Epic Real Estate Investing - Is a Turnkey Rental a “Good Opportunity” In This Market? | 1023

Episode Date: May 19, 2020

In today’s episode, Mercedes shares a detailed answer to an email that she received from one of her clients asking what opportunities a part-time turnkey investor has in the shifting market. Even though the client is dealing with limited marketing and investing options, Mercedes gives her a different perspective on her situation and solutions that will help her move forward. Tune in and find out 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 brought to you by Epic Real Estate Investing. My name is Mercedes Torres, the turnkey girl, and I am lucky enough to be partners in crime with Mr. Matt Terrio, the guy who created the epic real estate empire.

I help busy professionals create passive income through real estate investing so you can retire even faster. And when I say retire, I don't mean just quit your job at the age of 69. I mean quit your job today so that you can focus. on the things that you love to do. Having said that, we created this show to give you tips and real life, real estate advice so that you can create passive income in your world. Now, before I dive into today's episode, I want to share with you that this show is brought to you by Ridge Lending Group, our exclusive lender. I mean, Ridge Lending Group does all

of my personal loans. CEO Chaley Ridge is not only a nationwide lender, but she focuses on helping you create financial freedom and passive income in your world. Chaley Ridge is a real estate investor herself. She has spent over 20 years helping educate investors, has done thousands of transactions, helping not only investors but families all over the United States.

And the best part of Ridge Lending Group is that once you become pre-qualified, she will hop on the phone with you to discuss your personal financial situation. She will help you understand your buying power so that you can create passive income in your world. So if you want it done right, I would highly recommend that you go to ridgelendinggroup.com, click on the Get Started tab now and tell them I sent you. If you do, you will get individualized

financial and lending education with epic love. So this week, I am going to do something a little different. Now, I often share, I get emails and notes from our clients and listeners, and oftentimes they, I mean, just over-the-top amazing questions and questions that pertain to the situation in their

world that pertains to real estate or passive income. And just this week, I got an email from one of our listeners, one of our clients, and I decided to share it with you only because the question that she asked gets asked to me quite a bit. And it is a question. It's a question that has possibly popped in your mind. So here's the letter that she wrote to me. Dear Mercedes, I've been following the epic podcast and figured I probably should reach out with this kind of a situation. In the show, Matt talks about great opportunities ahead of us. As you know, I probably won't be able to launch a direct mail campaign or fly out to end.

of the markets to negotiate a deal or to conduct a rehab due to my job obligations. So as a turnkey investor, what is the opportunity for me? What do you think that I can do so I don't let this one kind of market opportunity pass by? I'm still looking to buy. However, I'm not sure that turnkey providers will pass the savings down to me, which I totally understand, but rents are not decreasing. So I want to hear your thoughts about this Mercedes, signed Yin. So, okay, Missy, I'm going to share my thoughts. And, you know, this letter was sent by Yin Ru. She lives in Los Angeles, California.

And Yin is actually a cash flow savvy client. She has purchased, I want to say, two or three rentals from us. One, she purchased with a business partner of hers that happens to be a co-worker. And Yin is a, she's a mother, and she's also full-time something else. She works for the city, and she happens to be the investor in the family. So the husband is on the sidelines kind of watching her do her things while she's a mom and a full-time employee, as well as a part-time real estate investor. Anyway, so the reason I share this about Yin is because you might relate to her. You know, 99% of my investors are full-time something else.

They are, you know, mothers, fathers themselves. and they often work, if not only for themselves, they work for corporate America or they have a W-2 job. And so I wanted to share this with you because I think many of you will resonate. If not, I have had the same questions that Yinnis had. Anyway, my instant respond to her email was, girl, I can write a book about this. But I decided to respond in the form of a podcast because there's a lot more that I didn't say in the email that I kind of wanted to share that I hope will, you know, shed the light or maybe help a light bulb go off in your head about just the real estate situation in our country while we are in the midst of this pandemic.

Now, I strongly believe that this pandemic is going to pass. I don't think that the future is going to be much like the past. When it comes to like how we would interact with one another, you know, how we would go to a nail salon and to a beauty salon or just even out to dinner, I think there's going to be a difference in that. But I know for sure that there is not going to be a difference in the rental demand. of our nation. So the first thing I want to say is that real estate isn't essential. I mean, God isn't creating any more land. I mean, outside of volcanoes erupting in Hawaii, we're not making any more land these days. And people, regardless of their financial situation, are going to need a place to live, despite what the nation's financial situation. And,

situation is. You know, many people today, I mean, have been directly impacted by COVID, not necessarily because they have the coronavirus themselves. They've been impacted because they've been laid off or because they've been furloughed. Many business owners have had to shut down their business and because the city is making them shut down their business. So as a direct result of that, many Americans are impacted to the degree that some people are not able to make their mortgage payment, let alone their rent payment. But what that's creating is an opportunity for those of us that are real estate investors to be able to rent your property. I mean, people are still going to need a place to live. And with this financial impact,

that it's caused many Americans, many people aren't going to be able to continue to afford their mortgage. So not only are many people looking to sell during this crisis, they are looking to buy because they have sold their primary residence. So mortgage payments generally seem to be a little more expensive than rent payment. So many people, in order to avoid a financial crisis in their, life, they're letting go of their properties and they are looking to rent. So why not own a rental that can be rented to a family that just sold their house for fear of not being able to make the mortgage payment? Also, keep in mind that if somebody is laid off or have been furloughed, they're likely to not be able to qualify for a conventional loan.

It's written all over the news that financing is changing as we speak. It's now becoming more and more difficult to qualify to purchase your own home. And specifically, if you have been laid off or furloughed or if you had to close down your business, then you are not going to be able to qualify for financing. Hence, people may need to rent. Either way, rentals are going to be needed more than ever. So, why not own your own rental? Now, statistically speaking, just in America, there are more renters than homeowners.

I mean, and even in the sign of the times with today's world, even millennials are choosing to rent more so than ever. because, you know, millennials are wanting to travel more. Many of them are starting life a little later, if you will. People are getting married later. People are having children later. And so as a direct result, they are choosing to buy their primary residence later in life. Hence, many people are renting in their 30s and 40s and even in their early 50s before they choose to buy their own primary residence. And on another note, millennials tend to be minimalist.

They like to have very little on their back so that they can get up and go. So renting is a lot more appealing to millennials. And there's even a whole other sector. Many people are downsizing. So families are downsizing from their primary residence that they own. to a rental that's more affordable. And even the elderly are downsizing. They're downsizing because they no longer need a five-bedroom, three-bath house because it's only husband and wife. They're not retired and they want something a little smaller. Therefore, they are renting. They're the home that they live in. And oftentimes, they are renting the home that they have paid off as a means to, you, you know, retire. And then that rental, their own primary residence that they lived in,

that has become a rental, is now used to rent a smaller, more affordable property that maybe an elderly couple can maintain a little easier. So, Yin asked a very common question. And her question is, should I depend on a turnkey? And I mean, I quote, she said, I am not sure that turnkey providers will pass down any savings to me. That end of quote. So stop worrying about what other people are making. Who cares what the turnkey provider makes on a deal that they sell to you? Focus on the opportunity that you're gaining. While you may be paying market value for a turnkey rental, You are not doing all of the work that it takes to make a turnkey property profitable. Now, let me just remind you what a turnkey rental is.

A turnkey property is a property done for you. So what a turnkey provider does is they go out there, they find the deal for you. Now, mind you, the hardest part of real estate investing, as I often harp about, is number one, finding the deal and number two, finding the team that is going to maintain the deal once you own it. So, a turnkey provider finds the deal. They then find the rehab team that is going to rehab the property to make it rent ready. Then they market the property for you. And when they market the property, they have to go out of their way to find and screen for a qualified tenant because if property management does not collect rent, you or they will not make a dime. So it is in the best

interest of the property management team to find a tenant that is going to pay rent. And let me tell you, finding a qualified tenant takes work. Now, all this is being done for you when you jump into a turnkey rental, hence the market price. And in my humble opinion, that marketplace is well worth it to get a fully rehabbed property with tenants in place and already performing. So, don't just look at what you're paying. don't worry about paying market value. Now, worry that you're not, that you're paying too much.

And when I mean by too much, when you buy a turnkey rental, you should get an appraisal. As a matter of fact, our lender, rich lending, does an appraisal every single time to ensure that the value of the property is there. Because a bank will not lend to you if the property's value is not there. So one way to secure that you're not overpaying for the property is to get an appraisal, which if you're getting financing, the appraisal is done by the bank. So that's when you need to worry if you're paying over the appraised market value. But outside of that, if you're paying market value for a property that is going to produce a solid return for you and is going to cause you to cash flow, it's perfect. And so don't worry about paying market value. And also, look at what I'm not mentioning.

I still haven't mentioned tax deductions that you're gaining from this rental. I haven't even talked about appreciation or depreciation, which ultimately works to your advantage. I haven't even tapped on amortization. Now, all of these things, cash flow, tax deductions, appreciation, amortization, all of these will continue to increase over time, despite what the market is doing. So I often talk about know your numbers, number one. That is one of the things I harp about because it's really important to understand the number that you're trying to achieve when you're buying a cash flowing property or when you're buying a rental that hopefully cash flows.

So know your numbers, number one. And then number two is make sure that when you purchase this property, the property is going to produce the return that you're looking to produce. So regardless, let's just say if the market is to drop tomorrow. if you had to drop rents so drastic, even at half of the rental amount you were collecting from your tenant, which likely will not happen. But even if you did, and that half rent payment covers your mortgage payments, your taxes, your insurance, you are still in the green. because at the end of the year, you're still going to benefit from the tax deductions and the amortization, perhaps even the depreciation. So know your numbers, buy right, and do not worry about what your turnkey provider is making so long as you're buying at market value.

Now, there's talk about the rent relief due to COVID that the government is trying to consider. And I'm saying trying to consider because nothing is in writing, nothing is inked in stone yet. It's just talk about rent relief. Having said that, if you have a rental and we get caught in this rent relief, rest assured that there is also mortgage relief. So there's talk about both. So if for whatever reason there's going to be a idle moment in collecting rents, know that there's a very likely chance that it will be the same thing for mortgages. So it's common that people wonder about getting a deal with turnkey providers. And in my opinion, buying turnkey properties that cash flow without doing all of the work to get it is much better than buying no property at all. Again, focus on what you're getting and don't focus on what somebody else is making. Super simple.

Now, if you'd like me to answer questions about your rentals or perhaps a rehab that you're working on or finding the deal or creative acquisitions or the real estate market, whatever it is, email me directly. I love to address, you know, your situation. Perhaps I can offer you some insight just based off of the real estate that I've done. My email address is Mercedes at epic real estate.com, and Mercedes is spelled just like the car. And oh, by the way, if you're hearing something that you like on our podcast, share this podcast with a friend. Or I ask that you give us a quick review.

It'll take you two minutes because it is likely that if this podcast has made a difference for you, it might make the difference to someone else. So share the knowledge. That's it for today, my fellow investor. My name is Mercedes Torres, the turnkey girl. And until next week, have an epic week. Do you have doubts about your current plan for retirement actually panning out? Imagine revolutionizing your retirement plan so it pays you right now and in retirement.

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