Explained: Turnkey Real Estate Investing (4/12)

Hey everyone, Danielyn here with Freedom Family Investments. And in this video we're going to be talking to you about turnkey real estate. But I encourage you to stay on till the end so that you can hear some of the real estate investors who have worked with us over the years sharing some of their experiences and stories with you. Hey everyone, Danielyn here with Freedom Family Investments. And in this video we're going to talk about turnkey real estate. So let's start by telling you what turnkey real estate is. In case you're new to this industry, turnkey real estate is really a done for you rental property. A turnkey company is going to find a property, they're going to renovate the property, they're going to place a resident in the property and then their property management company is going to manage the company, providing you a done for you rental property without all the headaches and the hassle. So the process of turnkey real estate just explained many people who are going to evaluate properties like this. There's many different turnkey companies out there. You need to make sure that you're comparing apples to apples because we are all very, very different in our product, in our service, in our customer experience, what gets offered with the turnkey rental property. So here are some numbers that sometimes you're going to see. I personally of cap rate, cash on cash and cash flow. I like cash flow. I like to keep things simple as possible and cash flow speaks my language. For those of you who do like seeing the cap rate and the cash on cash return, we're going to talk about that here real quick. We're not going to explain it. We'll actually put some, we have some videos I know on our YouTube channel that go over cap rate and cash on cash return if you're not familiar with it. So we'll try to get those video links into the description here so that you can click on those if you need some education on what those mean. So for those of you who do look at cap rate, I have two properties here that we just recently sold. So I'm going to give you some information on these. So the cap rates on these are 11.34 and 12.38. So 11.34 and 12.38. So that these are again just a couple properties we just sold. The cash on cash return is 21.42 and the other one is 22 point. Okay, the cash flow number, we have this entire performer here that lays out all the numbers. If you want to see something like this, just Ask the team for a Performa on any of our signature series Turnkey rental properties. Signature series just means that we've done everything for you, just like I explained at the very, very beginning of the video. So in the top part, the capital return is calculated, so you can see how that's done. In the bottom part, the cash flow is calculated. You can see how that's done. Just so you know, on both of these, it's assuming a 20% down payment and you're paying 3.5% closing costs and is assuming you've got a mortgage at 6.37% interest. And they're also calculating property taxes and insurance being taken out. One of these also calculates a monthly maintenance and vacancy reserve being taken out as well. So this one that has the monthly maintenance and vacancy reserve taken out says the cash flow every single month is 500 1978. That's a lot of cheddar every single month. And all you had to do is pay for a 20% down payment, and that's putting away $140 every single month for maintenance or vacancy reserve. So I like that they put that one in, that this one, this one doesn't have that vacancy reserve written in here. So this cash flow here is 745.61amonth. So you can see if you would have added $140 to this, then you would have been at 660ish. So a little bit closer to that. So that's just. That's a lot of cash flow. And one of these again, was calculating a reserve for you. So that's nice. The financed amount, this one right here, every single year, you're almost at $9,000 in cash flow. I got to put them on my glasses just to make sure I'm saying all this correct. Yep, almost. You're at $8,947.36. And this one right here, that monthly cash flow turns into $6,237.33 every single year that you're getting. Not to mention all the, all the other benefits you have with rental properties. Right. You own the property. You've got a resident in there paying down your mortgage. Isn't that wonderful? Meanwhile, you're getting the tax benefits of owning a rental property. And meanwhile, you're also getting the appreciation. Now, when we say when you invest in the Midwest, we like to say buy for the cash flow and let the appreciation be the cherry on top. Now, with that said, I'm going to be recording another video where we talk about investors who acquired properties with us. And let me just give you one example. You're going to have to watch the other video. One of our investors bought three properties in 2020 for 304,000. By middle of 2023, the estimate value of their properties was $429,000. That was a 41% increase. And then investor two, they bought a property for $79,900 in 2018, and it's valued at 115,000 today. That's a 44% increase. The other one's 56% increase, 38% increase. So the. Those were just four people that we pulled out of the mix who had bought some properties from us in 2018 and 2020. So that's a tremendous increase. So even though we tell you not to count on appreciation and to just focus on cash flow, there's perfect examples of what the Dayton market is doing. So we're also in Cincinnati. I would imagine Cincinnati probably has a little bit higher of an appreciation rate than Dayton. But you. You're gonna have to look at the numbers and talk to the team to see if I'm right. Okay, so now that we've talked about the turnkey real estate there, let's talk about the freedom guarantee. If you do purchase a turnkey real estate property from Freedom Family Investments, you will have a freedom guarantee attached to it. I challenge you to go evaluate other turnkey companies and see if they do anything that we do. So what we pride ourselves on is that we align ourselves with you, the investor. Why do we do that? Because it's important to us. Because we want to be the best company that we can be. And we really want you to become a raving f. Because we tell you all the time we're not perfect, and we're human, and we're going to make mistakes. And every time we make a mistake, we're going to try and find a solution to the problem and continue to get better and better and better. Well, one of the things that we did a while ago is I'm a client of Independence Property Management as well. That's our property management company. And one of the things, the property manager came into my office one day and said, hey, what if we stopped charging you tenant placement fees? And I was like, what are you talking about? That's how you make money as a property management company. He says, well, if we charge renewal fees, we've now aligned our interest with the investors, and we're getting paid to keep that tenant, and we call them residents we're getting paid to keep that resident in the property. And so now we've aligned ourselves with the investors. And when a investor is having a vacancy, they're not receiving any rent and, and when they have a vacancy, they're having the cost of the term to get ready for the new tenant. And on top of that, most property management companies are charging a tenant placement fee or a lease up fee or both. So it's just really adding insult to injury. And so I said, I love you, I would love that you did that. And again, I put on my owner hat and I was like, really? We're going to lose that income? Like how do we run a property management company without that income? But I ultimately agreed and I let him make that decision and I let him run with it. And I am really, really proud to own a property management company that does this. I'm proud to be a client because I love what our property management company is doing for us investors. And the more people that we can serve, the more money that property management is going to make. So as an owner, I'm really looking at the long term vision of this. Property management is never meant to be a big money making company, but it really is the anchor of our entire family of companies. We're vertically integrated for a reason. In order for us to control, in order for us to be able to help our investors, to help us serve you in the best way possible. And the power of vertical integration just means that we are able to have more strategic partnerships with other people. We're able to continue growing and building that strong, strong foundation of a company so that no matter the market, no matter what's going on in the economy, we will always be here. Because we have so many companies across the vertical that we can just control everything so much better than a company that's standing alone and is only doing one thing of many, which for us right now is 6, 7, 8 companies I think that we have going right now. So this is really, really powerful. Now to get this freedom guarantee, you have to be with Independence Property Management. We've tried outsourcing it and doing with other property management companies, but we just couldn't rely on them to get our contractors in or get us in to do whatever it was that we needed to do in order to fulfill our promise to you, the investor. So the only way that you're going to get the freedom guarantee is if you stay again with Independence Property Management because then we have full control and we can make sure that we're following up on Our promises. So what do you get? You get a $0 lease up fee. So this is typically a marketing fee that property management companies will charge you in order to lease up your property. You get a tenant placement fee of zero dollars. This is typically 50, 80 or 100% of one month's rent. So if you have a 900 or $1,200 monthly rent, you're going to get charged anywhere from half of that all the way up to 100%. 100% is more common. Again, this is one of the ways, one of the big ways, key ways that property management companies make money in order to cover their overhead is charging this fee. So many times they're hiring a realtor so they have to pay the realtor, so they're having you pay them so that they can pay the realtor to actually place the tenant or perhaps one of their employees. This helps covers the salaries. So this right here is huge. I don't know of any, not one property management company that does not charge these fees. And again, we're aligning our interest with you because right now you have a vacant property, you have no rent coming in, you're having the turn and it's costing you money to be able to, you know, fix everything and get everything ready for that new tenant. And then on top of it, most property management companies are now charging you to actually find the new tenant. We're not. Instead what are we going to do? We're going to charge you a renewal fee because that means we're doing our job. That means we kept that resident in the property, they're happy, they're enjoying it and they're staying. You don't have vacancies, you don't have that loss of rent, you don't have those turn costs. And now we get to earn money because we did a good job for you. So we are going to charge a $250 renewal fee every single year that we keep that resident in your property. Now check that out. We should have probably charged like one month's rent, right? Like we're not. If you have a $1200 a month rent, we're not charging $1200 a year, but yet we're only charging 250 for renewal fee. Like it's crazy how much this is saving you and ensuring that you have a cash flowing property. So I just want to point that out because I love it personally as a client. Management fee is going to be 10%. All right. Okay. Mortgage coverage. This is going to be on day 61. What does that mean? It means that if in the life of your property, where we are the property managers and this guarantee is in place, then we're going to cover your mortgage on day 61 if you have a vacancy and we have not been able to get the turn done and fill that property. So we want to make sure that you have as little cost as possible during a vacancy when you have no rent coming in. So again, if we have not done our job, turned the property and got another renter in there by day 61, we're going to start paying your mortgage for you. And that's just again aligning our interest with yours because we need to do a good job in order to keep the cash flow coming for you and make you a raving fan. And so free property management also, if you buy a turnkey rental property from us, then you are going to get free property management for one year. So this 10% fee right here, you won't have it for one year. Free property management. If you buy a turnkey rental property for from us, the warranty is going to also be one year. That means that the renovation that we did on that property prior to you purchasing it, anything that was in the scope of work that we touched, if something goes wrong with that in the first year, we're going to cover it at no cost to you. Again, we're just standing by the product that we deliver to you and trying to ensure that year one of your ownership with that turnkey property is a good one, is a positive one, and you're getting that cash flow. Please understand that you are a real estate investor. So what I don't want to do is share all of this stuff and just be like, you know, this is amazing, right? You're going to get so much cash flow owning a rental property, it means things are going to go wrong. You're going to have turn costs, you're going to have tenants that abandon the property, you're going to have tenants that vandalize the property. You're going to have things that sometimes get stolen. I've had properties where our AC got stolen. It's just, it's part of the game of being a landlord. You're investing in a property because you want the tenant paying down your mortgage. You want to experience that potential appreciation. You want the tax benefits of it in the long run. This is such a great wealth building strategy. But don't mistake that this is not always going to be perfect. There's going to be times when things go wrong and it's going to be hard, but in the long run it pays off. If you just stay the race and you're in this for the long run and you're not worried about the ups and downs of owning rental properties. This is such a great wealth builder for you. So again, don't. I don't want you living in a fantasy land thinking that I'm going to own a rental property and nothing's going to go on, go wrong. I'm going to have this type of cash flow every single month no matter what, because of our freedom guarantee or because of whatever that is, just not reality. So I always like to have like get real moments of let me make sure that we're being very, very true, very clear, very candid, transparent, authentic, genuine, all of those things so that I don't paint this rosy picture. And then you are upset because it wasn't exactly how I perceived it to be here. This would be like a perfect scenario, right? That all of these things happen and you have this cash flow every single month. I just, sorry, that was just important for me to throw right there because some investors come in for the very first time, never owning a rental property, not understanding that you're an investor. So you are taking some risk. You've got a rental property now and there's going to be some costs associated with that. It's not always going to be perfect. And then they get upset because they had this fantasy world picture of owning rental properties in their head. If you want consistent passive income, I recommend you look at the masternote program. You look at private money lending, you look at funds, you look at syndications. Those aren't all guaranteed either. But if you watch those videos, you're going to learn how consistent they are. You're going to learn that there's never once, never once that we have not paid a lender back their full capital and everything that was promised to them in terms of the rate of return that we were giving them. It is the best and easiest way to make passive income and get the cash flow that you're looking for. Rental property is more work, okay? It's going to be more of your time. It's going to be a little bit of a job reviewing financial statements, talking to the property management company. Whenever there's a large expense and it needs to be approved, letting communications when there is a vacancy and that you're, you know, getting a new resident in that property, there is more work involved. You also have the tax benefits and you have the appreciation over time and you have A tenant in there or resident in there paying your mortgage. So you gotta, you gotta weigh what's the best for you in terms of your goals. Make sure that you're really understanding your lifestyle design. Do you want to do the extra work for these extra perks, or would you just rather have the mailbox money coming in every single month? Because that's easier. It takes probably less than four hours to evaluate an investment and you're done. You're just getting cash flow every single month and you're not having to worry about all of these other things. Choose the right path for you that is so important. Make sure you're watching my videos about where do I start, which path is right for me and who do I trust? So this last one here is the cash flow we provide in our freedom guarantee, instant cash flow guaranteed. What that means is if you purchase a turnkey property from us and it's vacant at closing, we are going to start paying you rent. So our goal is to always have the property with a tenant already in there, a resident already placed in there. So you're already getting rent. But if for some reason we don't have it rented, we're going to guarantee instant cash flow for you. So we'll pay your rent until we get that tenant in there. So this is freedom Guarantee. This is anything here on the left side. These are things that we do for all clients, no matter if you bought a turnkey property from us or not. Anything here on the right side are things that we do only if you bought a turnkey rental property from us. So understand that as well. If you have more questions, please reach out to our team. Go to chatwithfreedom.com scroll down. You're going to see our investor relations team and their calendars there. Just go ahead and jump on a call. Look, you'll see that some of our investor relations teams specialize in like private money lending, syndications, funds. And then some of our investor relations teams specialize in turnkey real estate. So jump on the calendar for somebody that actually wants to talk to you about turnkey real estate, if that's the method of investing that you want to learn more about. And feel free to jump on somebody else's calendar if you want to learn more about private money lending, masternotes, syndications or funds. So we do it all there. I think that I've covered everything in this video. I really, really appreciate you. I hope you understand and see our heart in what we are trying to achieve here through our family of companies and serving you the Best way we can, while being very clear and doing the best job that we can setting you up for success so that you really understand which avenue you want to go down for investing, for you to start building your wealth. And you know for sure that that's the right path. So thank you again. We appreciate you. Look forward to seeing you at the next video. Well, I hope you enjoyed the video. Now it's time to get real. We're going to share with you some stories from real investors who are going to share their experiences with you so that these examples can come to life.

Put on your investing hat, because I know that you're an investor before we even got together. And so the top three questions that.

I get are where do I start?

Which path is right for me? And who do I trust? So typically when I hear where do I start? It comes down to the question of active versus passive. Because not everybody knows that they should be asking that question and should be thinking about their lifestyle and whether they should be an active investor versus a passive investor. So I'd like to get your take.

On that and then go ahead and.

Roll into how you decided based on your choice of those two, even if it was both, how you decided which path you were going to go down in your investing journey.

There's so many different avenues you can approach as far as investing in general, but specifically to real estate investing. It's still quite a menu of choices. The filter I would suggest in viewing all of those choices is your comfort level, your knowledge level. You know, some people are very, very new, very, very green. And some people are just like, yeah, okay, been there, done that type of thing, been there, been burned by that type of thing. So those filters of how much experience and knowledge do I need to have? Do I. Does that lend itself? How much time do I have? Because that will definitely determine whether you approach more passive versus active type of opportunities. And then also a piece that I don't know if a lot of people mentioned, but the control aspect, some people just really have to have a lot of control and they don't feel comfortable unless they're all up in the business and like really have that control level. So if you are one of those personality types, and I am the same, then I would suggest more active, active ish opportunities. Now, if you feel like, okay, I trust these professionals or I trust this, this, you know, just like if you're investing in stock, you have zero control over that. So you have to have some level of trust, right? And you don't want to be Active in that at all. You don't want to go to the Coca Cola plant and make sure the lights are on, you know, so you just. So that's a passive. So those main filters are what I would suggest. How much time do you have? How much knowledge do you need and you know, are you comfortable in giving yourself and you know, how much time? Time knowledge and control level. Those are the top three for as far as figuring out where to start.

Okay, so what did you choose? Are you an active investor or passive.

Blend? So I have a property manager for the rentals that I have. However, I tend to only call on them when I need them. Generally I have systems. I'm a systems person, right. So I have systems in place that make it very low, time consuming and very low. A lot of place, a lot of things in place where it doesn't take a lot of my time. However, if it's something, I have some rentals in another state so it's helpful to have those contacts there and that property manager there when I need them. So it's a little bit of both. But it's like I mentioned, it's the control factor. So I want to see the applicants. I want to, you know, I want to, I don't know, want to be more involved in that. But if I'm busy or if I just don't have time or whatever, then I have that choice of the property manager to lean on them.

Yes.

Okay.

Love it. How did you decide the path for you? So you have rental properties. There's many other ways to invest in real estate. Why did you choose rental properties?

Well, I started with tax liens, funny enough. And you know, in Florida, right, where you're at now, but. And did, did okay, you know, made some money, but it was a lot of research. It was a lot of. It's very time consuming and so that I lost interest pretty quickly in that and a lot of, a lot of laws and things. And we. Which state can they come back and ask for the property back in? Which state they can't and all of that stuff. And I was like, you know, that's, that's too many uncontrollables for me.

Gotcha.

Okay.

Can't be hanging there, you know. So then I decided, okay, well, everybody is talking about like, you know, you hear real estate is one of the best places to make a return and to earn that income, cash flow and whatnot. So I was like, okay, well, rentals seem the easiest to start with, the easiest place to go. And we just decided to go that route. And it's been, it's been, it's had its up and ups and downs for sure, because I've had those middle of the night phone calls and different things that I just didn't necessarily want to deal with. But you know, overall I think I've been pretty happy because they're paying my mortgage, my, the appraisal, the values going up. It's a, it's, there's tax benefits. So overall, I'm very happy with the choices that we made as far as going with rentals.

Love it. Okay. And then maybe talk to me about the third question is who do I trust? So talk to me about your point of view because you're more of an active investor. So I don't know if this question comes up as much as the passive, but certainly when you're choosing a property manager, you had to find somebody that really synced with you and trust is a factor there. So how did you answer the who do I trust question?

You go to the. You everybody reads reviews, right? Because instinctively you want to get feedback from. In everything I do, if I'm looking at a product, if I'm looking at a vendor, if I'm looking at, you know, somebody to go to my rental property to fix and xyz, I'm going to look at people's feedback and also reach out to people that I know who may have experience with them. So the state that we have these rentals, I know several people there. So of course I'm going to ask them like, who, who is the best person to go with? And then of course you just, it's trial and error. You have to give them kind of a test run and see how things go and then have your own experience. Don't trust all exclusively others, but that is a good place to start. Is getting references just like anything? If you wanted to hire a nanny, you would get references. You would say, okay, is this person safe with my kid? You know, is this safe in my wallet? Right. So that's what you want to do. You want to get references from known and trusted sources.