Ep 177 - Our Journey Episode 7 - Turnkey Real Estate

Hey, everybody. Flip and Danny here, founders of the Freedom Real estate group family of companies. And welcome to another episode of our.

Podcast which is called Freedom through passive Income.

That's right. And this episode is called our journey. Sorry, this. I had to do it. I just, I love it. I'm gonna be sad when we're done with our journey, but this one is our journey. This is turnkey real estate. And we're in that stage of our journey. And this is. We're wrapping up the nice cool days that we had in Phoenix.

This is a 12 part series.

This is it. Yep, it's a 12.

I'm just moving you right along there.

It's a 12 part. I was gonna make a comment about it being so dam in Phoenix. It was. This is a 12 part series. And this is day number seven of our 12 day series. 12 part series. And so, you know, to explain the series. So we start off way back when when we were on cruise ships. Then we went to art auction and then we went to land selling art artwork. And then you went into the insurance and mortgage industry. And then I wrapped up the art business and we said, what are we doing next? Let's do real estate. And so we did real estate. And then after eight months of doing one deal, then we said, well, this really sucks. And so then we real estate investing and we learned the 12 ways of how to do real estate investing. But one of the 12 ways was not turnkey real estate.

No, it wasn't.

It was not on the 12. There's. There's 12, and those are bonafide 12 ways on how to make money in real estate investing. Because we did most of them, but turnkey real estate was not one of them. And, and when, you know, I like to say this, and this will date me, there's a commercial out there way back when of a somebody eating peanut butter and then somebody was eating chocolate and like, oh, you put your chocolate. My peanut butter. And it was the Reese's peanut butter cup commercial. Like, you know, like, oh my gosh. The two got together and it was amazing. That's what it was with turnkey. When we learned what turnkey was, it was just like the skies opened up and we were just like, hallelujah, this is what we want to do. So, Danny, what is turnkey?

It's really done for you. Rental real estate. So a lot of people want cash flow. They want to own rental properties. They understand that's one of the biggest reasons why a lot of people are building their wealth is through property Ownership and having rental properties so they don't have the time to be able to do it themselves. And they look to a company that's going to do it for them. And that's what we call a turnkey company. And it's not always. Turnkey company is not always referred to with, you know, rental real estate or single family or, you know, one to four. But in our world, turnkey real estate is single family, one to four residents. We'll find the property, we'll rehab the property, we'll lease the property, we'll sell it to you completely, 100% done for you and cash flowing. Yep. That is turnkey real estate for us.

Yep. And so we wanted to go into this.

Oh yeah, yeah. So the. We, we were in Phoenix at the time. So we, we're going to jump into episode six for a second. If you haven't listened to that. We were wholesaling and while we were wholesaling in Arizona, we wanted to do volume because we were like, okay, we've. You'll hear the story in episode six. But we said let's do more of this. Let's go volume. So we hired some coaches there in Arizona to be able to do volume. And then another thing that I did was I created a Facebook mastermind, just a free mastermind. And I invited anybody who is doing voluum. You had to have done like I think 50 plus deals or more to be even like qualified to be in this little free mastermind group. And so built that. And we met somebody in that group that was doing a ton and ton of deals and they were doing, they lived in Ohio, they were doing turnkey real estate. It's how we got introduced to turnkey real estate while we were living in Arizona. And that's when I'm going to take. Let you take over Flip.

Yeah. So we met this person and then little by little you started helping out, doing little things with him and it became a little bit more. A little bit more, A little bit more. And then the next thing I know that I'm actually selling these turnkey properties. And so there I was walking around in our Astroturf backyard, melting because it's like 120 outside. But I was on the phone in my Astroturf backyard in Phoenix, Arizona, talking to somebody in New Hampshire about a property in Ohio that neither one of us had been to or will go to about selling him that property that I've never seen or even touched. And, and it was, it was a simple phone call and he said, how Much is it? And I said, it's X. Are you interested? He goes, yeah, I think I'll do it. I said, great, we'll send over the paperwork right now. Hung up the phone. I'm like, why am I not doing more of this? That was. That was the easiest real estate transaction I think I've ever done in my life. That was brilliant. And coming from the art business, this is one of the things that I really liked about it in the art world, we knew our buyers, you know, we knew what people liked. And when we went to that city, I knew I was going to see that person and that person, that person, and I knew what they liked, and I could lead them to where they need to go. But in real estate, you never see the same person twice. You know, they buy a house, and you might see them seven years later.

Yes.

You know, and so it was the repeat business. And I realized that, oh, my gosh, I just hung up the phone with this guy in New Hampshire, and I can call him next week and sell him another property, because now I know what he likes.

Yeah.

I was like, it's brilliant. You put your peanut butter in my chocolate. And so I loved it. And so I was born in Ohio. For anyone that doesn't know that I was born actually here in Ohio, I was a buckeye by birth, which I will never say that ever again in my life. You heard it here once. But I moved to Michigan real fast because I was smart. And so, you know, being here, all of a sudden, we're talking to this guy in Ohio was doing these deals, and we're helping him out, and I'm selling some of his properties now. And he kept saying, if you guys lived here, we could do a lot more deals.

Yep.

He said it, like, two or three times. And of course, she told me that he sold that. And I'm just like, wow, that'd be kind of cool to move back to Ohio. I've got a lot of friends up there. That'd be actually kind of neat. It was like my old stomping ground. I loved it. Well, right at the same time, because we were leasing a house in Phoenix, and our landlord calls up and says, we got foreclosed on on our house that we live in now, and we need to move back into that house that you're living in now. So would you like 30 days or 60 days to move out? I'm like, duh. Can I call you back? This is a. I might need to talk to my wife on this one. And so now I've got this in the back of my head going. He kept saying, you should Ohio, you should. And I'm like, well, maybe we need to move to Ohio. And so that was our sign that we needed to move to Ohio. So we loaded up a very large truck full of our stuff and we caravan it from Phoenix to Ohio to a house we rented sight unseen to an area that we'd never been to because I'd never been to this part of Ohio. Talk about, you know, we didn't burn the bridges, but we just, we didn't, we didn't leave anything behind. Yeah, we just, we just left. Yeah. And we came here and it was, yeah, it was exciting because also I remember driving down the street in the neighborhood to our house going, I hope you like this house. So. And then, and then we jumped in both feet and it was been turnkey ever since.

That's right. So in this part of Our Journey Episode 7, we are in Ohio now. We have fully moved and we're doing turnkey real estate. So let's talk about the pros.

Go ahead.

One of the biggest pros is the massive market for done for you rental real estate. We knew that if we started doing this, this was something that we would be able to do forever. We didn't want to DO mortgage assignments, sub 2 seller financing, wholesaling forever. None of them turnkey kind of went, oh, ding, ding, ding, ding, ding, ding, this is cool, let's do it.

Yep. And then also it's where you have your. No threat of market downturns if you can get inventory. Investors want cash flow. This is also to the fact that it's non emotional.

Yes.

You know, it's not a, you know, I really like that house but boy, if you could do that for a little bit less, you know, so I can afford it or whatever. No, it's, it's, here's the price. Do you want it? Yes or no? Yes. You know, it's very cut and dry. You know, I love, love that.

Yeah. And I love that it's a sustainable strategy. So I think you had called it the rice roll. Rice bowl.

Rice bowl.

And I had said bread and butter. There's different phrases that we've used that's kind of like the foundation. It's like if we were going to do a whole lot of things in real estate, which we did want to do because I hate being boring and doing one thing at any given time, this was a nice way to build a foundation. Because even if it was a down market, so long as we could find deals that were deals and be able to rehab them, put a tenant in there and then sell it to a cash flowing investor. We could keep on doing that no matter what the market was. And because we had already experienced a crash in knowing the creative strategies that we did, this was something that we truly saw that was sustained, sustainable for us to do long term. So that was another pro for us.

Yeah. And it was the, the one thing when, when we realized that now all we need to do is focus on, on busy professionals.

Yes.

I mean one of our first buyers was an actual rocket scientist.

Yes.

I was like, wow, I actually met a real rocket there. They actually exist, you know, and, and her husband was in the movie business. They literally both were just non stop. But they want to be real estate investors and this is, this is the best way. And they bought, came, they came over and wrote a check for four of them, I think, you know, and so it was that, that's amazing. In this area in Ohio, which is why they came over from California. They came here because they can buy four for the price of one over there.

Yeah.

And this, and the cash flow here, the, the cap rate on properties here are, you know. Yeah, you're going to get a better cap rate in some bad areas in Detroit and some bad areas in Cleveland, but the cap rate here on good properties is still so good, especially compared to those California markets.

Yeah, I agree. Some of the cons, so we're in charge of the entire process, A to Z. So that's something very new to us because we had typically been brokering transactions for the most part. Yeah, very easy prior to doing this. And so we had a lot of stuff to learn. And so that was one of the cons, at least for us, is the learning curve to be able to understand every aspect of this type of transaction.

And it was a new market because even though I was born here in Ohio, it was completely different. I had to go to, was it three or four weeks of classes just to get my realtor's license here, because they wouldn't take my other license. But we're dealing with older homes. You know, we were used to dealing with 1950, 1960s homes, and now we're dealing with 1898 houses. And well, winter, this isn't real bad winter for me here in a part of Ohio. But little Phoenix girl over here, first time it snowed, she was like, oh my God, this is so amazing. She loved it. Yeah, not so much anymore.

Not so much.

And you know, houses without air conditioning and leasing properties without stoves in them. You know, just all just new things that we had to get used to.

Yes. Another con was dealing with tenants and toilets. So everything that we had done prior was actually transferring ownership in some way, shape or form by us selling it or doing a wraparound mortgage and allowing them to take the deed to the house so that they were responsible for these types of things. Now we were doing a scenario where we were actually putting tenants in there and we were helping manage the property in some way, shape or form or outsourcing it to another property management company in which again that was our clients, we were trying to take care of them. So we got in the world of tenants and toilets for the very first time. And for us at that point in time it was a con. Now that we have good property management in place, it's different. But we're talking about this era and.

Then outsourcing vendors to help because we're a two man team, you know, that's it. And so now we need, you know, people to do the rehabs on these properties and you know, to good quality and so and we had to be reliant on them to perform and that was. Well, that gets into the next stage.

I believe it does. And then just unrealistic buyers. So if you are wanting a done for you, you know, cash flowing rent, real estate, if you live in California and you're used to those types of houses and those types of everything, then buying a house in Ohio where you haven't come here and you don't really understand it, you don't know what you don't know. It can lead to some things that are unrealistic, some disappointment. And so trying to manage those expectations as they, we try to tell them everything that we can. And even when I'm on the phone. Well, what didn't I ask, Danny? Well, you didn't ask what you don't know and that is these are older houses, the basements, they tend to leak. But that's okay, they're not living areas. And we have in our leases that you actually have, you know, if you're going to put anything down there, put it on a pallet, you know, they don't always have ac. We created standards eventually to put AC on them because we kind of liked it better. But we told them all these things and then, you know, as time goes by, they're still just kind of like, you know, and that managing those expectations and the fact that they're unrealistic, not. It wasn't their fault. It's just they didn't know what they didn't know. That was a con to me of trying to navigate that piece of the puzzle.

Yeah. And then I do want to point out something though. I'll never forget. The one property was built in 1896 and like two other sections of the house were built in like 1910 and 1930. And when we, when we renovated the whole house together, I mean, it looked really nice. And that, that inspector went through as if it was a brand new built house and a 200 point. 200 points that were needed to be fixed. Oh, and we're just like this house was built in 1896. Okay, seriously, 120 years ago.

That's right. You know, so you're telling us just to tear down and start all over, Is that what you're saying?

Unrealistic inspectors.

Yeah, yeah, that's for sure. That is a con, actually. That is a true con that I didn't have on the list. All right, so let's hit our five real quick. So risk tolerance, turnkey real estate.

Yes, there is risk. There's a lot more risk now because now we're doing the renovations and the property management.

All right.

Time availability every second of every day.

Yes, that's right.

Knowledge of everything.

Yes.

Inner circle, even more so.

And access to capital.

Now we're starting to need.

Exactly.

Right now we need to buy the properties.

Yep, that's right. So you can tell like even if you're on the investment side of turnkey real estate and you're buying it, there's some interaction that we've just talked about that we have to go through with you through the process. And you're going to, especially here in episode number eight, when we're talking about episode eight and episode nine, I think nine in particular, you're going to really hear about that interaction. So when people buy turnkey real estate, don't have the unrealistic expectations of this is a passive income investment. Okay. It's semi passive. And we have done an episode that you can refer back to and I'm sure we're going to put the link somewhere on this screen where we evaluate flips versus turnkey versus Syndications and we talk about the passive versus active. I think that's even another separate episode. Those episodes, if you want to invest in turnkey real estate, have that the get it. Set aside the time to watch those episodes so you understand that there's some activity involved. The activity is not bad. You just want to set yourself up for success by knowing what it is.

Yep.

So this is a great stage of.

Our.

Path in real estate, in my opinion because it's really led us to the launch of Freedom Real Estate Group, where we are today. We still love this. Even though there's cons, we love it, we're in it and we'll be in it for a very, very long time. So I'm just really excited that we got to episode seven because this is hey. Our life here in Ohio.

That's right.

So in episode eight we're going to be talking about. Oh also actually episode eight. This is funny. We're going to put a link somewhere to episode eight. That's the other thing that you want to watch is actually look at the turnkey rentals six benefits of done for you Real estate rentals. Flip and I were in one of our houses taking you on a tour of an actual renovation. So I've been trying really hard to start looking back at all the episodes that we've created to be able to tell you where to go. This is one of those.

That's the one where I appear.

Yeah. Yes. Yes. So I think we've given you three that hopefully that you can see somewhere either in the description or on links surrounding here that you can go back and check out because they're exciting. But in episode eight of our journey, not 365 series but our 12 part journey, we're going to be talking about renovations. That is where we go next in our turnkey real estate, Freedom Real Estate Group family of companies world. And we're excited to have you listen to that one next.

Are we done? Yeah, I think we are done. Make sure you go over to our website freedomcapitalinvestments.com to join our investor club to see what we're doing today. But make sure you hit the like button.

Just because Dan, Danny's a chatterbox is that he keeps on saying. And these episodes are super, super long.

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