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Turnkey Rental vs. Multifamily Syndication — Which Is Better?

Multifamily syndication is all the rage in real estate investor circles. If you’re unfamiliar, this is when a group of investors pools their money to buy a large apartment complex. Most of the money partners are “passive” investors, with a person called the “deal sponsor” or “deal operator” putting together and actively managing the deal. In this article, we will compare Turnkey Rental vs. Multifamily Syndication.

 

Turnkey rentals are a kind of passive real estate investment. At MartelTurnkey we do the hard part — acquiring the property and renovating it. Your property manager leases it out and handles the day-to-day. All you have to do is wait for the cash flow.

 

Turnkey Rental vs. Multifamily Syndication

So here we have two passive real estate investment strategies … How do they compare? Which one is better? Let’s compare the two on seven metrics. Spoiler alert — we saved the biggest one for last, so make sure to stick with us to the end.

1. Barrier To Entry

If you intend to finance the purchase with a mortgage (which, as we discuss in this article, you should definitely do) the biggest barrier to entry for turnkey rentals is that you have to personally qualify for the mortgage. This isn’t as hard as it looks, though. If you can qualify for a home mortgage, you can almost certainly qualify for an investment mortgage.

 

With multifamily syndication, the deal sponsor is usually the one who has to qualify for the commercial mortgage. But this isn’t the only barrier to entry. Many deal sponsors have “minimum investment” thresholds of $50,000 or more. Compare that to MartelTurnkey, with initial investments starting in the low $30k range.

 

Some multifamily syndications are only open to accredited investors — people with $1 million net worth (excluding their personal residence) and/or gross income of $200,000 or more. This barrier alone means many multifamily syndications are off-limits to a majority of beginner investors.

 

Advantage: Turnkey Rental

2. Initial Investment

When you buy a turnkey rental, you expect to get a “clean” property. If the sellers were scrupulous with the renovation, you should have no major repairs for years to come. So once you have made the down payment and paid closing costs and fees, that’s it — you’re all in.

 

Multifamily syndications, on the other hand, tend to buy property that still needs renovation. The initial investment includes a renovation budget. If the renovation goes over budget (which is far from uncommon), the deal operator may have to do a “cash call” — ask the investor group to pitch in more money.

 

Advantage: Turnkey Rental

3. Compensation for the “Active” Investor

Some people denigrate turnkey rentals because you’re “overpaying” due to the seller’s profit margin. Why not just buy a fixer-upper and do it yourself? 

 

Remember, though, that renovations can go over budget. With a turnkey rental, you’re paying appraised market value for less work and less risk. Whatever our profit margin, MartelTurnkey strives to hand over a property with positive cash flow on day one, so your risk is minimal.

 

Compare that to a multifamily syndication. The deal operator may take compensation in the form of up-front fees, an ongoing percentage of the rent collected … even a percentage of the deal equity that they didn’t pay for. And remember point #2 — there’s still renovation to be done.

 

Advantage: Turnkey Rental 

4. Return On Investment

When it comes to ROI, the location and the desirability of the property make all the difference, regardless of whether it’s a single-family home or an apartment complex. 

 

Multifamily property has some advantages due to “economies of scale.” Look at it this way — you collect a lot more rent per roof that needs repairing, since eight or more people live under that roof.

 

Of course, the deal sponsor’s fees could eat into that profit margin. Keep in mind, too, that commercial real estate moves in cycles — multifamily may be popular for a few years, then it may shift to industrial, then retail, and so on. 

 

By contrast, turnkey rentals tend to be single-family homes, which are always in demand and appreciate excellently.

 

Advantage: Tie

5. Financing

As mentioned above in #1, with multifamily syndications the passive investors usually don’t have to go through the crucible of applying for the mortgage. The deal operator takes care of that. With turnkey rentals, you have to get the mortgage.

 

Multifamily property may also qualify for “agency” loans from government agencies like Fannie Mae and Freddie Mac, which have attractive terms, including interest-only periods and non-recourse terms.

 

Advantage: Multifamily Syndication

6. Tax Advantages

All the same tax advantages that apply to multifamily property apply to single-family property. 

 

According to most real estate thought leaders, multifamily has a big advantage — it’s more cost-effective to take accelerated depreciation on an apartment complex than on a single-family home. 

 

However, in this article we not only describe what accelerated depreciation is and why it’s so amazing, we also describe how technology has caught up to the point where it may now be cost-effective to take accelerated depreciation on a single-family rental as well. 

 

Advantage: Tie

7. Control Of Your Destiny

One of the biggest advantages of turnkey rentals over multifamily syndications is that you get to call the shots. 

 

When you invest passively in a multifamily syndication, the deal sponsor has all the power. They hire and fire, they set and execute the strategy, they approve repairs and renovations, they decide when to sell or refinance. You have little or no say in any of that. It’s like owning stock in Apple — yes, you might make money, but you don’t get to design the next iPhone.

 

Worst-case scenario — if the deal sponsor turns out to be negligent or crooked, the passive investors could suffer huge losses before finally wresting control back from the errant deal sponsor.

 

With a turnkey rental, on the other hand, you’re the boss. Once MartelTurnkey hands over the keys, our clients are free to change strategies, change property managers, sell or refinance at will — no need for permission from anyone. With a turnkey rental, you are truly in the driver’s seat of your own financial destiny.

 

Advantage: Turnkey Rental

 

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The winner … turnkey rentals! Maybe not surprising, coming from a company called MartelTurnkey, but we’re pretty confident in our logic. We can also back up our confidence with results. Take a look at our property inventory, and if you’re ready to consider investing, reach out to us today!

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7 Real Estate Goals for 2023

REI Goals 2023

It’s a cliche, but for a reason — the end of the old year and the start of a new one is a natural time to reflect on where we are today, and where we want to be this time next year. To help you out we are proposing 7 Real Estate Goals for 2023. 

 

Some people talk about making resolutions … We like to think about setting goals. Depending on your stage in the journey, here are some real estate investment goals to consider:

1. Acquire Property

This is never a bad goal to have on your list. We’re not real estate investors if we don’t acquire property. Whether we’re talking about your first acquisition or your fiftieth, it should always be on your radar to potentially add to your portfolio of real estate investments.

 

Want to know what it will take to acquire a new asset? Check out the MartelTurnkey selection of turnkey rentals for sale. We estimate the all-in initial investment (down payment, renovation, closing costs, everything). This will give you a good baseline of how much capital you will need to come up with to add to your portfolio. 

2. Consider an Exit Strategy

If you already have a portfolio of real estate, consider exiting the investment this year. It may not be the right time … but at least crunch the numbers once this year, maybe even once a quarter. 

 

What is the current value of the asset? See what kind of profit (and tax liability) you might realize from selling it. Maybe you could refinance the loan and pull out cash to acquire another asset. Make sure to estimate how the bigger loan will affect your cash flow.

3. Update Your Personal Financial Statement

Checking in on the value of your assets is a great time to update your personal financial statement. Your personal financial statement is a one-page accounting of your:

 

  • Assets (cash, real estate, investment account balances, automobiles, commodities, jewelry, crypto holdings, etc.)

 

  • Liabilities (loans, accounts payable, etc.)

 

  • Income (employment income, business income, investment income, etc.)

 

  • Expenses (housing payment, automobile payment, any recurring bills or discretionary spending)

 

Lenders will want to see this personal financial statement … and as you make wise investments, it will be fun to watch your net worth and cash flow increase!

4. Expand Your Network

Ever hear the phrase “Your network is your net worth?” Never is this more true than in real estate. The more people you know, the more deals you will discover and the more problems you can solve.

 

Make a goal to add one new person to your network each week — an investor, a vendor, a real estate professional, etc. At the end of the year, you will have added over 50 people to your network.

5. Practice Deal Analysis

Real estate investors need to be able to crunch the numbers on a real estate deal. Set a goal to practice in 2023. This is especially true for new investors, but even experienced investors could benefit from brushing up.

 

Start by downloading the deal analyses we prepare for our inventory of turnkey rentals. Make sure you understand the math we use. See if you can verify the data we use online. We’re happy to jump on the phone and talk you through our logic so you can reproduce it yourself.

6. Improve Your Credit

A great credit score can significantly grease the wheels of your real estate investing career, making it easy to obtain financing at great terms. If your credit score is a little worse for wear, take some steps in 2023 to raise it. These steps could include:

 

  • Reducing the balances on your revolving debt. (Credit cards, HELOC, etc.) How close you are to your revolving credit limits plays a big role in your credit scores.

 

  • Negotiating with creditors. If you have accounts in collections, consider calling the collection agencies and offering to pay in full. They may agree to remove the black mark on your credit score. 

 

  • Acquiring more credit cards. Increasing the number of credit accounts in your name actually helps your score (as long as you don’t max them out and miss payments!)

7. Try Something New

If you have a comfort zone with real estate investing, don’t hesitate to double down on what’s working. But sometimes it pays to step outside of our comfort zone. Try a new investing technique you’ve been meaning to try. You don’t have to dive in with both feet — just dip your toes and see how it feels.

 

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There’s still a little time to get on our schedule for a strategy call before the New Year. Whether you make contact before the celebration or after, we look forward to hearing more about your goals for 2023.

 

Happy New Year from MartelTurnkey! We look forward to a prosperous 2023, helping you turn your financial dreams into a reality.

 

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Real Estate Investment Reflections for the Holidays

Looking back on real estate 2022

Happy Holidays from your friends at MartelTurnkey! You’re probably getting ready to travel, visit loved ones, eat amazing food, enjoy sparkling lights and winter wonderlands, and send 2022 out with a bang in preparation for a prosperous 2023.  Real estate investment might seem a little far away from the spirit of the holidays, but our status as real estate investors colors almost everything we do. On that note, please join us in some real estate investment reflections for the holidays … 

1. The Importance of Gratitude

It’s easy to get hypnotized by the hustle and bustle. We humans are problem-solvers, so we have a natural tendency to focus on problems. And in doing so, we tend to forget the ways in which we are lucky.

 

There’s a reason every society and religion has holidays — they help us focus on our blessings, rather than constantly fretting over our deficiencies. The holidays are the perfect time to practice gratitude. Gratitude lets us take nourishment from the bounty in our lives … and make room in our lives and our hearts for even more bounty. 

 

Real estate investors have many reasons to be grateful. We listed 5 reasons real estate investors have to be thankful in our Thanksgiving blog if you want to revisit them. Here they are in brief:

 

  1. Passive Cash Flow
  2. Appreciation of Value
  3. Debt Leverage
  4. Principal Paydown
  5. Tax Advantages

2. Helping People

In addition to counting our blessings, the holidays are a time to step outside of ourselves and think about others — especially those less fortunate than us. It’s a time of charity, altruism, and (as the song goes) “good will towards men.” And women, and children.

 

Many people believe real estate investors are money-grubbing Ebenezer Scrooges. Sometimes it’s easy to get seduced by the dollar signs.

 

But real estate investors who are in it for the long term … we know the truth. It’s not about a quick buck. It’s about improving lives. 

 

We like the way Zero Gravity CEO Peter Diamandis put it — “The best way to become a billionaire is to help a billion people.” People who succeed in any business long-term do it by helping people. 

 

Real estate investment is no exception. We turn bare ground into useful structures so people can start businesses and live better lives. We turn decrepit, substandard housing into beautiful homes. We turn crumbling, forlorn neighborhoods into thriving communities. 

 

The spirit of the holidays helps us think not about how much money we have made and expect to make … but about how many people we have helped, and hope to help in the future.

3. The Importance of Family

We’re nothing without the people we love and care for; the people who love and care about us. If we had any holiday wish for anyone, it would be to strengthen bonds, mend fences, and spend quality time with our closest kin.

 

Real estate investment is ultimately about legacy. We dig deep into that concept in this blog. Suffice it to say, it’s about building something that will last … Something that will edify and enrich your successors for generations to come.

 

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Again, best wishes for a happy holiday from the entire MartelTurnkey family! If you want to hit the ground running in the New Year with some brand-new assets in your portfolio, it’s not too late … in fact, we’re just getting started. Drop us a line now and let’s get you your next turnkey rental!



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Is Your Personal Residence an Asset or a Liability?

Investment Property

Homeownership is part of the “American Dream.” In addition to the pride-of-place, the backyard for the kids and the dog, and the opportunity to “keep up with the Joneses,” one of the first finance lessons many of us learn is that a home is an asset. Many families regard their home as the most important asset in their portfolio. 

Is Your Personal Residence a Liability?

Rich Dad, Poor Dad author Robert Kiyosaki famously lit the financial world on fire by describing a family home as a liability instead of an asset. Heresy!

 

But is he right? Let’s look at the arguments on both sides:

“Yes, your home is an asset!”

A home is real estate. Real estate falls under the category of “real asset” — something that has intrinsic worth. It’s not just valuable on paper. It’s a real thing that you can use, like gold or oil. Sure sounds like an asset.

Balance Sheets 101

A balance sheet is a financial statement you use to calculate your net worth. Assets go on one side, liabilities on the other. Liabilities include any loans, accounts payable, or obligations to pay. Subtract the value of the liabilities from the value of the assets, and there’s your net worth. 

 

On a balance sheet, the value of your home goes in the asset column; the balance of your mortgage goes in the liability column. Unless the market tanks and you’re underwater on your loan, the equity is almost always higher than the mortgage. That means that most homes are a positive contributor to your net worth. Still sounds like an asset! 

“No, your home is a liability!”

If the goal is “retirement” — to work until your golden years — there’s nothing wrong with considering your home an asset. It certainly squares with a narrative that most Americans have bought into … and will fight to defend.

 

Your home starts to look less like an asset and more like a liability when the goal is financial freedom.  

 

Kiyosaki defines “assets” and “liabilities” in the following way:

 

    • Asset — something that puts money in your pocket.
    • Liability — something that takes money out of your pocket.

 

There’s no doubt that a home takes money out of your pocket. Mortgage, insurance, property taxes, utilities, repairs … don’t quit your day job. According to industry estimates, a home costs an average of 4-5% of its value to operate every year. In an environment where the home may only be appreciating 4-5% every year, you’re really running to stand still. 

 

Is there a way to avoid this? Not really. Here’s the rub — our need for shelter is a liability, same as our need for food, water, and oxygen. It’s always going to cost us money to live somewhere, whether in the form of rent or homeownership costs. Because of appreciation, owning real estate is often a good long-term financial strategy … but that doesn’t make the personal residence any less of a liability in the Kiyosaki sense.

 

Is there a way to take that same home and make it put money into your pocket?

 

There is — by moving out of that home and renting it out to a tenant! If the rent exceeds the expenses, suddenly you’re putting money into your pocket … and still enjoying exposure to appreciation!

 

Add enough of this rental income to your monthly cash flow, and you can actually replace your work income with rental income. We call this financial freedom — having enough cash flow to cover all your essential expenses, so you never have to work another day in your life if you don’t want to.

 

This is why we think there’s a real argument to be made for taking that money you would have put into a down payment on a home, and making a down payment on rental property instead. It has all the financial benefits of homeownership … plus the benefit of passive cash flow and extra tax advantages. For a deep dive on why you might want to invest in rental property instead of a home, click here.

 

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Whether or not your home is an asset, MartelTurnkey rental properties are definitely assets. We make it easy to add them to your portfolio — without ever having to set foot in them! Click here to see the current assets in our inventory, available for purchase by people just like you. All of them are renovated or in the process of renovation, and many have tenants already in place!

 

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Building Tomorrow: Millennial Real Estate Legacy Strategies

Leaving a RE Legacy

MartelTurnkey attracts individuals from diverse backgrounds seeking cash-flowing assets poised for appreciation. One notable demographic displaying a growing interest in turnkey real estate investment is the Millennial generation. These individuals, aged 26 to 41, have emerged as strategic builders of financial legacies, carving a distinct path amid societal changes. 

 

Contrary to certain stereotypes, many Millennials, whether employed, freelancers or small business owners, possess impressive amounts of disposable income. And many view turnkey rental real estate as a more accessible and secure investment compared to the stock market investments that their parents favored, yet sharing a common focus on leaving a lasting legacy. With familial responsibilities in mind, they contemplate the impact of their digital and economic presence, recognizing life’s finite nature. 

 

In 2022, 54% of purchase mortgage applications came from Millennials, according to CoreLogic. Millennials incorporate turnkey real estate into their legacies in several ways:

 

Self-Expression

Millennials often leverage property ownership as a means of self-expression, naming properties after family members or adopting creative titles. One fun example is a MartelTurnkey client who named his two houses, “Thing One” and “Thing Two” for his future  children. Others choose to express their individualism by imprinting their family name on the buildings themselves, ensuring a lasting historical record.

 

Financial Legacy

Having witnessed unprecedented economic fluctuations, such as the epic rise and fall of Bitcoin, many Millennials prioritize real estate over volatile markets. They understand that, unlike stock ownership, real estate allows them to influence critical choices, such as location and tenant selection. They may envision accumulating a rental property portfolio, offering their children and loved ones diverse financial options for the future, transcending traditional notions of home ownership. It’s their version of building for tomorrow.

 

For the Children

Beyond naming and financial considerations, turnkey rentals provide Millennials with a valuable platform for imparting hands-on financial education. Recognizing the shortcomings of modern formal education, they value the opportunity to cultivate financially literate descendants, laying the foundation for a generation on the path to financial freedom.

 

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If you share a similar focus on legacy, consider reaching out to MartelTurnkey for a conversation. Discover how we simplify the process of buying and owning turnkey rentals, making it approachable for you to construct a real estate empire that not only secures financial freedom but also leaves an enduring mark on posterity.



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How to Maximize the Depreciation Tax Deduction
on your Real Estate Investment

As tax-filing season approaches, real estate investors get to face one of the ultimate “high-level” problems — deciding how much depreciation to write off. Most real estate investors are using straight 27.5 year depreciation on their real estate investment. In this article I explain how to lower taxes with accelerated depreciation and bonus depreciation.

 

We dig into how cool depreciation is in this blog, but to sum up — depreciation, i.e. wear and tear of the property, is an “expense” that real estate investors get to declare on their taxes without having to spend money out of pocket … even if the property has gone up in value despite the wear and tear!

 

It’s easy to see why this is awesome … but it can get even more awesome. The IRS says residential real estate can be depreciated over 27.5 years, maximum. Most investors — and, in fact, most tax accountants — just take that at face value. They divide the cost basis of the improvements by 27.5, and deduct that much every year. There’s nothing wrong with this … It’s certainly better than a kick in the pants.

 

But what if you could deduct even more appreciation … or deduct more, sooner? Creative real estate investors and tax accountants can make that happen, while still adhering to the rules set by the IRS.

Lower Taxes With Accelerated Depreciation

Let’s look at two ways we can legally take more depreciation than the standard 27.5-year rule:

 

 1. Filing as a real estate professional

 2. Accelerated depreciation through cost-segregation, aka “component” depreciation

 

NOTE: We are not lawyers, CPAs, or financial advisors. Consult professionals before trying anything you read here.

1. Filing as a Real Estate Professional

Most real estate investors are effectively capped at how much ordinary income they can offset with a depreciation deduction. As of this writing, it’s roughly $25,000. If you try to depreciate more than that, the IRS won’t let you.

 

But there’s an exception — if you qualify as a real estate professional under IRS rules, you can deduct 100% of your depreciation allowance from your ordinary income, without the cap that typical investors face.

 

To qualify as a real estate professional, you must spend at least 750 hours each year in the real estate business. For most people with full-time jobs, this isn’t realistic … but if your depreciation allowance exceeds the cap, it’s worth checking with your CPA to see if you can thread that needle.

 

Of course, you will need to own a lot of rental property to hit that cap … unless you use the second method to increase how much depreciation you are allowed to take from each property.

1. Accelerated Depreciation through Cost-Segregation

That’s a mouthful, right? But it’s actually simple — while real estate improvements (i.e. buildings and structures) must be depreciated on a 27.5-year schedule, certain components on the property may be eligible for faster depreciation schedules. 

 

Here’s the full chart of IRS-approved depreciation schedules:

See it? Even humble rental houses have fences, appliances, carpeting, furniture, etc. … and the IRS allows you to depreciate those assets faster than the structure! 

 

Using this chart to take more depreciation than the 27.5-year schedule is called accelerated depreciation. It’s also sometimes called “component” depreciation since you’re breaking the property down to “components” and using the appropriate depreciation schedule for each.

 

How do you figure out the asset value of each component? Through a process called cost-segregation — taking inventory of everything on the property eligible for accelerated depreciation, determining how much value it contributes to the property, and depreciating that amount separate from the structure. 

Example of Accelerated Depreciation

Let’s do a quick example. Say you bought a rental house for $122,000 in a city like Detroit (one of our favorites right now). The appraisal values the land at $22,000. You can’t depreciate land, so that’s a $100,000 cost basis eligible for depreciation. 

 

If you’re doing basic 27.5-year depreciation, you can deduct about $3,600 per year for this house.

 

But, let’s say you break down the components of the house, and find out that you are eligible for some component depreciation: 

Lower Taxes With Accelerated Depreciation

The total depreciation you can take for the first five years is now $7,181.82 — nearly double the eligible depreciation under the standard schedule! 

 

Of course, after five years the appliances, furniture, and flooring are fully depreciated, so you no longer get to take that extra $4,000 each year. After 15 years, that extra $600 will fall off as well. But many real estate investors don’t keep their assets for 15 years, or even five years — they sell and upgrade to something bigger and better. But in the meantime, they get to take all that extra depreciation up front!

 

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Historically, accelerated depreciation has been the province of commercial real estate. Why? Because it requires a professional cost-segregation analysis to avoid trouble with the IRS. These analyses are not cheap, and the tax savings for a single-family home rarely justifies this cost. Only big, multimillion-dollar properties justify the cost.

 

But, MartelTurnkey likes to stay on the cutting edge. We know how to make cost segregation affordable — even for small-portfolio landlords of single-family homes! 

 

If you want to incorporate accelerated depreciation into your SFR investing strategy as early as this year, you know what to do … Call MartelTurnkey today! 

 

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Happy Thanksgiving! 5 Things Real Estate Investors Can Be Thankful For

To all our friends about to celebrate with friends and family over a delicious turkey dinner, we wish you a Happy Thanksgiving!

 

Thanksgiving is a chance to be with our loved ones, count our blessings and remember all the things we can be grateful for.

 

Real estate investors have a lot to be grateful for. If you own rental real estate, here are five things to be thankful for. Of course, nothing is as crucial as your health and your family. . .  but success in real estate counts, too!

1. Passive Cash Flow

Few investment vehicles offer the opportunity for passive cash flow — money that shows up in your bank account every month without you trading time for money. . .

 

This is because, since time immemorial, the economic potential of real estate has been based on tenancy and monthly rent payments. If those rent payments exceed the expenses, you are — if you’ll pardon the seasonal pun — in gravy.

 

Why is passive cash flow better than income from a job? Because with enough passive cash flow, you can achieve financial freedom — the ability to stop “trading your time for money,” for good. Click here for a deep dive into the concept of “financial freedom.”

2. Wealth Building Through Appreciation

As many property owners get to find out, real estate tends to grow in value over time. As the owner of the property, this means your net worth increases with it. Your net worth is simply the value of your assets minus your liabilities.

 

Real estate, your car, your investment accounts, the cash in your brokerage account, your jewelry and precious metals … these are all assets. Your mortgage, car note, credit card debt, consumer debt, college debt … these are all liabilities.

 

When your property appreciates in value, you have more equity. You are wealthier … but only on paper. You can’t actually take property equity into a store and use it to buy a quart of milk or a Lamborghini. But, you can turn that equity into cold hard cash if you sell or refinance the property.

3. Debt Leverage

Real estate is unique among investment vehicles in that it is easy and relatively low-risk to add leverage to your investment strategy. This means borrowing “other peoples’ money” (OPM) to increase your exposure to the appreciation we mentioned in #2. Of course, the borrowing we’re talking about is the common mortgage loan.

 

Here’s the easy way to understand leverage — if you pay cash for a $100,000 property and it appreciates $20,000, you have grown your net worth by 20%. But, if you only put 20% down ($20k) to purchase the same property, and it still appreciates $20k, you have doubled your money.

 

Of course, leverage always adds risk to an investment. Your cash flow is lower, and if you can’t make the mortgage payment, you’re at risk of default.

 

That’s why a MartelTurnkey property is such a smart investment — we’ve taken a lot of risk out of the equation by doing the renovations for you. The property you purchase already has a tenant in place. Nothing validates the rent potential of a property like someone who is already paying that rent.

4. Principal Paydown

As time passes, your property value is not only getting bigger — your debt is getting smaller. Conventional mortgage payments include interest and principal repayment. The principal paydown starts out small, but gets bigger over time. Regardless, as the debt gets smaller, your equity increases — and with it, your net worth.

 

Every house on MartelTurnkey comes with a complete and accurate financial statement showing you the numbers on a monthly basis and conservative projections for the next 10 years, giving you an even better idea of how much wealth you will build over time with a MartelTurnkey investment.

5. Tax Benefits

Finally, real estate investors tend to be happy campers at tax time. The US tax code includes many provisions that make it easy to reduce your tax bill — even eliminate it entirely. Imagine owing the IRS nothing, or getting your entire tax withholding refunded. With real estate investment, it’s a real possibility. Click here for a more thorough exploration of the tax benefits of real estate investing.

 

If you want even more to be thankful for next year, consider gobbling upanother MartelTurnkey rental property to add to your portfolio. Or, if you’re new to us, consider acquiring your first one!

 

Click here to view our current inventory of available properties in carefully-selected growth markets. You may be surprised by how low the barrier to entry is, and how easy we make it to buy with confidence, without ever setting foot on the property!

 

Until then, from the team at MartelTurnkey, Happy Thanksgiving!

 

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How the Rich Get Richer During Economic Downturns

Growing money

We’ve all heard about how “the rich get richer.” Smarter people than any of us have marveled about how the rich seem to get richer even during times of recession. 

 

How is that possible? When the rest of the economy is contracting, how do wealthy people keep expanding, seemingly in defiance of gravity? 

 

The best way to explain it is that the rich understand, better than most of us, that money is inherently an illusion. It can either expand or contract, relatively at will, depending on what kind of illusionist you are — what magic tricks you do. This is especially true in economic hard times.

 

So if money is an illusion, and what matters is what tricks you do with it … what rich-person money tricks can we all copy so we can protect and grow our wealth during economic downturns?

1. Invest In Appreciating Assets

Middle-class people tend to use money to buy toys. Cars, watches, clothing, gadgets … what Robert Kiyosaki referred to as “doo-dads.” But when you’ve bought every toy … what else is there to buy?

 

Rich people exercise “retail therapy” by buying appreciating assets like gold or real estate. They enjoy buying it the way a shopaholic enjoys checking out at Nordstrom. 

 

And they aren’t looking for a 3-6 month profit. They take the long view — something they will allow to appreciate for 3-5 years minimum before they sell. They enjoy owning it. The longer they own it, the longer they have made the illusion of money into the reality of a hard asset.

2. Use Leverage

Leverage is a fancy way of saying “Let’s buy this with other peoples’ money instead of our own.” When it’s a credit card at the shopping mall, this is a dangerous way to get into a financial hole. When it’s using debt to accumulate appreciation assets, it can be extraordinarily powerful.

 

The best-known example of leverage is using a mortgage to buy real estate. Let’s say I have $100,000 cash, and I find a house for $100,000 in a market that appreciates 3% per year. If I use all of my cash to buy that house free-and-clear, by the end of the first year it will be worth $103,000. My net worth went up $3,000.

 

Now let’s say I use leverage. Instead of using all my cash for one house, I divide it into four and make down payments on four houses. At the end of that first year, my net worth had increased $12,000, not $3,000. Yes, the mortgage payment eats into that a little, but not nearly enough to erode the benefit. 

 

Wealthy people have access to incredible leverage due to their net worth and connections … but the home or investment mortgage is special because it’s within reach of most people with reasonable financial fitness.

3. Income-Generating Assets

The rich are always giving themselves raises — but not like Congress gives itself raises. Rich people increase their income by choosing assets to buy that generate income. Cash-flowing businesses, promissory notes, and — most relevant to us — rental real estate.

 

Here’s the secret — the amount of cash flow doesn’t matter as much to them. Consider the recent interest-rate hikes. In a higher-interest-rate environment, cash flows are going to be smaller. 

 

But for the rich, even small positive cash flow is worth having … if it’s an appreciating asset. As long as the asset pays for itself, why not? Appreciation will eventually pay off. Meanwhile, every small amount of cash flow is contributing to financial freedom — enough passive income to cover all personal expenses without having to work.  

 

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MartelTurnkey investments are three-for-three — appreciating, income-generating, and leveraged. If you want to prosper in the next recession like the rich do, reach out to us and let’s make your next asset acquisition easy.

Check out Eric Martel’s youtube channel for more insights

 

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How to Invest in Real Estate Without Seeing The Property

Google Streetview

Many people find it shocking that 99.9% of our clients never actually see the rental houses we sell them. 

We get it. When you put it like that, it does make us sound a little like snake oil vendors with a bridge in Brooklyn we’d like to sell you.

But that’s a mischaracterization. What we do is make it easy for busy professionals to invest in booming markets — even if they live far away.

So how do you confirm a rental property exists without ever seeing it? Actually, it’s simple. Here are some ways to do it. 

Google Maps

With Google Maps, you can zoom in on any property in the United States and gather a wealth of information. First things first — you can see that there is actually a building there. 

 

But you can go further by using the Google Maps area-calculation tool to measure the area of the lot, as well as the enclosed area of the structure. This can go a long way towards validating the reported square footage of the building — unless you have been told that an addition was built. More on that later.

Google Street View

The genius of Google Street View is that it can drop you right into faraway neighborhoods, so you can look at the property on your computer screen.

 

The downside is that the Street View photography may be out of date, especially if the home was recently renovated. But you can at least confirm that there was a house there at the time of photography, as well as snoop around the neighborhood to get a sense of it.

Zillow

Zillow has listings of nearly every home in America — for sale or not for sale. Again, the pictures and details might not reflect recent renovations, but you can at least use it to corroborate certain aspects of the listing.

Property Tax Assessment

Property tax assessments are a matter of public record. You can usually look them up online. The assessment will include basic details about the property, as well as the county appraiser’s most recent assessment of its value — both land and improvements. 

Building Permits

If the property has been renovated and/or had an addition built, there should be permits. Ask the seller or reach out to the city construction authority to validate those permits. If possible, you can request proof that the work was completed, as well as the contractor’s final pictures.

Insurance Quote

Your insurance agent will do some basic research on the property to provide you a quote. If the property doesn’t exist, it is likely to come up here.

Customer Testimonials & References

In these days of customer satisfaction indexes and ratings, if the seller is a company, chances are they have an online reputation.  Do a little research and see what you can find and don’t be shy to ask for references. 

Boots on the Ground

Even if you are not local, you can always recruit or hire people who are local to do some snooping and take some pictures. Good prospects include local realtors, bird dogs, handymen, or people you hire on platforms like Craigslist or Upwork. 

Be judicious about the trustworthiness of your third-party boots on the ground, but at the very least they have little to gain by duping you.

Due Diligence

The due diligence process offers multiple opportunities for verification — even from afar. Many professionals involved in the sale transaction will visit the property during the due diligence — professionals whose job and reputation are at stake if they deal falsely. 

If you plan to take out a mortgage loan for the purchase, an appraiser will visit the property and assess its value, including any improvements, additions, or renovations. You may choose to hire a home inspector to walk the property for the physical due diligence. Finally, trying to sell a non-existent house will raise many red flags in the title work.

 

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The truth is, you have many ways to buy real estate with confidence, even if you never see it with your own eyes. MartelTurnkey is here to help every step of the way. Want to build your real estate empire the easy way? Call us today!

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Is The Economy Headed For Recession?

Talking heads gonna talk. We are definitely, 100% not headed for recession. Oh, and we are for certain, without a doubt barreling headlong into a recession. Which answer you get depends largely on which channel you turn to or which podcast you listen to.

 

Who’s right? Does anyone have a clear crystal ball? The short answer is “no.” Everyone tries to predict the future, and at least half of them reliably look like an idiot this time next year.

 

Let’s run the checklist and see what signs tell us we’re in a recession — and which ones tell us we’re not.

Signs We Are Headed For Recession

Two Consecutive Quarters of Economic Contraction

Some experts insist that “recession” has an official, concrete definition — two consecutive quarters of GDP contraction. The economy contracted in Q1 and Q2 of this year, so by that definition, a recession technically already happened. 

Inverted Yield Curve

The yield curve between the ten-year treasury bond and the two-year treasury bond is currently inverted. This is one of the most famous “canaries in the coal mine” for a recession. 

 

A yield curve calculates the difference in yield between a long-term bond and a short-term bond. Want to know where we are on the most popular yield curve? Subtract the current yield on the two-year treasury from the current yield on the ten-year treasury.

 

When the yield curve is at a positive value, it means that short-term bonds have lower yields than long-term bonds. This is how it’s supposed to be. But if the yield curve is inverted — that is, its value is a negative number — it means that short-term bonds have higher yields than long-term bonds, meaning investors are skeptical about the short-term economy and moving money into long-term investments.

 

What does all this mean? Rare inversions of the yield curve have frequently preceded famous recessions. This is not a perfect indicator. In the late 1960s the yield curve inverted twice, but no recession followed. The yield curve inverted in late 2019, and the COVID recession followed … but there was no way an unprecedented global shutdown could have been priced into those bond yields. That would have been real magic.

Inflation

As we have discussed many times (including last week), inflation is higher than it has been in many decades. If this keeps going, Americans can expect to have to tighten their belts and buy less stuff, slowing down the economy. The Fed is fighting inflation with higher interest rates … but ironically that could cause a recession too by suppressing demand.

Signs We Aren’t Headed For Recession

Q3 Economic Growth

While the economy contracted in Q1 and Q2, GDP grew in Q3. So if we’re adhering to the strict definition of “recession” from above, technically the recession already came and went. 

Record Corporate Profits

Corporate profits grew 6.2% in Q1 and another 2.6% in Q2. Q3 earnings have been a mixed bag, but we’re still in positive territory.

Low Unemployment

According to economists, the US has a “natural” permanent unemployment rate of 4.4%. Above that indicates economic weakness; below indicates economic strength. Well, the unemployment rate is 3.5%, well below the “natural” rate. This doesn’t account for the toll inflation may take on the buying power of those wages.

What Does It All Mean … And What Should You Do?

No two recessions are alike, and hindsight is always 20/20. We could be heading into a recession; or we could be headed for recovery. A year from now, half of the talking heads are going to look pretty stupid.

 

If you’re wondering what to do to grow your wealth in such uncertain times, the best strategy is to target real estate in strong markets. Real estate enjoys the benefit of being highly localized. Strong local economies tend to grow even when the US economy struggles as a whole. 

 

Don’t believe me? Cities that grew during the Great Recession included Oklahoma City, Austin, San Antonio, Houston, Seattle, Charlotte, Raleigh, San Jose, and Salt Lake City. If you were invested heavily in those cities’ housing markets back in 2006, you would have probably come out of the Great Recession nearly unscathed.

 

So which housing markets are going to do fine in the next recession, when and if it ever materializes? MartelTurnkey has crunched the data and identified our winners … and we’re putting our money where our mouth is, buying up property there like it’s going out of style.

 

If you want to continue growing your wealth, recession or no, reach out to us today to find out where we’re investing … and how you can get in on the action with us!

If you like this article you may be interested in the article on how inflation is impacting your purchasing power.