MartelTurnkey

August 23, 2022December 12, 2022

BIG NEWS — We’ve Updated Our Cash Flow Summaries to Include Equity Buildup (And More!)

“So how much money am I going to make?” Everyone has that question when they consider a real estate investment — and there’s nothing wrong with that.

MartelTurnkey works hard to give you as good an answer as possible to that question before you buy one of our turnkey rentals … and now, the answer is more than just your initial ROI.

For every property we sell on MartelTurnkey.com, we prepare a cash flow summary. We’re thrilled to announce that we have made several updates to our cash flow summary to make it more accurate, as well as more reflective of the changing real estate environment.

Here’s what we added:

Our Cash Flow Summaries Now Include Equity Buildup

First and foremost, we have modified our cash flow projections to include equity buildup over time due to the paydown of the loan.

A quick recap for the newbies — when you buy real estate with a mortgage loan, some of your monthly payment goes to interest on the loan … but some of it also goes to paying down the principal. You are essentially making a payment to yourself, adding to your net worth as the loan gets smaller.

The difference between the value of the property and the balance of the loan is called your equity in the property. This is a part of your net worth. It’s not liquid cash, but it becomes liquid cash when you sell the property. You can also use that equity to pull cash out by refinancing into a bigger loan.

How does this reflect on the updated cash flow statement? Start on the front page of the spreadsheet — the “Summary Page” tab. The upper right-hand box is called “Summary of Returns By Purchase Method.” You will see a percentage ROI for if you:

– Bought the property all-cash (“Estimated Cash Purchase Gross Return On Investment”)

– Bought the property with a mortgage loan (“Estimated Annual Return — Financed Purchase”)

There’s no equity buildup reflected in the “all-cash” ROI. After all, in that calculation, there’s no principal to recapture because there is no loan.

But the second figure incorporates the gradual increase in equity adding to your net worth due to paydown of the loan principal (according to the loan terms we estimate to be most optimal).

Want to dig deeper? Go to the bottom of the spreadsheet and select the “Leverage” tab. This is where we break down the details of our assumptions about the loan. These assumptions include the anticipated loan-to-value, interest rate, and loan term.

About halfway down the page on the left-hand side, you will see a box titled “Summary of Returns.” Look for the field labeled “Estimated Annual Equity Buildup.” You will see we have included an assumption of 11% equity buildup per year.

This is the average annual equity recapture over the course of a 30-year loan. Actually, it’s less in the early years of the loan, but it gets greater over time. The longer you hold the property, the closer it will get to 11%, and most of our investors intend to hold these assets long-term.

If you want to dig even deeper, move one tab over to amortization. Here, we break down the amortization schedule, where you see exactly how much equity you recapture with each loan payment.

10-Year Projections

The cash flow summary also includes 10-year projections for both all-cash purchases and financed purchases. You will find them at the bottom of the spreadsheet under the tabs “Projections Cash” (all-cash) and “Projections Loan” (financed with a mortgage loan).

On these projections, you can see how our assumptions play out in terms of cash flow and equity growth, year by year, over the course of ten years. The projections factor in annual increases in revenue, annual increases in operating expenses, and annual appreciation. The “Projections Loan” tab also factors in equity buildup as described above.

These updates to our standardized cash flow summaries mark a significant upgrade in our ability to provide more accurate ROI projections to our clientele of investors — and to accurately demonstrate the wealth-building power of leveraged real estate investing.

Head over to this property and click download financials to see these new changes for yourself.

Ready to invest? Reach out to MartelTurnkey today. We always have a robust selection of properties to choose from — properties we hand over renovated, rented, under management, and cash-flowing from Day 1.

July 5, 2022November 19, 2022

Here are 5 Reasons the World Loves US Real Estate

With the 4th of July weekend just behind us … it’s the perfect time to reflect on the fact that foreign investors absolutely love US real estate. Americans tend to take our own property for granted, but foreign investors have an insatiable demand for title to US real estate. That appetite has only increased in the past decade.

By reflecting on why that is, we Americans may gain a better appreciation of what we have, right there beneath our feet. And if you’re a foreign investor, maybe we can push US real estate higher up your list of assets to consider.

Let’s look at five key reasons foreign investors love US real estate …

1. The Price

Soaring valuations have made American buyers hesitate. Who wants to pay $100,000 or more over asking.

But high prices haven’t deterred foreign investors. Why? Because the prices in their home country may be even higher.

Yes, $200-$300 per square foot may seem like a lot to pay for a house, especially when we remember what we paid for the same house 10-15 years ago.

But compare that to the plight of the Londoner, who has to pay $8,000-$10,000 per square foot at best to be anywhere within an hour of the Thames. Tokyo, Hong Kong, Monaco, Moscow, Mumbai … these cities have property price tags that would make a US homebuyer blanche.

The US not only has lower prices, but also a variety of prices. Yes, you could pay $1 million or more for a brownstone in New York … or you could pay $150,000 for a rental house in Euclid, Ohio. The US has options for every price point … and there’s still a lot of undeveloped land to tap for new assets.

2. The Loans

We Americans have it good. It’s easy to forget that most of the world has to borrow money for real estate purchases on terms that seem like outright usury to us — terms no American would ever accept, because our lending market has spoiled us.

What if you were limited to maximum leverage of 60%, like in Spain? Interest rates in the neighborhood of 15% on a good day, like in much of South America? No fixed-rate option, only adjustable rates, so your cash flow became impossible to predict?

Foreign investors will go to great lengths to take advantage of the favorable US real estate lending environment — partnering with local guarantors, seeking private debt, etc.

One of the main reasons we created the first tokenized real estate fund was so that foreign or low-credit investors could take advantage of US debt and leverage without having to qualify for the loan themselves. Read more about that tokenized investment fund here.

3. The Cash Flow

Americans not only take their debt for granted but also the possibility of positive cash flow. It doesn’t always happen … but we’re at least aware that it can happen, due to a salubrious balance between property value and market rent.

In London, by contrast, positive cash flow is rare enough to qualify as a pipe dream. In Sydney, Australia, investors expect to realize negative cash flow. To the Sydney investor, a property that generates positive cash flow is a luxury on par with diamonds — it’s like getting paid to be an investor!

4. The Stability

Every now and then, someone will complain about the rule of Eminent Domain — the ability of the government to forcibly seize property within its jurisdiction.

This is the dark side of real estate. We talk about “owning” our homes and real estate investments … but try skipping out on your property taxes next year. You will see exactly how much you own that property when the sheriff comes to evict you.

In many ways, we haven’t left the Feudal Era when the rules of real estate came to be. All the land still effectively belongs to the government. After all, they have the big guns.

That being said, the US has an enviable reputation for protecting property rights compared to other countries. There has never been a military coup, nor has there been mass or routine seizure of land when the owner has committed no crime, as is common in places like China.

If a US governmental authority deems it necessary to force someone to give up property — to make room for a highway project, for example — they at least have a history of paying the owner fair market value for their inconvenience.

5. The Passivity

On paper, US real estate may be a good buy for a foreign investor … but what does it matter if the investor lives on the other side of the world?

Fortunately, the US business infrastructure makes it easy to buy US real estate remotely and invest passively. Due diligence and document signing can be done remotely, and professional property managers can keep the property leased, maintained, and generating cash flow.

That’s what MartelTurnkey does — do the heavy lifting of property selection, acquisition, due diligence, renovation, and leasing. That way, investors both foreign and domestic can buy with confidence without ever setting foot on the property.

Ready to invest in US real estate the easy way? Call MartelTurnkey now!

June 28, 2022November 19, 2022

What Does It Mean to be “Financially Free?”

We often talk about “financial freedom” here at MartelTurnkey.

On the surface, we’re a real estate company. “Thanks, Captain Obvious,” right? Our core business is to acquire rental properties and to help other people acquire cash flowing rental properties for their own portfolio.

But that’s what we do … not why we do it. The “why” of a business is important. If you want to know what a company stands for, push past the “what” and get to the “why.”

Scratch below that surface, and MartelTurnkey isn’t in the real estate business — we’re in the financial freedom business. Real estate is just a means to that end. We help clients acquire rental property so they can realize the dream of financial freedom.

So what does financial freedom look like … and why build a business around it?

What is “financial freedom?”

“Financial freedom” is an approach to wealth. What is a wealthy person? Someone with an abundance or surplus of assets.

What kind of assets? Money? Real estate? Gold? Bitcoin? What’s the most valuable asset?

Many smart people — including the people who work here — actually value one asset above all others — time.

From the slums to the White House, everyone has the same 24 hours a day. Money comes and goes; power comes and goes. But time only goes. You can always make more money. Governments can print more money. And there are millions of acres of undeveloped land. But no one can create more time.

And eventually, we all run out of time. We’re all on this planet for a limited amount of time. Time is the only asset of absolute value.

For such a valuable asset, most people don’t own most of their time. The average American will spend 90,000 hours of their lives at work … and a global Gallup Poll revealed that only 15% of all employees feel engaged by their work, leaving a whopping 85% dissatisfied with their jobs on some level. That’s a lot of time to spend miserable.

Measuring Wealth Not in Money, but in Time

At MartelTurnkey, we believe that the true measure of wealth is not how much money you have, not how much real estate you own, but how much time you own.

Some people call it “financial freedom.” Others call it “early retirement.” Look at it this way … if you were to no longer report to work — to a job that, love it or hate it, requires you to spend your time as your boss sees fit rather than as you see fit — how long could you exist before you ran out of money?

Six months? You’re “six months wealthy.” Five years? You’re “five years wealthy.”

What if you could skip out of work and cover your bills and pleasures indefinitely? That’s when you’re “financially free.”

What can create this enviable condition? Consistent cash flow. Money that arrives in your bank account not in exchange for your time, but as a dividend for your ownership of an asset.

At MartelTurnkey, we trade real estate because we believe it’s the best way to create this kind of cash flow. Not only does property under management produce revenue while you sleep … real estate investment also offers the advantages of leverage and tax savings.

How Much Cash Flow to Financial Freedom?

By this metric, financial freedom happens at a different net worth for each individual.

Take an office employee who earns $50,000 a year. By amassing a portfolio that creates $50,000 in passive rental cash flow, that employee is now financially free. He can quit work and maintain his same lifestyle.

(Actually, it’s closer to $30,000 or $35,000 in cash flow, considering how heavily employees are taxed and how much you can save in taxes as a real estate investor.)

An employee who makes $100,000 a year will need to amass a portfolio twice as large to achieve financial freedom, because there’s more income to replace. And this always assumes that on the way to financial freedom you don’t develop a taste for Rolex watches, Prada bags, and Lamborghinis. “Financial freedom” isn’t the same thing as “fabulous wealth” … but it’s much easier to achieve.

In fact, through real estate, we at MartelTurnkey firmly believe that financial freedom is within reach for almost any employee who has the discipline and will to go after it. And that’s why we’re dedicated to making it happen for everyone who partners with us to create cash flow, grow their net worth, and build their legacy. Many, many of our investors buy multiple rental properties through us, some all at once, others consistently over time. We work with them to reach their goals.

Ready to start your journey toward financial freedom? Reach out to us today and let’s get the ball rolling on your first rental property … or the next one! It’s easier than you think.

May 10, 2022February 13, 2024

Investing for Cash Flow vs. Appreciation — Which is Better?

Most people know that there are two core ways you can harvest a return on your investment when you buy real estate — cash flow or appreciation.

Ideally, an investment property will produce both, but nearly every investor comes to a crossroads where they have to pick which one is most important. Whether you prioritize cash flow or appreciation has a big impact on how you look at investment opportunities. Think of it as the “lens” through which you view the real estate market.

Is one strategy better than the other? There’s no real right answer. It really depends on the investor and their long-term goals. But let’s examine the question and see if we can declare a winner, even if it’s by a nose.

Cash Flow

Cash flow in real estate usually means any surplus rent you can pocket after all expenses have been accounted for. Of course this means expenses like property taxes, insurance, and service contracts, but it also means the mortgage payment and contributions to a reserve fund for emergency repairs.

Deals that Tend to Emphasize Cash Flow

Properties in Slower Growth Markets. How fast a metropolitan is growing really matters. Faster growing economies tend to cause housing shortages which means higher real estate prices. In markets with more sustainable growth — like places in the middle of the country like Ohio or Missouri — real estate values just don’t swing wildly up and down.

“B” or “C” Neighborhoods. These are typically workforce housing neighborhoods. You can usually get them at a lower price compared to their rent potential — which means higher cash flow.

Property values less than $250,000. This is not a hard rule but, usually, properties at the lower price point have a higher chance of cash flowing. The reason why higher price properties usually don’t cash flow is that people who could afford these higher rents have more options and are able to buy a house instead of renting.

When is it a good idea to invest for cash flow?

Compared to appreciation, cash flow is more predictable. Yes, sudden vacancies and emergency expenses do happen, but after you settle into a rhythm with your tenant, it becomes easier to know how much cash you can count on each month.

Also, appreciation doesn’t manifest as cash until you harvest it in a sale or refinance. Before that happens, appreciation is entirely speculative. Cash flow, by contrast, manifests itself as cash every month— a big deal for people with their eyes on retirement or financial freedom.

Appreciation

Appreciation in real estate is when property increases in value over time. Over long periods of time, real estate tends to increase in value … but in the short term, especially in volatile markets, real estate can potentially lose value.

Deals that Tend to Emphasize Appreciation

Properties in Fast Growing Markets. Hot markets like California, New York, Texas, and Florida tend to feature big swings in property value. If you buy at the right time, you can profit big from a dizzying uptrend … but you can also lose big or have to weather a long doldrums if you pick the wrong time.

“A+” Class Neighborhoods. This is real estate talk for “nicer properties in nicer areas.” The purchase price is significantly higher so are the rents but the rents are not high enough for the property to cash flow. That said, because demand for the properties and the area is likely to remain high, they tend to appreciate more than outdated properties in bad areas.

“Value-Added” Strategies. A property that comes with a clear strategy to increase its value — say, a fixer-upper on the market for a song — can enjoy significant appreciation through a “value-add” strategy. Of course, this depends on the strategy succeeding without going vastly over-budget and eating into the appreciation profit.

When is it a good idea to invest for appreciation?

Investors who prioritize appreciation tend to have legacy or generational wealth in mind — building a large net worth to pass on to their successors.

So Should You Invest for Cash Flow or Appreciation?

Again, it’s great if you can have both … but if we have to declare a winner, we call it for cash flow.

Why? Two words — financial Freedom. For most people, financial freedom would have a much bigger impact on their life than some hypothetical windfall that may never manifest.

By financial freedom, we mean the ability to quit or retire from your job and focus on your passions, confident that a predictable stream of passive income will continue to fund your lifestyle.

People who are financially free have much more time, many more options — including the ability to occasionally speculate on appreciation, essentially having their cake and eating it too.

At MartelTurnkey, we look first and foremost at the cash flow potential of our turnkey rentals. When you buy from MartelTurnkey, you know you are buying a key piece in your personal financial freedom puzzle.