Epic Real Estate Investing - How To Manage a Turnkey Rental From a Distance | 680

Episode Date: June 11, 2019

Tune in and discover the key points that will help you to successfully manage a turnkey rental from a distance. Learn more about your ad choices. Visit megaphone.fm/adchoices

The reason why we attended Epic Coaching Intensive was because we were very impressed with what we heard in Matt's podcast. We're very interested in building wealth and leaving a legacy for our children through real estate investing. The biggest takeaway that I got from the Epic Coaching Intensive was that you don't have to do it by yourself, which I like to do, but I don't know it all. There are a lot of people smarter to me and they focus on different aspects of different business parts that will help me. accelerate what I'm going to do. Hey, Matt here. You know, everyone is talking about real estate investing, right? It sure seems so.

I mean, everybody wants to get in on the action. And we all know that finding off-market deals, it can be tough. It can be really tough. But what almost no one understands about real estate investing is the concept of finding truly motivated sellers. Because it's not spending more on marketing to finding these motivated sellers that helps you buy discount of real estate. It's setting up a really good automated leap.

machine that finds quality sellers around the clock. And that can happen, even if you can't stop trying every new strategy that you see at the RIA clubs or hear about on a podcast. As long as you're also contacting your leads, setting appointments, and making offers. And before I forget, if you like the sound of where this is going and you want to go deeper, you might like to attend the live three-day epic intensive lead machine workshop. It's July 18th through the 20th. And if that sounds interesting, then head on over to epicintensive.com. Get the details. That's epicintensive.com.

All righty, now let's get on with the show. 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-Tores. Hello and welcome, welcome to Turnkey Tuesdays. My name is Mercedes Torres, the Turnkey Girl, and I am privileged enough to be partners in crime with Mr. Matt Terrio, the guy who created the epic real estate empire. So for my friends joining us again, welcome back. So good to see you again. It's been a great week and I hope you had a great week as well for my new listeners to Turnkey. Tuesdays. I created this show for busy professionals. Busy professionals just like you who understand

the importance of real estate. They just don't have the time, the desire, or the knowledge to do it all themselves. So on this show, we talk about how to make you a real estate investor while somebody else does it for you and you learn from them. So we do cater to that busy professional that has that real estate investor mindset, and we're going to hold your hand every step of the way. You know, it's truly my passion. I love real estate, and I really love to share it with you guys. And when you reach out to me, whether it's through a review or whether it's an email asking me a question, it absolutely makes my day, because I know that real estate can make all the difference in the world. And your financial goals are super attainable. I mean, they really are. And real estate is so

powerful. I mean, it's life-changing. I truly believe, and like Matt says, real estate is the final frontier where the average individual has a legitimate chance to make themselves a millionaire. Life-changing. Anyway, I'm going to spare you those details. So today we're going to dive. right into it because on today's show, I want to share one of my clients' main concerned just about turnkey real estate. Now, it's no secret. Most of my clients live in one state and they invest in another. For Matt and I, it's no secret that we live in Los Angeles, California, and we do not invest in Los Angeles, California. We are cash flow investors. And it's very difficult to cash flow here in California.

Not impossible, but extremely difficult. When I compare it to markets where we have sought out can produce a strong return. So on today's show, I'm going to talk about one of the main concerns my client has. And one of the questions that I get asked almost on a daily basis, I call it my everyday question, and it's how do I manage my rentals from California when my investment properties are in the Midwest and in the South? Ladies and gentlemen, I live in Los Angeles, and my investment properties are in Birmingham, Alabama, Little Rock, Arkansas, Memphis, Tennessee, St. Louis, Missouri, Indianapolis, Indiana. I mean, they are far, far away from me.

And I always get asked, well, how do you do it? How do you live in L.A. and manage all of these properties? Because that is where all of our properties are. Well, the answer is, I don't manage them. My property management teams manage them. I manage my teams. But, I manage my teams. But, my property managers manage my properties. Now, I do have property managers in each state. It makes no sense in the world to have a management team here in my LA office when my properties are in Little Rock, Arkansas. So my job is to find amazing property management teams on the ground, and my job is to manage them. They manage our properties. And this is why I am adamant about a strong property management team on the ground.

This is why I make it very clear to all of my clients. You know, the location of your property, yeah, it's important. The maintenance is also important. But the most important aspect of real estate investing is property management and the team you have on the ground. In fact, I'll go out on a limb and say it's everything. It literally can make or break your investment property, your rental. So this is why when breaking into a new market, if I don't have a strong property management team on the ground, I won't go into a market.

And this is why Matt and I specifically and cash flow savvy, this is why we're why we go deep into a market instead of wide across the United States. For example, in Indiana, Indianapolis specifically, I'm not only in Indianapolis, I'm a big fan of buying around the suburbs of Indianapolis. I'm also in Anderson. I'm in different little suburbs because I know that the people that live in Indianapolis, the commute to a suburb may be 20 minutes. and that's 20 minutes that a tenant is willing to drive just to get outside the city center.

So they may work in Indianapolis, but they don't have a problem going right outside of Indianapolis. A 20-minute commute. It's not like California. California, 20 miles will take you two hours. But in Indianapolis, 20 miles is, you know, a 20-minute commute or so. So I am really, really big on making sure that my team on the ground is solid. And it is for this reason that the teams that I currently have, and mind you, Cash flow savvy has been around for eight to ten years, but this is why they're so successful because they focus on the things that I feel are important. And I will dive into that in just a moment.

So it's not about the increasing market. It's not about how pretty your home is. It's not even about how old your investment property is. It's not about how many corporations are coming into the city. It's all about the team on the ground. It's about that team that finds your tenant, the team that screens them, and it's the team that places them that make all the difference in the world. Because at the end of the day, if your tenant is not a strong tenant paying their rent every single month, nobody makes money.

Not you and not property management. So I'm going to share with you the three points that make all the difference in the world, not only to me, but to all of our cash flow savvy clients. because this is what allows me to live in Los Angeles and invest in the Midwest. And my clients, because I use the same criteria for them, in fact, to our property management team, it's often invisible until the very end who really the owner of the property is, because it is extremely important to me that everyone gets taken care of on the same caliber. So let's dive into it. Point number one, what makes all the difference for your investment?

For us, all of our property managers must be a real estate investor themselves, hands down. It makes all the difference in the world. If my property manager does not understand what it is to be a real estate investor, they're not going to understand me or you. So they don't need to be managing my property. I can't have an employee of a property manager try to run the ship of your home, so to speak, of your rental investment. No, my property managers need to understand what it's like to buy a property, to find the team to rehab the property, to place the tenants. It is a lot of work, and it's a lot of lot of skin in the game, and only somebody that has done it is going to understand the severity of it.

They're going to understand how important it is to place the right tenant, to fix the property the way the tenant is going to feel as if it is their home. So it's really important that all of my property managers are investors. They also understand how important it is for the investor to get communicated with. So my property managers go out of their way to communicate with you the investor. They need to keep you on point at all times. And whether it's an email, an automatic email at that, you need to be able to communicate with them like they're able to communicate with you.

So they not only have to introduce themselves to you, because that's a priority, they have to walk you through their property management process. You know, what to expect, explain to you what the property management agreement is, because at the end of the day, the contract is between you and your property manager. Remember, the property manager works for you. So if it's important to you that you get two-year leases, that needs to be communicated. Now, I'm not a fan of two-year leases because I like to increase the rent every year. But heck, if you want two-to-three-year leases and that's what works for you,

then our property manager needs to have that line of communication with you so that they fully understand what you want out of your investment. After all, this is your property. We're just managing it for you. Now, property management works for you. Huge difference. And property managers that are investors tend to understand that. So they need to have a lot of communication with you.

And they need to go out of their way to explain what their fees are. Because at the end of the day, property management also has to make. a living, but if you don't understand the fee structure, then it can create upset. So if you don't understand what you're getting billed for, that doesn't work. So it needs to be clarified at the very beginning. So management fees need to be discussed. Generally across the spectrum, management fees are anywhere from 8 to 12 percent of rents. Now, our management fees are generally 10% of rents collected. So our property management teams will not charge a fee unless they collect your rent. That is really important. You also need to understand what your re-up fees are.

If they do resign a lease, is there a fee for that? Do you get charged for that? Or is it part of the initial fee? And is the fee a half of months rent, 25% of the rent, 80% of the rent, or a hundred 100% of the rent. That needs to be explained to you because every property management team sets their own rules. Now, generally speaking, for us, it's either a 50% of the rent or a whole month's rent with no re-up fee. So that needs to be explained to you from the very beginning. And when they have a turnaround, when your tenant places their notice to leave, is that a 30-day- notice, is it a 60 day notice, or is it a 90 day notice? And they need to explain to you what to expect when it comes to turn your property around. So when your tenant leaves, they really need to explain to

you, does it take two weeks to get the property rent ready, or does it take four weeks to get the property rent ready? Those two weeks make a huge difference. Now, point number two is Tenants. Tenants in general are a priority, and your property management team needs to absolutely understand that. The two priorities here are investor communication, number one, and number two, tenants in general. So it is really important that your property management places a huge importance on tenant placement. Because at the end of the day, if your tenant does not pay rent, nobody makes money. And this is why our tenant selection process is crucial.

And we are absolutely careful about running credit reports, about running background checks. That is so important to us. And then when it comes to the credit report, we actually take the time to understand a tenant that has less than desirable credit. Now, I am a big fan of looking at the credit report and understanding derogatories. Because, you know, life happens, my friends. And sometimes there's a death in the family that causes dismay in someone's life. or there's a divorce that potentially sets somebody back.

So I'm big on having a conversation and understanding when I find a tenant that seems like a potential fit and is just honest about their situation up front. When I run a credit report and I see, okay, well, maybe they had financial distress because of medical bills going into collections seven years ago, I'll have a full-on conversation with the tenant and understand what happened. And if it's something that seems like they're trying and there's a second chance,

I may ask for a three-month deposit instead of a one-month deposit, or I may say a two-month refundable deposit. Well, in order to get to that, you really have to have a property management, team that weeds that individual out. I'm big on thinking outside the box because I've had experience in some of my best tenants have been those tenants that just needed a chance. And what I don't do, and I'm a big stickler on, and so are my teams, is if we have collections to utility companies, or if we see that, you know, the water was shut off and they were sent to collections for that. I won't really budge on that because my mentality is if you didn't have enough money or didn't care enough

to keep your lights on and it went to collections, then you're probably not going to make my rent a priority. So there are a few things that are deal breakers for us and there are a few things that are conversations. starters for a tenant that we feel has potential or has their heart and desire in the right place. So our teams are trained to look for that diamond in the rough that sometimes needs a second chance. And our property management team is really good about that. Now, that's not to say that we haven't experienced evictions because let's just face it, at the end of the day, real estate investing is an investment and there are risk. And the one variable that exists in that whole equation is a tenant. And if a tenant doesn't play by the rules, which means paying rent, then

that's risk for us. And at the end of the day, if we do have to evict a tenant, our property management teams are really good at nipping that in the bud and making sure that that happens sooner than later when it happens. In fact, our tenants are really good about, or in fact, our property management is really good at saying, hey, we're going to evict you. So why don't we just make an agreement to have you move out and will help you? That not only saves time, but it saves a whole lot of money. So property management has to absolutely understand tenants, the importance that tenants are, and make them just as much a priority as they make you the investor a priority. Okay, so that was point number two, tenants.

Point number three, that is also critically important, is your property. The maintenance of your property. Because, again, at the end of the day, if you have a good, maintained home, that's going to keep your tenant happy and that's going to make your tenant pay rent. Maintenance is extremely important. So this is why we go out on the limb to ensure that our properties are made rent ready and up to code. So you don't have any maintenance issues, but you do need to understand maintenance in general. For example, with your property management team, who does the maintenance? Is it an in-house team that does it? do they hire subcontractors and really important? Do they have team specialists? Like do they have

roof specialists? Do they have foundation specialist? Who does the HVAC system and who takes care of the plumbing and who takes care of the electrical? Is that an in-house team? Is that a specialist team? It's really important to understand that from the outset. And then the fees. What are the fees that entail hiring a specialist. And are we going to be in charge of that? Or does property management team give that to you? Is that your responsibility? In our case, we do it all for you, but we tell you all about it. And if you want to take on the way, by all means, you can do it. But for the most part, it should be done for you. Of course, there will be a fee. It is really important that you understand what that fee is. Now, it should be a nominal fee for just setting it up if a specialist has

to be hired. But again, you need to understand that. Now, this is why I'm big on a maintenance program. Many property management systems have a maintenance program set up where during the winter in our markets where winters are severe, they go in and make sure that your pipes won't freeze over. where in the summer, in those markets that you have to have air conditioning running 24-7, it is really important that, you know, that is maintained because at the end of the day, if you were running air conditioning all summer, it is really important that that unit gets maintained. So we're really big on making sure that all of our clients have the option of having a maintenance program. So for your rentals, make sure that you have some type of maintenance

implementation system in place, whether it's a company that's hired in that you bring in, or whether it's your in-house team that does it. It's really important to kind of maintain the property. And sometimes it's just by season. So make sure that that is on your list of priorities. So the three points again, just to recap, number one is your property manager must be a real estate investor and have a real estate investor mindset. Number two, tenants. Tenant placement and tenant care is an absolute priority. And point number three is the maintenance of your property. How property management maintains your investment. critical point. You know, ladies and gentlemen, I often say it doesn't matter how pretty your home is. It doesn't matter how old it is. What matters is who is taking care of your property in your absence. Who's taking care of your investment? Who is collecting your rents and forwarding that money to you? It is all about your team on the ground, your property. Your profit. You're

property management team. It is imperative that your team on the ground gets it. It's imperative they understand why you are a real estate investor and why you are trusting them to oversee your investment to make sure that they keep it on point so that it continues to perform for you. Your team has to have a track record and your team needs to be accessible at any time just as you need to have your property at your fingertips, whether it's an online portal that you can check in on your property or whether it's a phone call that you're able to reach out at any time of the day. That is what's going to make all the difference in the world. My friends, that is it for today.

If you want more information about turnkey property management, just go to cashflow savvy.com. That's savvy with two Vs. Lots of great information about turnkey properties there. And feel free to reach out, contact us, and we'll make sure we connect or just send me an email. By the way, ladies and gentlemen, I do answer my emails.

It may take me a few days, but I do get to them. At the end of the day, ladies and gentlemen, it's all about cash flow real estate investing because cash flow is king. Have an epic day, my friends. Is Wall Street failing to meet your expectations? Has your 401k tragically turned into a 201k or worse? Don't panic. You don't have a money problem.

You have an idea problem. We're cashflow savvy.com. And we'd like to share with you a new idea how one small shift can transform your financial future and accelerate its arrival. Go to cashflow savvy.com to get this new idea that Wall Street doesn't want you to know about. Cashflow savvy.com. More control,

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