Our Series | REIal Talk | EP. 3 | Real Estate Investing

Hi, everybody. Flip and Danny here joining you once again.

Yes. And this is our podcast Real Talk, which is Real talk for real estate investors. And we are on episode three. Three.

I had a figure too.

Three. All right. We are enjoying these. And, you know, we kind of set out and our marketing coordinator, Caitlin, she said, I'd really like these to be a weekly thing. She gave us the option for bi weekly and we almost took it. And I said, no, consistency is key. This is important and we enjoy doing it. So here we are again. And we are going to do this every single week, Tuesday mornings. We'll be there for you. And hopefully we can try and keep it within the 20 to 40 minutes range. That's, you know, our vlogs, three to five minutes turned into eight to 10. These we're trying to keep to 20 to 40. So if there's anything you ever want us to talk about more in depth, let us know. Especially if you see a vlog and you say, hey, I want you guys to talk about that. Because that was kind of part of the idea, is that we just talk about something for a few minutes on a vlog and then, hey, we could actually go and dive in, actually educate people a little bit more about maybe how we do it, our Freedom Real estate group family of companies does it, or just about what we've learned in the, in the marketplace. Because we've certainly spent hundreds of thousand dollars on coaching, right?

Yes, we have.

Oh my goodness. But we've learned a lot and so we can share, you know, what we've learned with you. So always feel free to let us know if you'd like to talk about something. I do have a few things from some of you already on our of future podcast Ideas. Right now we're playing catch up with some of the vlogs that we've done so that we can dive deep into them. And then we're going to probably do some mirroring. So if you say I want to learn about X, then we're going to do a quick 3 to 5 minute vlog about it and then dive deep in the next podcast. So that way you get some high level overviews. For those of you who like me, we'll look at a YouTube video or an audio and I'll say, how long is that? Five minutes. I can do five minutes time and a half, but if I see 30 minutes, I might not press play. So we're trying to achieve both depending on who you are in everything that we do. Okay, so today's topic, let's get there. Today's topic is our investor series. So we are primarily a turnkey company. Flip has his Freedom Real Estate Group shirt on. As you know, we have a family of companies. I have my Cash for Ohio Houses shirt on. So that's our acquisitions arm. Our turnkey is what we started with. It's our main brand, our umbrella brand, if you will. That's why we say it's Freedom Real Estate Group family of companies. Well, one of the things that we primarily do in that is market our turnkey properties, and there is more buyers than inventory 100% of the time. So we were trying to strategize how do we help more people. And so we sat down and brainstormed and decided, hey, we can do more than just turnkey properties and end up buying more volume and being able to help more people at the same time. So we created an investor series. That investor series is what we're talking about today. We don't know of any other company out there doing it. So they're going to soon, I'm sure, because they're going to see this. Well, maybe they won't. We're not that.

Who knows?

But we want to differentiate ourselves. We want to offer more value to the people that we surround ourselves with and the people that we work with. So today we're going to be talking about our investor series. That is three different types. It's actually four. We'll lightly touch on the fourth at the very, very end, but that one is for Randy to talk about later in another future podcast. But three, mainly, we're going to be talking about our signature series, our investor choice series, and our Instant Cash flow series. Did I get them right?

You did.

Okay, so I believe that we're going to start this off with you and signature series. Is that correct? All right, take it away.

So originally, when we started many, many years ago, what we set out to do was to do the McDonald's approach to turnkey real estate, to real estate investing. What we wanted to do is take a property, put the same flooring, the same light bulbs, the same light fixtures, the same switches, the same back backsplash, the same. You get what I'm saying?

Yes.

Everything's the same. So this way, if. If somebody doesn't come to the to Ohio to visit us and they buy one property and they go to buy another property, they don't say, hey, what does this one look like? Because guess what? It's going to look like the last one. And it makes it very simple. Now, the materials we use These aren't rental grade materials. These are above rental grade materials. So when people say about 5k and you're going to be rental ready about 25 for us, because we go above and beyond. Typically our properties are close to retail in some of the neighborhoods that we're buying or that we're buying in. In fact, we had one property, we bought two new turnkey and realized after the fact that it was going to be a retail property and we didn't have to change a thing. So it was, that was awesome. And it sold in, I believe, in less than one day.

I love this market for an extra like $20,000.

So. So this is our signature series. This is the property has already been rehabbed from top to bottom. We, we include the, a warranty on the items that we had done on the rehab. The, the scope of, scope of work.

Thank you very much.

And so. And typically these properties already have tenants which we call residents in the property already paying rent when people are closing on their property. Yes. So there, so it is cash flowing, but this is an instant cash flow. This is something different. This is our signature series because everything has. The red carpet has been laid out. Here is your glorious investment property that is done that you shouldn't need to worry a thing about. Now all real estate investing is. There are risks. Thank you. Risks. There are risks even on the signature series. So I'm not saying that is risk free. I did not say that. So anyway, so this is our red carpet. That's why we call it our signature series. This is the top of the line. This is what we started with. And then we said, geez, how can we get these properties to these investors faster? And that's why we created, created these other series. And so then the next one of the next series is called the investor choice series. And Danny's going to talk more about that.

All right, so investors choice, if any of you are in a market and you buy from wholesalers, it's very similar to that in where we are going to buy a property. And it's a property that we intend to put in our own inventory and ultimately take it to a signature series. But perhaps there's a period of time and at the end of this, when we finish explaining each one, we'll explain a little bit about how that works. Flow looks like to you as the investor. But this is a property that's vacant. Maybe we spent, I don't know, $30,000 when we purchased the property. We know it's going to have $25,000 in rehab. And eventually we're going to go ahead and do that. But we go, hey, flip, this is a property. You like this area, $30,000. This is what we paid for it. We're going to tag on our profit because we still, we are a for profit company. So we're going to tag on whatever we want to make on that. And then we're going to say, hey, flip, we're going to give you the advantage of being able to buy this here at a less price than what you would buy at our signature series. You now going to be able to do the rehab yourself. And when you do that, you've got some tax advantages there. So we'll talk about that too at the end. So at the end we'll tag on workflow of how it looks to them, we'll tag on tax benefits and the difference between all three of these. But essentially you're buying a property that is not rehabbed and is vacant right now so that you can have the opportunity to do the type of rehab that you want or do nothing, depending on the condition of the property and just rent it in as is condition. And you're getting it for a much lesser price than what we would do if we bought it, rehabbed it to that signature series standards, and then sold it at arv, which is true after repair value. We look at all the comps in the neighborhood. What are houses like this selling for and appraising for on the MLS off market? Doesn't matter. We just want to see what the market is demanding. That is what we're selling it to you for. So you're saving a little bit of money, but you're doing some of the work. Of course we have our renovation company, Bulldog Renovations. I don't. We're only two people, so we don't have that shirt here. It's there so we can do the rehab for you. So that's investors choice. Did I hit all the points?

Yeah, because the main point was we've been hit by so many investors saying, why do you put that material in your rental properties when you could put this other kind of flooring that's less expensive?

It's less expensive. Yes.

But on the other hand, we've also said, why do you put that material in your rental properties when you could put this great material in there? And we're like, oh, okay, so we're getting it from both sides.

Yes.

And so now with the investor choice. Well, it's your choice.

That's right. Okay, good. So then the third one we're going to talk about is the instant cash flow series. And Flip, you're going to take this one.

So a lot of the properties that we buy, well, recently I would say it's almost 80% of the properties that we're picking up in our acquisitions company, Cash for Ohio Houses. The properties are already tenanted. And so our standard priority to the creating these series is as soon as we would buy it, we would make sure number one that it was on a month to month lease. And then as soon as we would buy it, then we would actually get that tenant out. So that way we could get our rehab team in there, rehab it so we could make it a signature series or. Well, we didn't have that back then. It was just making a turnkey property and being able to sell that property with a new resident in there with the turnkey property. So we're getting so many properties that are tenanted that it's taking us so long to get a lot of these tenants out. Some tenants are still in a current lease which we have to honor until whatever that expiration date of that lease is. And so this gives you the opportunity to. Now we're not going to sell it at that after repair value, the ARV that we were going to, but it's already got a tenant in that property. And so you have that option of keeping that tenant there because now you're instantly cash flowing.

That's right.

There's the name. So you're getting cash flow from day one from that tenant. Now we can't guarantee that the, that it's going to be the market rent. We don't, we can guarantee what the condition of the interior is. We can tell you as best to our knowledge from pictures and from walking the property ourselves. But you're saving money because you're getting it at a reduced rate. And then once the tenant, once the lease runs out, then you can either renew with that, with that tenant or have that tenant get out and then you can go in, do the turn to your liking. But it's up to you at that point. Everything is on you and it's your options. But you're instant cash flowing from day one of buying that property.

Yes. And so one of the things that we're going to be doing for you before we drop into the workflow is when we send our project manager out. It's one of the steps that we take for us to evaluate a property. So Flip will take a look at it. What's the neighborhood look like? What are the rents? You Know what can we get arv projected rent after rehab. He's evaluating all of those things before we even decide to buy a property. Once it's passed his first initial test, then he's going to send the project manager out there and he's going to do a scope of work. And it's usually a scope of scope of work that is signature series. Because we want to know if we rehab this thing to the, you know, top tier that we always do for our standards as a company, what is it going to cost us? And then we plug in those numbers, are we still making a profit? Because again, we are a for profit company. We have to pay our overhead every single month. So. And that's how we decide to buy. So now what we're going to do in order to help give you guys the numbers that you need if you are purchasing Investor's choice or instant cash flow, what the project manager is now going to do is he's going to go out and scope two different ways. He's going to scope our signature series. He's also going to scope a rent ready price. And that's going to give you the flexibility of knowing, hey, okay, so you're going to be talking to one of our investment team members and they're going to say right now it's an instant cash flow phase. This is what the project manager said it would be if, when the tenant moves out, you want to do signature series. If you love our standards, here's what it looks like, here's the scope of work here, here's how much it's going to cost if you want to do a rent ready and here's what that looks like. Here's, you know, here's the scope of work, here's what the cost. Maybe you want to do it in the middle, maybe you want to do neither. But at least you've got two sets of numbers based on what, you know, what we already do. For our signature series to be able to make a decision on what you're going to want to do, we'll have pictures and everything so that you can evaluate the property that way as well. So I think that's really good for, in terms of numbers because this is providing everybody more flexibility, including us. We can buy more because we can sell it to you earlier on than just holding it in our inventory. And we're just like, our crews are like, you know, three months out. We don't want to just hold it. And many of our investors have very literally said that one was already tenanted I would have bought it just tenanted and, and then once they moved out, then I would have done the turn and I would have gotten some different tax benefits. Right. From being able to do it that way, which we'll get into. So there's a lot of advantages in being able to choose which stage that you want to buy a property in. So do we want to talk about the workflow? Do you want to dig into that?

Yeah. So when we go to buy the property, as soon as we already know that there's a. For this example, there's a tenant in the property and they have. They're on a month to monthly. So let's just say that. And so we're getting ready to close on the property or that we're buying it. And so the day that we buy it, then that information for that property goes out to our team and says this property is instant cash flow, is now an instant cash flow property. That means that the tenant is already in the property. We do know that it will need a turn eventually, but the tenant is in there now and the tenant is paying and the tenant enjoys the property.

Yes.

So that's instant cash flow. And that will last approximately 30 days.

21.

Oh, sorry, 21 days.

21 days is what we ended up deciding on.

Yep.

And then on day 22 we're going to offer that's when a property management team is going to go ahead because maybe the numbers don't work. Maybe the current rent that they're paying right now, even though they're paying on time, they want to stay there. Maybe the numbers just don't work for an investor to want to buy that property at that stage. So day 22, then our property management team will have already prepared a notice to go to the tenant to be able to post on the door and we're going to go ahead and do the normal steps that we do right now, letting them know we need them to move. It's a notice of non renewal. We're not going to renew their lease and then giving them options of other properties that we have or any help that we can provide so that they can move out and find a new place to live so that ultimately we can go to the next step. So as that's happening, we are now releasing it from instant cash flow. It's no longer available that way because now the tenant is deciding to leave and we've given it 21 days to see if anybody wants it. Day 22, we start that process of alerting the tenant and then we make it an investor's choice. So during the process of us getting the tenant out, it is now available investors choice. You are now buying it based on the fact that we're doing the work and we're getting the tenant out and you're going to have a vacant property to do with what you please. So then do you want to go the next step and how long that takes?

You're doing great.

So it's literally since we're starting it on day 22, when property management starts that process, it depends on how long the eviction starts. So let's just say we didn't have to do an eviction. We just, we noticed the tenant with a 30 day notice of non renewal and they said absolutely no problem. Maybe we have another property for them. Maybe they were buying another property anyway. Maybe they're out in 30 days. If they're out in 30 days and it has not sold investor choice, we're moving to signature series or there's a small caveat there. Or if we had to evict them, if they didn't move out in that 30 days and now we're having to do a three day notice and then go through an eviction process as soon as it becomes vacant. We're thinking if nobody's bought it at this point, then it's likely we're taking it all the way to signature series. But we will allow you to still buy all the way up to the point that we assign a crew. Once a crew is assigned, that means our project management division has taken that property and went slot and they slotted it in for another crew. Because part of the reason why our crews are so loyal to us and they give us such great costs on rehab that we then pass on to you. So if you use Bulldog Renovations for any work, you're getting it cheaper than you're going to get any retail contractor out here. I promise you. Because we have constant work for them. So we've got a huge whiteboard of all of our properties and what crews are going in. So as soon as it's slotted, it's theirs. Okay. Then it's no longer investor choice, it is. No, it is now signature series because we've committed to a crew that this is your property, here's your scope of work, here's what we agreed on to pay you. You're going to do that. And they know that their dates, they have properties lined up, you know, two to three months ahead because they're going so fast and they're growing their crews to serve Us and that method is not something that we or that machine is not something we want to mess with. We don't want to stick a wrench in it it so it's running perfectly and we're just going to keep on doing it. So once we take it off Investor Choice and make it signature series, it will be sold as a fully rehab property at the current comp value or what we call ARV after repair value.

So roughly anywhere from for the investor cash flow to IC is roughly about two months.

Yes.

Or give or take, but roughly about two months where you have that opportunity to get it at a discounted price and to make your own choices. Sort of like the brrrr method.

Yes.

And so but about that, about that amount of time. But now this is also getting properties to the investors right out of the gate.

Yes. Much, much sooner. And if it's vacant, we start at Investors Choice.

Yep, right away.

So you don't even have an instant cash flow option because there was no tenant in there when we bought the property. But it is vacant. And if we're, you know, lined up and we don't have a crew signed for that short, it could be seven days, it could be 14 days before a crew is assigned. But within that period if there's not a crew, you get it for that investor choice. It is an option for you at Investor's Choice. And then as soon as the crew is assigned, same thing as before, it's it's swiped up by us. We're taking it all the way to the finish line and we're going to offer it up to people who do like everything done and they don't want to worry about being involved in the process of okay, now I do a turn. What am I going to do now? I've got to get a new scoop of work. Or maybe you use our rent ready scope of work, who knows. But there's a little bit more hands on activity when you're going to buy Instant Cash Flow or Investors Choice. Some people are going to love that, some people are not. And so there is a investor out there for every single.

Yeah, a lot of people love the hands off hassle free. They like that.

Yes.

But then there's some people that are like hey, what, what flooring did you use? Hey, could we. What about that?

Yes, exactly. Right. Okay, so then let's talk about taxes. So many of the tax benefits that you're going to have is going to be across the line. Doesn't matter if it was instant cash flow, investor's Choice or signature series, you're still going to have the same tax benefits. And so I wrote a bunch of them down. But let me just say this before I read them because I didn't want to miss any because there's nine at the top and then three at the bottom. I'll tell you more about that in a second. Repairs. So repairs are kind of the biggest difference, right? So if you're familiar with the word brrrr, buy, rehab, rent, refinance, repeat.

I think that's enough.

Rsa, if you're familiar with that word, Instant cash flow series is kinda, it could fall in there. Investors choice for sure because the rehab is step two. But you could flip your Rs around. Buy, rent, wait until the tenant moves out, Rehab, refinance, repeat. So both of the investors choice and instant cash flow, we're kind of a throw into the brrrr. Because a lot of people go do you do brrrr? And we're like, well we could easy because we're doing this for ourselves anyway. We're buying them. Sometimes they're tenanted, sometimes they're vacant, sometimes we have to wait and sometimes we say no to deals and offer them to other investors anyway because we just don't have the pipeline or capability to keep them in our pipeline. So that was part of the conversation that made us go, hmm, we should just think about this and be able to offer more things to to you, the investor. So if you think brrrr, because more educated about that, you understand it, think, apply that, apply what you're thinking to instant cash flow in investors choice because the same principles will apply. And the biggest thing for tax benefits is the repairs because now you are going to be making the repairs. Now keep there's a difference between repairs and improvements. Improvements are not tax deductible. That will be part of the depreciation expense that you're going to get. So when you have a property and you purchased it and you've made improvements to the property, there's a basis that you are going to be allowed to take depreciation on over 27 and a half years, repairs can be taken tax deductible in the same year that you do them. So when you own a rental property and you're doing maintenance, you had to replace a hot water heater or something that was a repair in order to keep it in rentable condition. You get to take that as a tax deduction in the same year that you do it. Same thing as if you're going to do this Brrrr method. When you do the turn, there's some rules. We're not financials advisors, CPAs, accountants, attorneys. We're none of those things. So talk to your individual CPA about all of this and how it applies to you and what you're. What rules you have to meet because there is this in service thing that you have to do. So I was reading something about a brrrr. And he said, so here's what I would do. I would call it bar because I think it was buy, advertise, rehab, rent, refinance, repeat. And he says now nobody's going to go and call it bar. But his point was the tax benefit of being able to take some of those repairs as a tax deduction in the year that you did them. Because a repair might be replacing the water heater, replacing the roof, your H VAC system, replacing that. Something that's going to. It's required to keep the property in rentable condition, but it needed to be in service. Meaning some people will say a rent sign in the yard. I don't know if that's technically going to fall for an IRS guideline or not. So again, talk to your cpa. But certainly those when you it's rented or going about to be rented, I would think that it certainly would qualify. So those are things that you're going to be able to take a tax deduction on in a bigger amount of money. Say it was roof, H vac windows, hot water heater, things that are required for you. Plumbing things are required for you to fix in order for a renter to be there. Those are things you get to now take as a tax deduction instead of them just being a depreciation expense over the 27 and a half years that you have. So that's a big difference of tax deduction. But here's all the rest of the stuff that applies to all of them because repairs honestly reply to signature apply to signature series. Anyway. So the first one is taxes. You can deduct your taxes. You can deduct your mortgage interest. You can deduct repairs, not improvements, not improvements that make the property increase in value, repairs that keep it in rentable condition. There's a difference. It's an important difference for your insurance costs. Five, your management fees, any other professional fees that you have that you incur through an accountant or an attorney or anybody that you're using on a professional basis for your rental property. Agent commissions. If you use one on it and you have to pay agent commissions, depreciation, we've talked multiple times about that. Now, utilities, if you pay them, not if you have a single family. Many, many of us, including us, have our tenants pay for the utilities or we work it into the rent. That's. Oh, that's a future podcast.

Yes, it is.

All right, well, you guys are gonna have to wait for that one. Nine was casualty losses. And then I put 10, 11, 12 was travel. Again, talk to your CPA about what type of travel can be tax deductible to your property if you have a home office or if you have employees. Not a lot of people that we work with are that big that they have home office and employees, but if you do those or other. That's why I kind of put them at the bottom. But the first nine are things that apply to everybody, whether it's signature series or not. You just get a little bit more benefit if you're doing it on the instant cash flow or investor choice parts. What did we forget? You want to do a quick summary?

Oh, no. Then there's that fourth one.

Oh, yeah, that's kind of a. So we said this is a Randy thing.

Yes.

And I can't even remember exactly what it's called. You remember the exact.

I don't. I don't remember the. The acronym or whatever, but it involves taxes and which. Anytime that it involves taxes, that involves Randy and so not us. So we're gonna get Randy in here one day and he'll go over the benefits of everything for the fourth strategy.

Yeah. And so if you go to our website, turnkeyohio.com then you're going to see the signature series or investor series on the web. The menu bar, click on that and go down to the fourth one. I think it's like tax advantage series or something like that. This is literally where we are working with your cpa, your financial advisor, in any circle of professional that you have to figure out how can we help you in a financial way, take the most amount of advantages out of what we can do together, essentially, mostly from a financial point of view. And so that's the conversation. That's why somebody like Randy has to be involved, because he gotta. He has to have that level of intelligence. That's why we work with them, because he has that level of intelligence and helps us and advises us on, you know, what we could do and things that we might be missing that we should take advantage of. So that's something we'll do in a future podcast.

Absolutely.

So you want to sum up the.

Yeah. So again, what we started with Our turnkey model, we've just turned that into our signature series. It's our top of the line model for investors. Again, it's hassle free, hands free real estate investing. We do everything from start to finish. And again you get a great product from roof to ground with a resident already in the property. So that's our signature series. Then we have the instant cat. Sorry. Then the investor choice series. And then this is your opportunity to get the property at a discounted price because it's not after repair value yet because it's not been repaired. And you get to make your own choices as far as what flooring you'd like, what paint you want to use, what light fixtures you want to use. So that's the investor's choice. Now that's again without a tenant in the property. And then you have your instant cash flow series. When that's a property that we've bought that already has a tenant in it and you are going to keep the tenant, you're going to buy the property with that tenant in there, in that property and you're going to keep the tenant going forward until that tenant moves out. Then you can do the turn or renew the lease and keep going from there. But that's the instant cash flow series. So those are the three series that you get the opportunity to buy one of our properties.

Awesome. So we hope that this episode, we did it on purpose because we just defined the timeline and we really laid it out for our entire team, marketing team, everybody, and said, hey, we're going to open this up because our investors want this and they want to be educated more about what they can do and how they can maximize what they're receiving in terms of value from their properties, from us and our team. So we encourage you to ask questions. If you do have questions about any of this, we're happy to just even just play an educational part for you to be able to help you maximize whether you're buying with us or you're just buying. You know, this podcast isn't to advertise us in our companies. It's just to educate, have fun, talk about what we do and get to know other people. So that's the goal here. So, so we hope it brought you some value. And this is real talk, which is real talk for real estate investors. And we always end with invest smart.

Live happy, have a great day, bye.