Epic Real Estate Investing - Finding A Good Turnkey Market | 1044

Episode Date: June 9, 2020

To you who are too busy or maybe inexperienced to take on investing, Mercedes, the Turnkey Girl gives you the clues to finding a good turnkey market! Particularly, she shares what a good cash flow market is, where to find them, and how to choose a reliable property manager. Tune in and learn more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Tuesday on the Epic Real Estate Investing Show for Turnkey Tuesdays with your host, Mercedes-Torres. Hello and welcome, welcome to Turnkey Tuesdays, the podcast brought to you by Epic Real Estate Investing. My name is Mercedes Torres and I am privileged enough to be partners with Mr. Matt Terrio. Mr. Terrio is the one that created the epic real estate empire and how lucky I am to be his partner.

If this is your first time here, glad you made it. Make yourself at home. If this is not your first time here, let me just tell you a little bit about the purpose of Turnkey Tuesdays. Now, I created this show specifically because I saw that there was a growing demand in the market, specifically for that busy professional that was looking to dive into real estate investing, but didn't want to learn every single detail that there is to learn about investing. The show caters to that busy professional who understands the importance of real estate, doesn't have the time or doesn't have the desire to learn at all. but rather wants to have someone hold their hand through the process. That's exactly why I created this show.

And, you know, having cash flow investment grade real estate acquired, rehabbed, tenanted it, and managed for you. And the idea, or the typical client, rather, is someone who may know about real estate investing themselves, but, you know, they don't have the time or desire to do it. or two, is someone is just getting started in real estate investing, doesn't have a lot of experience or knowledge in real estate, but still doesn't have the time or doesn't want to learn how to do them themselves. So while both of these clients are idea for a turnkey property, one of the most common questions I get, I mean on a regular basis is, why do you invest there? You know, why are you investing in Indianapolis or St. Louis, Cleveland, Birmingham, what have you?

And the inspiration from this question, I feel, seems to come from a variety of places. But most commonly, the reason for that question is the client's mindset. And specifically, the difference between a consumer mindset and an investor mindset. For example, a client may reject a property, let's say, in Dayton, Ohio because they've been there, and it isn't a place where they can see themselves living or visiting again. Or a client may reject a property because the front yard is ugly, or because they're not happy with the neighborhood because they can't possibly see themselves living there. And all of these reasons for rejecting a property.

property will primarily come from a consumer's mindset. And there's nothing wrong with the person indeed with that mindset, but it's important to set your mindset as their real experience with real estate is likely limited to the purchase of their own primary residence. So, things like neighborhood, location, curb appeal, it's super important to them. And not that these things aren't important for an investor because they absolutely are, but for different reasons. The consumer looks through the eyes of a home buyer. The investor looks through the eyes as an asset buyer. Huge difference. The consumer is taking into consideration more their quality of life if they were to live there. And the investor is taking into consideration the performance. The

performance of the asset. Big difference here. So what side of the coin do you find yourself in? Are you more the consumer mindset or are you more the investor mindset? Well, I speak from personal experience, ladies and gentlemen, because at one point, I did have the wrong mindset. So to be successful in cash flow real estate investing, the mindset of an investor must be adopted. So that's step one. You know, do a checkup of yourself and see where your mindset is. The inspiration of this original question, you know, why do you invest in Memphis, Birmingham, Indianapolis, whatever market? And the second level of this question would be concern or doubt about what makes a good cash flow market. So let's go over that. When it comes to buying cash flow real estate,

a lot of people think you have to start somewhere close, somewhere close to where you live, that is. They think that they have to have their property within driving distance or in their own backyard. And honestly speaking, guys, that's just not the case. Our model, Matt and I specifically, is you live where you want to live and you invest where it makes sense. You live where you want to live. you live where you want to live and you invest where it makes sense or where dollars makes sense, even better. So maybe the question is, well, what market should I invest in? Now, that's going to depend on your criteria. Being a cash flow investor, I look for the cash flow numbers. I look for the markets that has a really solid rent-to-purchase price ratio where I can get a solid return.

Now, I personally want at least a 9 to 10% cash-on-cash return. Sometimes I will consider anywhere from a 7% to 8% return if the property is a newer property or a nicer neighborhood. But generally speaking, I kind of target that 9% tile cash-on-cash-reterm. turn, if I can get a 10, even better. You see, I'm addicted to my monthly paychecks. I think that's a good addiction to have anyway. The bigger, the better. And the more consistent, the better. This is where a solid market really comes into play. So I look for the markets that can produce that without me doing any extraordinary effort on my part. Then, in those markets, I look for all.

all the basic indicators. Indicators such as a strong economy, diverse industries, a healthy growing employment, stable or growing population, anchor companies. You know, I do look for, you know, Fortune 500 companies or companies that are up and coming or growing. Now, when Matt and I started cash flow savvy, Matt created a proprietary algorithm that pulled information from government census. You know, his brain is out of control. But this algorithm pulled information that was medium household size and medium household income, purchase price to rent ratio. Those were the things that we knew were going to give us a solid, stable return. Now, we look at migration numbers. You know, I look for government participation or developments in the areas because

I know that if areas are maintained or upgraded, people are going to want to move there. So I definitely look for that in addition to all my other indicators. So almost be in place to my satisfaction. But ultimately, I will not go into a market unless I am confident in the team that's going to manage my properties. I talk at nauseam, guys, about how important it is to have a strong and solid property management team that understands the investor and the investor mindset. It is critical that your property management is on the same page as you. And I will not go into a market, even if all the economic indicators are there, if I do not have a team.

on the ground, specifically a management team that I trust and that I am confident in. I've got to have a relationship in place before I step into that market. And if it's not a personal relationship, then I have to be referred by somebody I really trust and respect to make this introduction for me to this property management team that could potentially serve me and my clients. Because the reality is, You can have the best house with the best numbers, but if you have bad property management, it doesn't matter. Your property will likely not perform at its optimal level. Same for the markets. You can have the best economic indicators that gives you like a massive thumbs up for that market,

but if you don't have a property management team, then it doesn't matter either. So make sure, and I am preaching this every single day, that your property management team is on point. It's like building the best motorcycle in the world and then having someone race it that's never been on a motorcycle before. That's what it's equivalent to. It's still the best motorcycle in the world. But that newbie is going to crash it and it's going to burn to the ground the first time, regardless of how great that motorcycle is or how new it is. That's what's going to happen.

Same thing with your property. If you acquire a property, however, you're buying your properties and you're getting the best price and on paper it appears to be amazing cash flow. But if you hand it over to the wrong person, you're shooting yourself in the foot. What happens on paper and what happens in reality aren't always. the same thing. I speak from experience, ladies and gentlemen. Keep that in mind. What happens on paper isn't always what happens in reality. So make sure that a property management team and a team on the ground is solid before you invest in that market. Cool. So what constitutes a good market depends on

the criteria such as the basic economic indicators I mentioned and the kind of return you want to get. But it also has to do a lot with the solid property management team that is going to take care of your property in that market. Now, realize this. In the U.S., at any given time, there are 300 to 350 cash flow investment markets and sub-markets that are considered really hot cash flow markets. And statistically, your backyard is probably not one of them. So why I mentioned this, you managing your own properties is probably not going to be an option if you're looking for the highest return. And so that property management relationship that I speak of at nauseam, for that area,

you have to have it in place, an absolute must. To answer your question, what makes a good cash flow market? Well, there are two things in my opinion. Number one, you need all the economic indicators that I pointed out previously. And number two, you need a good property management team that will cause your asset to perform to its optimal level. So let's take this a step further now. How do you find a good property manager?

Well, networking and referrals are hugely important when you're investing in cashful real estate in markets outside of where you live. Now, when I got started, I belonged to an educational network, which unfortunately is no longer around. It was phenomenal. But that network had about 30,000 students all over the country. I was blessed to be a part of this amazing network at his peak. And I was able to create some pretty strong relationships across the country. So a network that is still solid for me today is our mastermind group. And it's not just really about the referral. And it's not just about the property managers, but I also depended on my network for realtors, contractors, inspectors,

all of that with these fellow investors. When we got our first out-of-state deal, which was eventually a group of deals, it was referred to us by a fellow investor. And through that experience, I was then referred to another investor that introduced me to the Memphis market, and that's where we bought our first multifamily building. And through each of those relationships and referrals, I kept getting referred to other people that in turn introduced other markets and other professionals. And that's originally how I started to build our national team.

So it was originally through, you know, referrals and other networks and real estate professionals through our network. And because we had created that algorithm that I pointed out previously that helped us with all the key indicators that were important to us, we purposely sought out connections in those markets. And bam, I started creating an awesome team. Now, having said all of that, the referral system, it's not always a foolproof system. It's just a starting point, if you will. Because I think actually, now that I think about it deeper, all of those original referrals that were sent to us, I don't think we're working with any of those

anymore. But what it did is it introduced us to different markets, different people, different opportunities. All of this was referral and networking and then backed by the algorithm that Matt had created for us. So once I got more involved in the communities of our markets, we got to learn a little bit more about the markets, we met other people, we were able to upgrade, if you will, the quality and caliber of our teams, and then we were able to increase. And we're still upgrading our relationships. That never happens, or that never stops happening. And we're still optimizing at every moment that we possibly can. So back to answer the original question, how do you find good property managers? from my experience, most of the time, you just have to pick one.

Keep close on them. Keep your eyes and ears open always with your current property manager. And then always keep your eyes and ears open for a better one. But start with referrals. Start with turnkey operations that already operate in certain markets. And definitely, feel free. to interview them before. There is nothing wrong with interviewing property managers. I will caution you when you're in the process of interviewing, the property manager is going to tell you everything that

you want to hear. Be weary of that simply because you're going to have to dig deeper. So always kind of count on a referral that's going to help you with that selection. Until you have a network of investors to tap into yourself, tap into a turnkey team as a starting point at the very least. The likelihood that their investors is probably going to be high. If they're not investors, I encourage you to look for somebody else. The investor mindset is critical to not only you, the consumer, but also to the property management team on the ground and to the turnkey team that you are using. What location, location, location is to the value of real estate, management, management is to the performance of your cash flowing asset. That's it for today, my friends.

I'll see you next week on another episode of Turnkey Tuesdays. Have you been searching for a lender that is knowledgeable, experience, and will actually talk with you about your financial situation? Well, we found them for you. Rich Lending Group is Epic Real Estate's exclusive lender. And not only do we recommend rich lending groups to our listeners and our clients, they are the ones that we trust with our personal loans. Rich Lending Group's CEO, Chaley Ridge, is not only a nationwide lender, focus on the needs of residential real estate investors, but she is a real estate investor herself.

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