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Multi-Family vs. Single Family Home Rentals

I’ve talked to a lot of people who are interested in real estate investing, but most of them skip the single family home rentals aspect and move right to the duplex, triplex, or quad investing. Perhaps this is because they have learnt that these properties create more cash flow. It is true that duplexes, quads and triplexes do produce more cash flow on paper, but in reality these numbers can be misleading.

Lower Rental Rates

The rental rates for duplexes compared to single family homes are lower, especially when you get into quads or triplexes. For example, in Memphis, where we invest, a single-family home rents out for $700 to $750. If that were to be a duplex, each unit of that same property would rent out for $500 or $550. But you’re going to have to pay a little bit more for the duplex than for the single family home rental. So when you’re calculating your numbers for your duplexes, triplexes, or quads, be aware that you’re actually finding comparable rental rates for the same size of building. Don’t use comps for a single family home rental if you’re buying a duplex, etc.

Tenant Quality

Normally, the tenant quality is lower when you move into multi-families compared to the single family home rentals. In single-family homes we are more likely to rent out to families of three or four. It might be a mother, a father, and a child; or a mother and her two children; or a mother, father, and their two children. Those are the types of people that are moving into our properties when we have single family home rentals. On the flip side, duplexes or other multi families normally have a greater pool of tenants. Sure you’re going to get some families, but you’re also going to get a college kid and his other buddy, or a newlywed couple, or a couple that’s dating. Most of the time these tenants are also much younger than the ones who are renting out the single families, so the tenant quality decreases.

Higher Vacancy

The average for a tenant to live in our single-family home rentals is around 18 months. But if you compare that with a duplex, for example, the average length that the tenant will be in there is nine months. Which is significantly less. These people tend to not stay their full leases. They’re paying a lower rate, they’re not that good of tenants in terms of quality, and they’re also not staying their full leases. It is therefore very unlikely for a tenant in a duplex or a quad to stay for four or five years. But in a single-family home, this is much more likely, especially if it’s a family whose kids are going to school nearby and the parents are working somewhere close. For them to pick up and leave is pretty difficult, compared to a college kid, or two roommates going to Community College, or a newlywed a couple. There are a lot more things that can arise that would make those tenants cease renting your property.

Higher Operating Expenses

With single-family home rentals we can pass all the operating expenses on to the tenants. For example, the tenants handle the lawn care, the water, the electricity, etc. But if you look at a quad the owner actually has to pay for the lawn care and property upkeep.  There are common spaces of the home that just can’t be split up. In some quads or other multi-families, instead of having four water meters, there is just one, which makes it difficult to split up the water bill. There are ways to split it up, but sometimes the landlord has to just eat the water bill cost for their tenants.

In the end, these multi-families are good investments. Make sure that you’re putting in quality tenants. Double-check what the rental rates are for those types of properties.

If you’re buying a duplex, find rental rates and comparable rents for duplexes. If you have a quad, find rental comps for quads, etc. You want to make sure you sign these people up with 12-month leases, at the very least. Don’t do month-to-month leases because you want your tenant to stay in there as long as possible. Make sure that you have the right number for operating expenses. See if you can pass on those operating expenses to the tenant. Check if there are separate meters for water and other utilities. This makes it possible to split up the bills and pass them on to the tenants.

If you’re interested in seeing the properties that we currently have available view our current inventory. If you would like to talk to us and ask us more questions, feel free to schedule a call with us.

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Property Management Fees and What to Expect

Property Management Fees and What to Expect

When investing out-of-state and especially buying rental properties out-of-state, your property management company is your boots on the ground. They’re the most important person on your team. They do everything from collecting rents, to managing work orders, to filling vacancies, etc., and they help you manage the property entirely.

Therefore, you want their interest to be aligned with yours. You want them to be paid when you get paid. You want them to make money when you make money. That’s why the fees are very important, and they should be aligned with you generating revenue.

There are some normal property management fees that we pay all of our property management companies that we use out-of-state. So if you’re talking to a property management company, you want to make sure that the fees are normal and you’re not being over charged.

10% of Gross Collected Rents

The first fee that property management companies normally charge is 10% of gross collected rents. Most property management companies out-of-state for the single-family home space will charge this. Once you’ve developed some portfolio of five, or ten, single-family homes, you can negotiate with the property management company to get this fee down to maybe 8%, 7%, or 9%.

Now, of course I’ve heard that other property management companies out there charge only 6% to 8% right from the start. I would definitely do your due diligence on those companies. Maybe they’re just starting out and they manage 20 to 30 properties and that’s why they’re charging such a low fee just for them to get started and get some numbers. You just want to know why they are charging a lower fee compared to the normal fee.

Filling Fee

When property management companies go and fill vacancies they are paid a fee which is normally the amount of the first month’s rent. The way that it works is that if a property is vacant, the property management company will fill that property.

Let’s say the rental amount is $800, the property management company will get the first month’s rent or $800. After that the property management company is just paid $80 a month. Hopefully your property management company is putting the tenants in on one-year leases, and even better if they’re putting them in on two-year leases.

Lease Renewal Fee

The other fee that property management companies charge is what is called a lease renewal fee, and it’s normally a flat fee, it shouldn’t be more than a couple hundred bucks or half of first month’s rent. For an $800 rent, it should not be more than $400 for them to sign a lease renewal.

In addition, for every lease renewal, your property management company should recommend you to increase the rent a little bit. Even a little bit of money each month is going to keep more cash going to you. And if you can increase your property rent by just $25 every lease renewal, that’s money going right into your pocket. When you scale your properties up and you do $25 rental increases per property, and you have 10 properties, that’s an extra $250 a month right into your pocket.

The Right Company Size

In terms of the size of property management companies, I tend to like property management companies which manage a thousand properties or less. I like these managers because they’re a little bit more hands-on. The larger property management companies which manage 2000 to 3000 properties, I feel like their clients, the landlords, just get lost in the shuffle. They just become numbers on a spreadsheet and are not well taken care of.

That has just been my personal experience with those larger property management companies, and that’s why all the property management companies I use manage less than a thousand rental properties. I have a real interaction with the property managers and the people who go and walk on the property if there are any work orders, etc.

If you’re interested in seeing the properties that we currently have available view our current inventory. If you would like to talk to us and ask us more questions, feel free to schedule a call with us.

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5 Reasons to Invest Out of State

5 Reasons to Invest Out of State

While California may be a great place to live, investing in real estate in California is not great at all. When I first started investing in real estate I didn’t have much money. I grew up in the San Francisco Bay Area and wanted to really invest in my local market because I knew it so well. I tried to invest locally for about two years but it became virtually impossible for me to find any cash flowing assets in the Bay Area that I could purchase for cash flow. Therefore I transitioned my whole business to invest out of state. There are five reasons why I love to invest out of state and why that is all I do now.

Affordability

Investing out of state allows you to buy properties from $50,000 to $100,000 that are cash flowing from day one. In the Bay Area you may buy a million-dollar home that rents out for $5,000 a month. The cash flow on the California home will not be as great because of the debt service and large amount of taxes and insurance. Investing out of state allows you to get into real estate investing with just $15,000 instead of $250,000, which is what you would need as a down payment on a home in California.

Diversification

While in the Bay Area you can buy one house for a million dollars, out of state you can buy 10 houses for $100,000 and have them all cash flowing. When one property is vacant you still have nine other cash flowing properties. If your million dollar home in San Francisco is vacant, then you have zero percent occupancy and have no cash flow coming in.

So using that same amount of money out of state, it’s affordable and it also allows you to diversify. You could also diversify in the different product types. You can buy duplexes or triplexes or quads. You can buy single-family homes. You can also diversify in the markets. You can buy properties in Memphis, St. Louis, Cleveland, Akron, Birmingham, and many other properties in the Midwest which are also great for cash flow.

This helps too because you’re not putting all your eggs into one basket. Let’s say that a million dollar home in San Francisco completely depreciates for whatever reason, the market crashes, all that cash you have, all that equity you have in that one deal completely goes down. But if you diversify your equity and your cash into many properties, then if one market tanks you still have the other ones to help keep your portfolio afloat.

Lower Property Taxes

Especially in California, the property taxes are incredibly high. Some of these states, like Alabama, have the lowest property taxes in the United States. Memphis, Tennessee, St. Louis and Missouri have very low property taxes as well.

Tenant Laws

California in general has very strict tenant laws, which means they are on the tenants side, which can then leave a landlord in some hot water. If the tenants play the game right and know how to use the system, they can stay in your property for six months or a year, and if they plead bankruptcy they can ride the wave to stay in your property for a very long amount of time. Each month that the tenant is in there not paying rent, you’re losing money in cash flow.

These states in the Midwest are landlord friendly states. They favor the landlord instead of the tenant. For example, we’re able to evict tenants in Memphis, Tennessee, within a couple of weeks, instead of a couple of months which would be here in California. We’re also able to do it for a much cheaper cost. It costs us $500 to $1,000 to evict the tenant if everything goes smoothly, whereas in California it can be much larger dollar amount than that.

Exposure to Up and Coming Markets

If you’re so focused on investing locally and what’s around you and markets that you can drive to, you’re really limiting yourself to changes that are happening around the USA. There are up-and-coming  markets every year that are making changes, that are progressing. We love to be a part of that change. We love to be a part of those markets that are changing for the better and have new things coming.

These are just a couple of reasons why we like to invest out-of-state. If you’re interested in seeing the properties that we currently have available view our current inventory. If you would like to talk to us and ask us more questions, feel free to schedule a call with us.

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What Does a Property Manager Do for You?

property management company

The most important person on your team when you are buying rental properties out-of-state is your property manager. They’re your boots on the ground, and they’re your most important asset on the ground. If you don’t trust them then you might as well not have these rental properties out-of-state.

While they can be replaced and you could find new ones, it’s better just to find a good one from the get-go so that you don’t have any further problems down the line. Many investors when they’re first starting ask questions like, ‘Why do I even need a property manager? I want to manage it myself and save all the fees and all the expenses.’ In my opinion those fees and those expenses that you’re paying to these property management companies are well worth what you’re paying them to do.

So what does a property manager actually do for you?

Collect Rent

Every month, whether they have electronic payments, or they collect the payments in cash. The property manager is going to go out to your property or collect rents from the tenants. They get in touch with the tenants and make sure that they pay the rent on time.

Your property management company should be set up in a way where only if they collect the rents then they get paid. If they don’t collect rents then they don’t get paid. You want to make sure you have aligned interests with your property manager.

Fill Vacancies and Screen Tenants

The second very important thing that your property manager does is they fill vacancies and they screen tenants for you. Filling vacancies is very important and you want to minimize the amount of time that your property is vacant. Especially for single-family homes, if there’s no tenant in there that means there’s no income and you’re a hundred percent vacant. So you want to fill those vacancies as soon as you possibly can, or else you’re not making any money.

Screening tenants is also very important, and property managers have this down to a tee. They have very specific tools and numbers that they’re looking for in order to analyze these tenants. They’re meeting these tenants face-to-face. They’re learning about their background, where they lived before, how long they live there, etc., so they could find the best tenant to place in your property. They also have the subscriptions and access to all the tools to do the background checks for you, and this is all part of the cost that you pay to the property manager.

Manage Maintenance Requests

The other thing that property managers do is they manage all the maintenance requests. If the toilet breaks or anything happens to the property, the tenants call the property management company and the property management company handles it for you.

You can request to have the property management call you every time a call request comes in. Or you can have it so that if a maintenance request comes in less than $200 they don’t call you or text you, and if it comes in over $200 or $250 then you have them reach out to you to get your approval. This helps to limit the amount of phone calls that you get from the property management company.

Once the property manager gets a phone call from the tenant about the maintenance request. They’ll handle the work order and get the contractor out there. They’ll go and verify that the work has been completed. They’ll make sure that the tenant is happy with what has been done. And then they’ll take that balance and put it on your online portal for you to pay for through the rent roll. Normally that’s how we pay it. We’ll get the rents in and then we’ll just pay all the work orders with those rents so we don’t have to take any cash out of our own pocket to pay for those work orders.

Manage Evictions

Lastly, hoping that this never happens to any of you, property management companies also manage evictions.

They’ll show up at court for you. They’ll find a lawyer to go to court and fight your case. They’ll manage the entire process with the sheriffs and the lawyers and the court and all the people involved, and they normally do it for a very low fee. You have to pay the lawyer, which is his own separate fee, but the property management company doesn’t take much. They don’t make money from evicting tenants. If they did, then that wouldn’t be an alignment of interest.

Especially being an out-of-state landlord, managing the eviction process is very beneficial. If you’re trying to manage properties out-of-state and eviction comes up, you have to have somebody physically present to go to the court. The property management company is there for you as your boots on the ground to manage all of these things. They get the eviction done on time, so that they can rent it out again so that they can start generating revenue for you, which therefore generates revenue for them.

If you’re interested in seeing the properties that we currently have available view our current inventory. If you would like to talk to us and ask us more questions, feel free to schedule a call with us.

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5 Risks of the BRRRR Strategy

Risks of the BRRR Strategy

Over the last couple of years a new term and a new style of investing has popped up. It is called the BRRRR method, which stands for Buy, Rehab, Rent, Refinance, and Repeat. Essentially you’re buying these properties, you rehab them, you get them rent ready, you rent them out, you put your property management in place, and then you do a refinance after you hold the property for six months. Now that you’ve pulled that capital out you can go and do it over and over again.

 

While this is a great strategy, there are many risks to consider when doing the BRRRR strategy, especially if you’re doing it out-of-state where it makes the most sense. In places such as in the Midwest. There are some risk to consider when moving over from a passive investor buying rental properties to actually going and doing the BRRRR method yourself.

Renovation Time

Many investors, when they buy these properties, have their contractor go through, the contractor gives them a bid before they close. They will name a price and timeline for the project.

 

When you’re doing your first BRRR strategy, you’ve never worked with this contractor before and you don’t know what could come up with that contractor. They may have an influx of deals come through the door from other investors who they know better than you, because you’re just some out-of-state investors, so they may go and work on those projects. Then your rehab project delayed by two weeks, and then it gets delayed two more weeks. And then there are break-ins at the property because everybody in the neighborhood now knows that your property is vacant and the rehab has just been going on and on and on. There’s a big risk when using new contractors that you have no experience with.

Renovation Cost

Time is money in this business, you’re losing a lot of money when the rehab goes over schedule. But also renovation costs can add up quickly. For example, I’m rehabbing a house right now and I got a rehab bid for $15,000. Week one of the rehab with a new contractor, they come back and tell me that something came up and they need new windows and it’s going to cost $1,500.

 

Sometimes there may be even bigger issues that may pop up. Maybe they find out that the electrical panel needs to be all done and the wiring are all outdated and it wasn’t caught by the contractor. That’s happened to me as well and that was $4,000 to do all that work.

 

These renovation costs can quickly add up. When you’re getting into a project with a new contractor that you haven’t worked with in the past, these things can definitely kill your project and make you put more money into the deal than you want.

Appraisal

This is probably the biggest risk when doing this BRRRR strategy. You’re putting all this money to buy a property, you’re putting all this money in to rehab it, and then you’re hoping that you can take this cash out when you do your appraisal.

 

What happens if your appraisal doesn’t come back what you wanted it to? What if the market crashes at that time and you have all this money sitting in a deal and you can’t pull it out anymore because the property appraised for less than what you have in a deal?

 

Now you’re underwater and you’re banking on this appraiser to go out and appraise this property for you. And it may or may not come back at what you want, and most of the times they do not come back at the appraised value that you would like. So this can be a complete deal killer and it can definitely sink all your cash.

 

If you’re using cash to buy these properties and do the BRRRR strategy, then you also have all this cash sitting in a deal. If you’re using hard money, that is even worse, because now you have to pay off this hard money loan, and you’re not even going to be able to pull the cash out from the appraisal because it came in lower than what you thought. Therefore you have to sink even more money into the project to pay off this hard money loan that you have.

Time to Fill Vacancies

When you’re doing the BRRRR strategy, once the renovations have been completed you’re going to have a property management company come and rent out the property for you. Many property management companies should be able to rent a property out when it’s all done within two weeks. That’s normally how long it takes my property management companies. But working with new property management companies, you always take that risk where it can take a lot longer than you think.

 

We had a four-unit apartment building which took about a month and a half to rent out one of the units, and it also came in below what we thought we could rent it out for. This certainly does happen when you’re using new property management companies. You don’t know how long it’s going to take them to rent it out, they may say one thing and do another.

Rent Amount

Many property management companies when you buy a property will say yeah we’ll be able to rent it out for $800, and it comes down to it and you list the property for $800 a month. Three weeks later the property still isn’t rented out and now you’re freaking out because you’re going to have to drop the rent. And the property may rent out for $700 eventually but now it’s been two months that you’ve been sitting on this property and the rent amount is $100 less per month than what you thought.

 

This can also turn out to be very costly for you. If you have a vacant property sitting there in some of these neighborhoods with no tenant in there, nobody protecting the property, then there’s a high chance that the property may get broken into. So there are many other risks that come into account when you have this property sitting there vacant for a long period of time.

 

These are just a few of the risk of the BRRR strategy. There are many other risks that come into account, such as market factors or choosing the right location for these properties. The BRRRR strategy is a great strategy but it’s not for everybody. It is a risky strategy and this should be taken into consideration when you’re making these kinds of investments. If you’re looking strictly for cash flow, then buying rental properties that have already been renovated and already have a tenant in place would be a better option since much of the rehab risk has already been taken out of the equation.

 

If you would like to talk to us and ask us questions, feel free to schedule a call with us.

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Why Buy and Hold is the Best Real Estate Strategy

Buy and Hold Strategy

Many people when they get into real estate want to start flipping houses, and this is because they have been watching TV shows on HDTV. These shows show people flipping one house and they profit $40,000-60,000. Which is as much as someone makes in one year just with one project. While this is the case and there are many real estate investors out there who are investing like that and making great returns, there are a couple of pitfalls when it comes to doing these flips where the buy and hold strategy is superior.

Ground Zero

The reason why the buy and hold strategy is better is because you’re not relying on appreciation to profit. For example, if a real estate flipper flips ten houses in one year, next year he is on ground zero and he has to start all over again. Yes, he may have more cash in the bank and stuff like that, but the flipper has to go find ten more deals, has to rehab those deals and sell those deals. So he essentially has to start from ground zero.

On the other hand, a buy and hold investor who bought ten properties still owns those ten properties, those proprieties are still profiting, they’re still cash flowing, and they’re almost on autopilot. So I like to say that a real estate flipper created a job for themselves, while a buy and hold investor has a business generating revenue for him, a passive income stream.

Scalability

The buy and hold strategy therefore develops the possibility of scaling. Now with the buy and hold investments you have this cash flow coming off from these investments, that cash is going into your bank account. You can eventually use that cash flow to buy more and more properties.

Of course it is slower rate than flipping a house, but you are growing your wealth and your cash balance, which then allows you to use that cash balance to buy and hold properties. Which allows you to grow your portfolio and therefore cash flow even more and even more. It is a compounding effect of buy and hold investments that make it much better for the long-term.

Tax Benefits

There are also many benefits to owning these long-term buy and hold rental properties, and that is the tax benefits. This comes in the form of depreciation. When you don’t sell a property immediately, when you don’t flip a property, the IRS allows you to write off the value of any property over 27.5 years. And this depreciation counts as negative income since it is considered a loss of value.

The difference between this and flipping a house is that when you flip a house you have to take part of your profits and give them to the government, because it was a short-term investment and there was a flip, and you have this capital gains tax that you have to pay on that investment property.

If you’re interested in seeing the properties that we currently have available view our current inventory. If you would like to talk to us and ask us more questions, feel free to schedule a call with us.

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5 Steps to Take Before Buying Your First Rental Property

5 Steps to Buying Your First Rental Property

Many new passive investors don’t know where to start when they become interested in buying rental properties. They don’t know the steps required to purchase their first one. However, there are five basic steps that must be taken before you purchase your first rental property.

1. Know Your Goals

Step one is write down your goals. You want to know your goals in terms of purchasing these rental properties. Why are you buying these rental properties? What certain number do you want to hit by the end of the year? What cash flow goal number do you want to hit? What are you trying to achieve? What are your reasons, what’s your WHY for doing this?

It’s very important to always be going over your goals and looking at what kind of properties you need to purchase in order to meet your goals. It also will help you figure out how many properties you need, and therefore how much cash you require and how you can come up with that cash.

A good person to talk to about this would be your turnkey provider. You can reach out to us, we can help you create a plan and look at your financials. If you want to hit a certain cash flow number, then we can tell you on average each property we sell cash flows this amount, and therefore you’ll need this amount of money in terms of down payment. So feel free to reach out to us if you need help going over your passive income strategy.

2. Research Different Markets

The next step would be to research the different markets that you may be investing in for rental properties. Do your own due diligence on those markets and figure out which market is best for you.

There are a lot of markets out there which are just cash flow markets, there’s going to be no appreciation, you’re just betting on safe market that are not going to appreciate in value so much, but they have great cash-on-cash returns and great cash flow.

Then there are markets where there are many companies moving in, there’s a lot of job growth, everybody’s focused on growing the city, etc. Typically these cities do not have much cash flow but instead have greater appreciation.

There’s no right answer, it all goes back to your goals and what kind of returns you’re looking for and what kind of deals you’re looking for as well. If you’re just looking strictly for cash flow, then of course you should focus on a city which is all about cash flow and not so much about appreciation.

3. Get Pre-Approved

The next step, once you’ve written down your goals and researched some markets that you may be interested in, is to get pre-approved. We have lenders that we recommend our clients to work with, and we can recommend you to our lenders as well.

Getting pre-approved is a big step because it shows the turnkey provider that you’re ready to make the purchase and you’ve already gone through the steps of getting the financing in place. It shows that you have the ability to purchase a property of that price point.

That’s really beneficial and helps make the process a whole lot smoother when a rental property does come up. These properties do move very quickly, so it helps when a buyer comes with a pre-approval letter already completed.

Pre-approval letters also don’t take very long. Once you’ve given the right documents to the bank they can normally pre-approve you within a couple of days. So it’s not as difficult as you may think, it’s actually fairly simple. As long as you have all the right information to give to the bank, they can get you pre-approved pretty quickly.

Getting pre-approved is also going to let you know what price point you can be in. For example, the bank is going to be able to tell you what loan amounts are going to work for you, how many loans you can have open. You can then take that information and bring it back to your goals and say – “Okay, now that I’ve been pre-approved, does this match up with my goals and do I need to go back and change my goals?”

4. Connect with Turn Key Providers

Next step in this whole process is to talk with turnkey partners, and begin to get on their lists, and show them that you’re ready to purchase, and what you’re looking for. We have properties come up all the time that never hit our website that we sell to our pre-approved buyers. We appreciate it when buyers reach out to us saying that they’re interested in buying properties, they’re already pre-approved, and they’re ready to go.

So get on turnkey providers’ lists, start looking at deals, start analyzing deals, start to do your own due diligence on all these deals. Once you’ve become comfortable analyzing deals yourself with the turnkey providers help, then it’s time for step number five, which is to find the right deal and purchase.

5. Make your first purchase!

All of the hard work came before when you went and researched your markets, you wrote down your goals, you got pre-approved, and then you started talking with turnkey providers. Finding the right deal is now just the easiest part because you’ve done all the hard work before.

Talk to your turnkey provider, tell them you like the deal, show them the pre-approval letter, put the property under contract, and then go and work on getting the property financed and closed.

Normally once you’ve been pre-approved, closing will probably take four to six weeks, so it won’t take that long after that and you’ll be on your road to achieving your goals for cash flow.

Let us know if we can be of any help in this process. We’re here to help you. We can help you with goals. We can refer you to different lenders to use. We can show you past and present deals that we have available, and we could run through the numbers with you as well. If you’re interested in seeing the properties that we currently have available view our current inventory. If you would like to talk to us and ask us more questions, feel free to schedule a call with us.

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$40M Amazon Warehouse Coming to Memphis!

I recently read a book called “Emerging Real Estate Markets” by David Lindahl. In this book, Lindahl talks about what to look for when investing in a new market. He describes that the most important things for him are the potential job growth in this market and the population growth. One way to find this information is by going to the Bureau of Labor Statistics and finding information there. You will be able to see population growth and job growth for the last number of years on this website for the city of your choice.

Another way to figure this out is by reaching out to the economic development committee in the cities that you’re investing in. Give them a call and see if there are any major employers moving into the city. They should be able to tell you this information. They should also be able to tell you if there are any major projects going on soon.

This book sparked me to look for this information in the cities that I am currently investing in. I do a lot of numbers and research about the cities before I invest in them. Numbers like unemployment, population population, growth job. But potential job growth and major companies moving in is not something that I was looking at.

Memphis PILOT Program

After looking around and doing some research I found a website that shows Memphis PILOT programs. PILOT programs in Memphis is when the city gives incentives to companies who are moving to Memphis. Normally these companies need to invest a certain amount of money and bring a certain number of jobs to the city.

Amazon’s New Facility

Through this research I found that Amazon is building a new $40 million facility which will be 600,000 ft.². This warehouse will hire 600 new employees. Many of his employees will be paid $30,000 a year but there’s a couple dozen employees who will be paid around $80,000 of year. This new warehouse that they will be constructing is going to be next to the Memphis international airport, which is the second largest cargo airport in the world. This facility that they are building in Memphis is going to be a receiving center to support the North American Fulfillment Network. The facility will collect and repackage products for distribution to fulfillment centers across the US.

Most of the investments that I do in Memphis are close to Memphis international airport. These new jobs coming into the city are going to help the real estate market in this area and hopefully entice more companies to move in.

To learn more about Amazon’s move into Memphis and the new $40 million warehouse here is the link.

If you’re interested in seeing the properties that we currently have available view our current inventory. If you would like to talk to us and ask us more questions, feel free to schedule a call with us.

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Amazon Bringing 3,000 Jobs To Cleveland

Over the last couple of months of 2017 Amazon has announced that they will be bringing 3,000 jobs to Cleveland. These jobs will be in two areas of Cleveland, Euclid and North Randall. The company has decided that they will be taking over two malls that have been demolished over the last couple of years.

North Randall Location

Amazon will be bringing 2,000 jobs to the North Randall mall. This development will cost Amazon $177M and should take about two years to complete, so it is planned to be completed in 2019. The facility will use about 20% robots and the rest will be full time employees. These employees will be eligible for benefits including health care and retirement. This development is going to change the real estate market and the landscape for rentals in this area. To read more about this development click here.

Euclid Location

The other development that Amazon is doing in Euclid will bring 1,000 jobs to the area. The building site will be where the Euclid Sq., Mall used to be and it should take about two years to develop, so it should also be completed in 2019. This fulfillment center will include 53 truck docks, surface parking for 200 trailers and 1800 cars. There will be 1.7 million square feet of floor space across three levels. To read more about this development click here.

For both of these developments, Amazon will qualify for 100% property tax abatement for 15 years, a program that dates back to the 1970’s.

If you’re interested in seeing the properties that we currently have available view our current inventory. If you would like to talk to us and ask us more questions, feel free to schedule a call with us.

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Why You Shouldn’t Manage Your Rental Properties

Recently I had a phone call with an investor who lived on the East Coast but he was investing in the Midwest. He was telling me how he owns a couple of properties in the Midwest and he’s managing those properties himself. I spoke with him and asked him how he was managing his rentals from far away because he was interested in buying more rental properties from MartelTurnKey. There were a couple of things I told him about why you shouldn’t manage your rental properties if you’re out-of-state. When you’re an out-of-state investor you should definitely get a property management company to manage your rentals.

Not Scalable

The first reason for this is that managing your own rental properties is not a scalable business model. You want your real estate investment company and your real estate rental property portfolio to be a business, and you want to treat it like a business, so you want it to be scalable. When you’re managing rental properties from out-of-state and you have two to three rental properties, that’s fine, but what’s going to happen when you have 20 or 30 rental properties? Are you still going to be able to manage those properties from out-of-state? Absolutely not. It’s going to be hard to manage even two to three rental properties from out-of-state. So you want your business model to be very scalable and always think of the big picture. What if I 10x what I currently have, will I still be able to manage them? Managing your own rental properties from out-of-state is just not a scalable model.

You’re Now An Employee

The other thing about managing your own rental properties is that it’s a job, it takes a lot of your time, and it hinders you from on things that actually generate revenue and build up your business. Instead, they’re just time wasting tasks which somebody else can handle for you for a very small fee. Normally these property management companies take 8% to 10% of the gross rental income as their fee every month.

 

Therefore, on a $1000 rental property you pay a $100 a month for a property management company to collect the rent, manage the tenants, maintain the relationship with the tenants, handle maintenance requests, handle evictions, etc. So that 8% to 10% fee is nothing, because it allows you to then focus on growing your business. Instead of just managing those two to three rental properties that you currently have. You can actually go out and raise more money or build more cash, which would allow you to buy more rental properties and create more passive income for yourself.

 

For example, let’s say you have a couple of rental properties and you’re making an extra couple of hundred bucks a month because you’re managing these properties yourself. But think about what happens when you have an eviction in one unit, a maintenance request in another unit, and something else happens in a third unit? First of all, the eviction is going to be a very lengthy process and you may have to go over to your rental property to sit in court for a whole day. You also have to find a lawyer and pay them for their time.

 

We had a rental property where we actually had to evict the tenant — there’s only been one case where we had to evict the tenant — and the property management company handled everything. It was just 20 minutes of my time picking up the phone to get an update on what was happening. They were able to manage everything from finding the lawyer to appearing at court. Only for that little 10% fee that they’re making. Imagine all that time that you would spend evicting tenants or managing maintenance calls. You could instead use that time to grow your business instead of just managing it.

 

It all goes back to the philosophy of working on your business, not in your business. So put people in the right place to manage certain aspects of your business and focus on growing your business. Picture yourself being at the top of your company, with all these different layers below you managing certain aspects. So that clears your plate to go ahead and generate new business. Buy more rental properties. Or make your system and process better.

If you’re interested in seeing the properties that we currently have available view our current inventory. If you would like to talk to us and ask us more questions, feel free to schedule a call with us.