves more money, give it to them. But the way that you compensate people and thank people and promote people is really important. If you want someone to do more work, you need to align compensation to that immediately. You're also going to lose your mats, or I don't know if he wants to be named my banking, but you lose your very best people. If you don't think, how does compensation make them feel? And if it doesn't make them feel loved, you're probably going to lose your best people. I've learned that in a short time in business. Um, and I do a lot of hiring and firing. I have to date still fired more people than I've hired because I do acquisitions, but you, it's painful when you have great people leave. When is it monetarily the right time to leave a job? Where were you at where you're like, Like I can leave this job and I'm still going to be okay. Yeah. I think like I had hit that matching my employment income in cashflow. So not revenue, but cashflow for a year. Once I hit it a year prior, I noticed it, you know, but there was no reason, you know, I could have left at that time. But I'm someone who I think by nature, in some ways, I'm very open to risk. In some ways, I'm a little bit risk averse. And I felt it was prudent to keep on chugging and keep following this model that worked well for me so far. And then once I got kind of pushed towards leaving, when push came to shove, then I decided to go. You mentioned property management. When you left, how much of your business was managing rentals and how many of it was like Airbnb, boutique hotel, that sort of thing? How much was it, I own property and that's bringing in money and how much of it was I own a service company and that's making money? What did that look like? Yeah. So all the properties... So it was mostly properties that I owned. So any property that I've owned, I've always owned outright so far. So I haven't done any partnerships and I've just used my own money to grow my ownership business so far. I had been getting asked by people to run their property as well. So I had a small client business, but that really wasn't materially really a big deal. And I've done the arbitrage model twice. So I had experience with that model as well. So ownership, management, and arbitrage. And all the business I was doing was all within that Airbnb umbrella. So I've never done long-term rental management. Never done it. Okay. Let's touch on that really quick. You didn't do long-term. This is something that I did wrong. And this is going to tie in later in the podcast. So stay tuned. But one thing that I did wrong in the business, I talk about this all the time, I deviated from my business model. Long term, I have long term property management, long term people. We do tons of renovation on entry level housing. I did a project that did not fit that mold and I regretted it. You said something that I think was very interesting. It's always been short term. Have you done any projects that are not short term? No. Rentals? None. All of your businesses are, it's all vertically aligned. Vertically integrated. Yep. And you manage rentals, you have software and your whole skill set ties into short term rentals. Yes. What do you own today? Yes. So I'm actually inside City Place B&B, which is a boutique hotel, 10 unit building in downtown Dallas. So I own this building and it's a building that I bought in September of 22. And when I bought the building, it was grossing less than $10,000 per month. And we just hit $35,000 per month last month. Wow. That's phenomenal. Yeah. Well, hospitality, done right, has amazing cash flow, amazing cash flow upside. And so it was a building that needed some love. It was 1960s build, no personality. And the interiors actually had good bones, but could need some love, deferred maintenance. And we had a mural done on the front of the building, converted the front yard to a dog park and renovated all 10 interiors. So yeah, I mean, it's been a fantastic project and really happy with the results. I own it outright. I own it myself. I'm the only owner. I have a note on it. But it's been a great case study and just want to do more. It's been great. Right. Amenities like dog parks. Everyone sees the personality thing. That is the thing that I think everyone markets online really heavy. Like, oh, we took this one space, we made it look like something else. I'm super happy you're good at that. And that seems to be the main success metric. For the extra amenities, I saw Rob Abasola added a pickleball court to his place. You have a dog park in yours. How much do you think that affects your bookings and your revenue? As opposed to anything else you do, those bonus features, how big of an impact does that have? It's huge. So there's a competitive aspect that differentiation, especially in high, I think it's so important in every aspect, every asset class of real estate. I think it's, well, hospitality, there's a little more room, you know, there's a little bit more kind of, there's a little bit bigger space to differentiate, got a little more options, right and I think that. You know, whether that's like pools, hot tubs, you know, pickleball, you know, yeah, dog park, all kinds of things. You got some, you know, kind of a lot of options there. It's also a very marketing driven asset class. So not only having those features, but really showcasing them in great photos, great videos. We like to do a welcome video that prepares the guests, you know, as soon as they book prepares them to arrive and a great website. So you want to have great, great direct booking website. And so amongst a lot of other things, so I would say the other big branch within hospitality is operations. So you want to have really tight operations and the yield from that is great reviews. So your first, your number one sales tool is photos. Second is reviews and great operations, great, great reviews. People tell tell each other that it's a great place to stay. So you just got a lot of levers within hospitality. There are other things in the kind of underwriting ecosystem of hospitality, but you're absolutely right. Those, you know, the feature set and the amenities are huge. You know, my favorite thing about hospitality is, and there's not much because hospitality is not been my favorite experience of all time. My skills are poorly aligned. There's one thing about it that i love though hospitality is uniquely competitive now in multi-family you have market price you can get a little below market rent and you'll have less vacancy. You can push market rent if you own a ton of stuff like we did in Moses Lake. I have the management company. You have to build massive infrastructure, massive to be able to compete in multifamily. In hospitality, every single project competes with every other project on its own, whether it's one room, 100 rooms. There is a competitive nature. One of my favorite quotes in business came from Matthew Barge. George, the only way to solve an overpayment is to outperform. Now, I had never heard that or thought about that when he brought that up because I'm working on the Robin Hood where we dominated on terms of that contract, but then I realized we suck at multifamily and we overpaid for it so we can't trade it to the next person. I was like, well, the only way to outcompete us or to fix overpayment is to outperform. My initial instinct was like oh yeah wouldn't that be nice but then you think about this you're like this is uniquely a business where outperforming is a legitimate option yeah you actually can out market and out deliver and demand a higher price by having a unique product because. Multifamily being the best cookie cutter repeatable thing is where you make money hospitality is literally the opposite this is why i suck at it i'm geared towards replaceable parts cost of renovation efficiencies time to completion this is more of a like how do you out creative the people around you which is a. You note takers out there, write that one down. That's a good one. I think that's like the key to hospitality. Because it's not even fixing an overpay. It's like, how do you win? Outperform. Everything is, what do I do in this thing to optimize the pictures, optimize the feel, optimize the experience, optimize the follow-up, optimize the Instagram ability. That's a word now. That is how you run this. uh every single one of those is something that me and my team is bad at matt we're working on a project together what are we working on well we're a team now so we're gonna let's go baby, we're gonna tackle this this project together so yep you're absolutely right so christian and i agreed to terms along with cody on robin hood so i'm very fortunate to be sharing that i'll be be taking over management of Robinhood shortly. So we've already started onboarding and it is a property that has great potential, amazing potential against a waterfront location and really charming cabins. And what has happened is what we're going to do. So assets equals liabilities plus owner equity, right? What we need to do is just increase the asset value. How do we increase the asset value? We increase the NOI. How do we increase the NOI? We're going to drive more reservations by a way of better marketing, and that means better photos, more