Retail Flipping Vs. Turnkey Flipping | Real Estate Investing | Flipping | EP. 14

Hey, everyone. Slippin Danny here. We are the co founders of Freedom Real Estate Group, family of companies.

And we're doing things a little bit different today. In today's day and age, we're doing a Zoom vlog.

That's right.

Yeah. Today is episode 14 of our vlog series, which is entitled again, it's intended to be a day in life of the Freedom Real Estate Group family of companies and team members. And today we are talking about our turnkey flips versus our retail flips. And what's the difference?

Absolutely. All right, so this is a great topic. So turnkey flips, these are intended to be the exit strategies for to buy them, flip them and sell them to buy and hold investors. So like you, we hold our own rental properties. We have 60 doors here in the greater Dayton area. And so we are doing for you what we do for ourselves. We go get the property, we rehab it, and then we sell, we put a tenant in it, we sell it to one of you guys who want to buy and hold cash flowing property. So that's what a turnkey flip is. So we're going to talk about that one first and then we'll compare it to a retail flip. So I'll start off with the first two things we address. Major systems. So major systems are things like H vac system, which is your air conditioner and your furnace, your hot water heater. Your roof is what we would call a major system. So there's standards that we have on those in terms of life left. And a lot of that is judged by the project manager when he goes out to walk the property. Because you can talk to numerous inspectors and they can say, hey, you know this furnace right here, it's been kept in great condition. It's 15 years old. It's going to last another five to 10 years easy. This is a great model. Blah, blah, blah, blah, blah. They understand and know all of that data. The rest of us, we're just like, okay, that's great. So we do trust our project manager and things like that. Same with the roof. You can get three different roofers out there and some are going to say, replace it now. And somebody said at 15 years of life, 5 years of life. So we have these standards that we want to have five to 10 years left of life in every major system or component of the house. So you as the investor, as you buy a cash flowing property, you're not going to have major expense in the first few years of your ownership. So that's the first thing. And then also Our materials, we have standards for the materials that our guys use. We've even gone to the extent of building a materials packet that when you are onboarded and you're a contractor for us and you're doing one of our turnkey flips, you're going to get a packet that says, these are the lights, this is the backsplash, this is the type of countertops, this is the type of faucets, this is the type of tubs, et cetera, et cetera. Every single light switches, everything is in there. Because we want a standard of every house that you walk into. And I'm going to let Flip give the example of why we do that.

Yeah, so the main reason we stumbled upon doing this about six years ago now, and what we loved the most about it is that it was for the investor that could buy not only one, but buy multiple, you know, and we want to keep it the same on every one, because if when they buy one, then they know when they go to buy the next one, they know it's going to be exactly like the first one or the first 10 that they bought, whatever it is. And so I always like to call it the word the McDonald's a turnkey. Because if you're in Germany or if you're in Los Angeles or if you're in New York, Big Mac is a Big Mac is a Big Mac. And that's why we want to keep that the same on every. Now I'm hungry for Big Macs for some reason. But that's why we do that, because we want to keep it the same. We don't want the contractors to be going, oh, I wonder if this light will work. Or, oh, this, hey, look, this faucet's on sale. Let's buy this one. No, we keep it the same on every single property. Another things, some more things that we do is we also go through and make sure all of the electrical is updated. We do handle a lot of properties here in the southwest Ohio area that are built and before 1900 or 1900 to 1940, and they still have the knob and tube wiring. So we get. And even so, some electricians will still say it's the safest out there. We still pull it all out. We put in new electrical work. We also replace all the light fixtures, like Danny said. We also replace all of the outlets and all of the switches and the COVID plates, because sometimes those cover plates are from 1910. And so we made sure that they're all updated so that way the house looks new. We also Go back in. And we. We also make sure that the plumbing is updated. A lot of these houses have galvanized plumbing still. So we'll take all of the galvanized pipes out and we replace everything with PEX plumbing, PEX tubes. And so we make sure that all of the plumbing is updated because we want to make sure that nothing's going to have a problem. Nothing's going to. Your pipes aren't going to freeze, you know, so we want to make sure that that's covered. Lastly, when we do anything that's four units and more, we make sure that all of the units have appliances and we make sure that they have a refrigerator, a stove. Yeah, that's it, right?

Yeah, yeah.

Because we don't do dishwashers in any of our turnkey properties, unless there was one there already. But we don't do any dishwashers and we don't supply any microwaves, so. But that's just on the four units and up.

Yes. So that's something that. It's interesting. A lot of people will say, what didn't I ask you about? And that's one of the things that we actually talk about. There's a few things, is that here in Ohio, residents, tenants, whatever you want to call them, they typically bring their own appliances to a rental. So you don't supply them as the owner, except for properties that are four units or more than it is common. Go ahead and supply those. Also, a new change that Flip didn't even know about because he mentioned it here is dishwashers. When there are dishwashers, we actually pull them out and we add shelving or something like that. We don't even use them anymore because we've learned as landlords ourselves that dishwashers just cause more problems, more issues. We just. We don't want to deal with them. Right. We want to make this as easy as possible for you, the landlord, and the owner of the property not to have to be spending money or dealing with appliance issues. So only on 4 units or more do you supply the appliances. Anything less, it's standard for the tenant to have to bring them in, and therefore you don't have to deal with all those repairs. Which made me think of another thing. We always pull out garbage disposals. We don't want to deal with garbage disposals. So there's lots of different property standards. We just gave you the highlights on some of them for turnkey. So turnkey specific. We're always looking at a renter being in there. Right. We want to have standards that are renter friendly. All of those things that we just talked about are part of that. So let's talk about now. Retail flips. What are the differences? Well, the things that we just talked about very recently now is that garbage disposals, well, we don't pull them out. Dishwashers, we leave them there. Retail flips, the end buyer for that, the exit strategy is to sell it to on the MLS to an owner occupant. So perhaps Flip and I would want to live in one of these retail flips. We're looking for a new home, we want to live there. We're not buying it for cash flow or we're not selling it, renting it out to a future tenant. So we're going to do things a little bit differently like what I just talked about. But the standards are similar. So our turnkey standards are very high. If you look at other properties and compare them to what we do, there's a reason why we get top of the market value and good appraisals on our properties because it's a very high quality rehab. So our retail flips actually use many of the same standards. Same paint, same flooring, same faucets. You know, we might then look at the comps and I'm going to let flip dive into this a little bit more. But we not might. We always look at the comps, but we might change our standards a bit because of the comps. So if we're in a price range of $300,000 and we see that neighborhood for that price range, all uses granite or a particular pull down faucet or those, you know, really extravagant kitchen, you know, what do you call those stoves with the. It's coming out of the ceiling. I don't even know what it's called. But anyways, we'll match the property to the standards of other properties in that price range. That's part of what we change. But if it's, if it's a house that's 120, $150,000 and we just couldn't get that 1% rent to purchase price ratio that is good for a rental property. And we decided to make it a retail flip. Sometimes we're doing the exact same rehab that we would have done for a turnkey property with a few minor changes of leaving the garbage disposal or leaving a dishwasher or something like that. But it's the exact same stuff. Because our turnkey quality rehabs are so high flip taken away for what I missed.

I'm guessing that thing Coming down from the ceiling. That's the range hood. So.

Thank you. It was in my head, I'm like, what is that called?

But like Danny said, we've just recently did a retail flip. It sold in less than 24 hours. And we didn't do anything different from our turnkey standards because of the neighborhood. The neighborhood didn't require granite countertops. They didn't require even the stainless steel, Even though I think we put stainless steel in there anyway. It didn't require it because all of the other comps in that neighborhood were actually. Ours was still better than theirs. But we didn't have to do anything different than our turnkey package. And because we always say that too, our turnkey rehabs are typically better than the standard in that neighborhood anyway. But it depends on the. What it really depends on is the price range. Now, as you get higher in price range, you're gonna. The buyer pool gets smaller. And so as we get higher in that the price range, that's when we're gonna add the granite countertops and we're gonna do just little, little tweaks here and there. But again, everything's still the same as the turnkey standards, but we just do a few things. But as we get higher in price, we cut it off too, because we don't want to get so high in price that our buyer pool is so small. And we're sitting on a property for a very long time that's hundreds of thousands of dollars. So there are properties that we just won't do at all because it just. It's out of our range. But I'm trying to think of really, if there's anything else to add to that. That's pretty much the difference between our retail flips and our turnkey flips. And like Danny said, that 1% of the rent to price, once we get that, which is right around that 140 to 150 range, that's when it just immediately turns from turnkey to a retail flip. And then we just put it on the mls. And right now everything's so hot that you put it on the MLS and it's gone in a day.

Yeah. For over asking price. Yeah.

Yeah, exactly. And like she said as well, that's all that also helps with our appraisals for how good our properties are being done, because the appraisers come in and see the property and they're like, wow, this has really done.

So.

I hope that you enjoyed this. We like to keep these short. This one wasn't as short as we wanted to say, because we always say, oh, it's going to be three minutes and ten minutes later. Here we go. We're wrapping it up. So we hope that you enjoyed this week's vlog number 1414. But again. So again, we hope you enjoyed it. Be on the watch for our podcast. It is launching soon. We swear. Pinky promise, whatever that is. But we swear it's launching soon. But we hope to see you guys around soon.

Okay, Bye, everybody.

Bye.