In March of 2022, if you came to me and told me that by the end of that year the real estate market in Arizona would come to a screeching halt and I would no longer own the business I built for over a decade, I would have laughed in your face and told you in no uncertain terms you were an idiot for even suggesting either one of those things could ever happen…Let alone both? Not a chance.
And then they both came true.
Looking back, that was the best thing that could have happened to me.
Isn’t that funny how trials often work in life? What at the time may seem like such a horrible thing, ends up being the very thing that you look back on as a catalyst or a start to something so much more fulfilling or exciting?
Here is what 2022 forced me to do as I looked into the proverbial mirror:
- Create a recession proof business that would last the rest of my lifetime. One that would no longer be reliant on transaction volume, quick cash, and require large amount of overhead and marketing expenses
- Learn to become lien and do more with less
- Take extreme ownership
- Lean into what WORKS and go all in on the ONE THING. <LONG TERM SINGLE FAMILY>
- Help others on their journey to achieving financial freedom
To be honest, #5 on this list is the most exciting component of what I do. And the funny thing I have learned is the more I truly try to give others, I am blessed 10 fold. Love it.
I have come to realize that what is “Common Knowledge” to me may be uncommon to you.
You may not consume hours of data and content related to the current real estate market trends and where opportunities exist within the RE space like I do…Just like I do not spend most of my time focusing on your line of work.
While I could write a book on the lessons learned over the last 18-24 months, today, I want to focus on the lessons I learned while being on the other side of a “turnkey” real estate company and WHY I decided to create a turnkey real estate model that FIXES all of the issues that I experienced as a “passive investor”
MY EXPERIENCE INVESTING WITH A TURNKEY SF PROVIDER:
I made some connections in Alabama several years ago that introduced me to a property manager who worked with out of state investors like us. I wanted a solid property manager who understood the pitfalls of rental properties and would steer us in the right direction of what to buy and someone that would manage our properties like they were their own.
We put full faith and trust in his opinion.
Here is my experience in a nutshell over the 2.5 years we owned these “turnkey properties”
- Every single property we owned had tenant turnover. The average cost for each turnover was ALWAYS in the 5 figure range. Often times we paid over ½ the price we paid for the home originally in repair costs for a turn.
- We purchased small portfolios of 20 properties the first round and a year later another 10 properties. I would classify each property as C- or D class properties. Meaning the tenants were section 8, low credit score, and would just trash the place every time.
- Deferred maintenance: Another huge issue with renting to perpetual renters in low income areas is they usually let the “little” repairs slide…for a very long time. Meaning that small water leak in the corner of the bedroom from the roof, when you peel it open a year later, has rotten wood, rodents living inside, and the roof needing all new decking
- No inspections were taking place for, in many cases, years. If a tenant renewed their lease, nobody ever took the time to actually go and walk the property and see if they were taking care of the place…Leading to 5 figure turns when they moved out
- Communication was always months behind the issues. Meaning, when an actual problem came up, they would try to handle it in house…and then randomly charge us thousands of dollars that we would not know about if we were not paying attention to our monthly estimates (which when you have hundreds of properties and things going on, little details can get lost in the shuffle).
- The supposed savings we were getting from having their “in house” crews handle the repairs always ended up being much more than what it would have cost had a 3rd party vendor gone to fix the problems.
- 9% management fee and high placement fees for new tenants ate away at our profits to the point we had fewer months after expenses in the green than we did in the red.
- These properties only appreciated by maybe 15-18% over a time period where Nationwide the average was double that. This is because C & D class neighborhoods rarely appreciate especially when compared to the National average.
So as you can imagine, one of the best days of 2023 for me was when we finally sold that last remaining “turnkey” property.
By the way, I put quotations around the phrase “turnkey” because I feel that term is used VERY broadly and loosely and it means very different things to different people. You will find my example of what a turnkey property looks like as you read on.
If any of you have not had the opportunity to look up Alex Hormozi and read his content, I highly recommend you start following him.
Do not let his looks fool you. He will without a doubt soon be a billionaire.
The reason being in my opinion is simple. He tells you the truth. Unfiltered. No sugar coating. And not just that, he gives you actionable advice that you can make you money NOW.
Here is what I took away from his first book 100 million leads:
- Find a problem that people struggle with and create a solution.
- Make the solution you are providing a ‘no brainer.’ Make it so good that they would be a complete idiot for saying no.
- Provide MASSIVE VALUE that people are almost embarrassed at how little they pay you for all that they are getting in return.
- Double down
- Once you have mastered this solution…Read book 2… 100 million offers so that other people can find out about this amazing service you offer so you can then help more people.
SIMPLE. Not EASY. Simple. Remember what Steve Jobs said about simplicity?
“focus and simplicity is our goal. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains”
Alex Hormozi struck a nerve with so many because he cuts through the noise and confusion and delivers a simple solution.
This is what we strive to offer our clients looking to invest in real estate.
Simplicity & Transparency.
This is why Monday mornings are by far my favorite. I LOVE waking up to another full week ahead of me to improve, solve complex problems, and help others achieve their goals of financial freedom.
Here is how we have simplified and are providing profitable turnkey real estate solutions for anyone looking to invest in residential single family houses that have equity & cash flow day one…
While skipping all the headaches that come with rental property investing:
- When we sell a “turnkey” property to an investor, this is what they can expect from us: All major repairs such as roof, electrical, plumbing, etc have been inspected and repaired or replaced so you are not dealing with major repairs in the first year. *With this said, this is real estate…And there are always issues that were not found during multiple inspection such as underground plumbing leaks that were not found with our sewer scope. Or a natural disaster occurs and a tree falls on a house…Those things will and do happen. But our due diligence is second to none. We BUY every single home with our own capital…So we literally put our money where our mouth is and treat every home like they are our own (because they all start out as our own!)
- Only buy properties in C+ or B & A class areas. We will NOT buy a home no matter how good of a deal we can buy it for in a rough part of town. Lesson learned already.
- We have high standards when screening tenants. Many say they are too strict for our area but we have found it is much more beneficial to wait for the right applicant vs hurry up and place a warm body in a home. This protects the home owner as well as the property manager from dealing with tenants that are problematic.
- We have bi annual inspections. We also train all of our vendors when visiting one of our properties to take photos of any issues of concern related to deferred maintenance or damages to the home. We want to stay on top of repairs before they fester.
- Communication is critical. Our property management team is trained to notify the owners as soon as we hear of an issue and have several potential solutions to bring to the investor.
- All of our maintenance is handled by third party contractors that we have vetted. We then share the estimate or invoice with the owner and charge 10% for managing the repairs and scheduling with tenants, etc. Transparency is key!
- We are the only flat fee property management company in Chattanooga, TN. $100 flat fee. This saves investors thousands of dollars in cash flow (which at these interest rates can make a difference of actually cash flowing).
- We are in this market because it is one of the few “Unicorn locations” left to invest in right now. Not only have rents continued to increase by 7% in 2023, appreciation of homes in the greater Chattanooga area have outperformed the majority of markets across the US. The median sf rental is at $1,577
Simply put, we take the headaches out of buying, remodeling, tenant placement & management, financing, maintenance, and selling.
Your job is to get the funding to buy a property. We will take care of the rest.
Our goal is similar to Steve Jobs but in a different industry. He said:
“Simplicity is the ultimate sophistication. It takes a lot of hard work to make something simple, to truly understand the underlying challenges and come up with elegant solutions.”
We are far from perfect…But we are having a blast perfecting our processes every single week.
Are you looking to get started with investing in real estate?
Click below to schedule a 20-minute call to see if we are the right fit.