MartelTurnkey

November 21, 2022December 12, 2022

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!

No one’s life is without problems. Especially around the year-end and the holidays, life can get downright stressful. But Thanksgiving is a chance to count our blessings and remember what we have to 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. Maybe they aren’t as crucial as your health and your family … but hey, every little bit of gratitude helps!

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 having to suit up and report for work.

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 homeowners 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 have taken a lot of risk out of the equation by doing the renovation for you. In many cases, you get to buy with a tenant already 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.

MartellTurnkey recently adjusted its projections to account for principal paydown, giving you an even better idea of how much wealth you stand to 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 adding another MartelTurnkey rental property 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!

November 14, 2022November 19, 2022

How the Rich Get Richer During Economic Downturns

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

November 8, 2022November 20, 2022

How to Invest in Real Estate Without Seeing The Property

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!

November 1, 2022November 19, 2022

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.

May 3, 2022May 4, 2022

How to Buy Rental Property Sight-Unseen

It sounds scary, right? Committing to something as significant as a real estate purchase — often with a large mortgage — and you have never even seen the property. Yet busy professionals who don’t have time to jet around the country looking at potential investment properties do it all the time. Why? Because their local real estate market may not be booming … but that doesn’t preclude them from profiting from a market that is.

Look … seeing is believing, but it’s not always possible, and incredibly, 20 years ago no-one would even think of buying a house without seeing it, but we live in a virtually abundant world now. So if you’re considering buying a rental property sight-unseen, here’s a quick guide on how to do it right.

“What if they’re selling me property that doesn’t exist?”

This question comes up a lot, and it’s honestly not an issue at all. Even if you don’t get on a plane to inspect the property yourself, it’s almost impossible to close a transaction on a property that doesn’t actually exist. Multiple people will be able to attest to the fact that there is, in fact, a house on the property in question and to the condition of that house.

There’s the appraiser and other people who report to the lending company about the collateral they are lending against. There’s the home inspector you may hire for the physical due diligence. The insurance agent won’t be able to track down the house for their purposes, and finally it will raise some serious red flags in the title work, if the house doesn’t actually exist. It is actually more likely that the house does exist, but there’s a flaw in the title or the seller is not the actual owner. It’s something that can happen even if you’re buying a house next door to where you live. At MartelTurnkey we make sure you have a clear and free title before you close.

Bottom line — don’t worry too much about signing for a house only to discover you are actually getting a burnout or an empty plot of land. There are several professionals confirming the property is-what-it-is along the path.

Build a Local Team

Real estate investing is a team effort, whether you buy down the street or in another state. The key to successfully buying real estate sight-unseen is to have a team on the ground along with a trusted turnkey partner.

Your team could consist of:

Realtor or wholesaler.

Local realtors and real estate wholesalers can be valuable “boots on the ground,” especially if they want a crack at selling the property at the end of the investment cycle.

Contractors and handymen.

You need these guys in place for the inevitable repair tickets your tenant will file. They can also be your “eyes and ears,” giving you checkups on the condition of your property after closing. Of course when you work with a property manager, they have a Rolodex of professionals and often an internal team too.

Property manager.

You don’t have to hire a professional property management company, but doing so can go a long way to making an out-of-state rental property a truly “passive” investment. All MartelTurnkey properties come with a property management team in place. Read more about this here.

Having a local team makes particularly good sense if you plan to buy multiple deals in the city, building an out-of-state turnkey empire.

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Being an “out-of-state” landlord is not as difficult as it sounds. MartelTurnkey makes it even easier by providing out-of-state investors with already-tenanted deals to purchase at competitive prices with a property manager in place. No renovation, no rehab, no long vacancies to weather — just close the deal and start collecting rent, all from the comfort of your own home! Financial freedom can be yours.

April 26, 2022

How to Do “Due Diligence” on a Rental Property, in 3 Easy Steps

“Do your due diligence!” If you have heard it once, you have heard it a million times — often from someone who has never done “due diligence” in their lives.

It sounds good, but no one ever stops to think about how unhelpful that platitude is. Okay … I should do my due diligence. Granted. But what does that mean?

Honestly, there is no need to be cryptic. When it comes to real estate, “due diligence” means three things … and none of them are rocket science. In many cases you will have professional help.

Here are the three critical stages of due diligence.

1. Financial Due Diligence

Financial due diligence is the process of “crunching the numbers” on your investment. This is how you determine whether or not it is a “good investment.”

Here’s how to do it …

Market Analysis

Analyze the current conditions of the local real estate market and determine whether or not you are getting the property at a good price. A real estate agent may be able to help, or you can do it yourself using online tools like Redfin or Zillow.

Cash Flow Analysis

Determine the gross potential rent the property can produce (based on prevailing market rents for similar properties) and subtract the total expenses. We break down the major expenses a landlord should account for in this article.

Check online to see what market rents are for similar properties. Look at utility bills and maintenance contracts. Examine any current leases and property tax bills. Try to corroborate everything with documentation.

If you are conservative in your estimates and come out with a positive number, you have a reasonable chance that your rental will produce positive cash flow, not negative cash flow.

Tax Savings Analysis

Figure out how much you will be able to save on your taxes every year as a result of owning this property. If you have a CPA or tax prep specialist, they may be able to help. Details to look at include which expenses in the cash flow analysis can be deducted, and how much depreciation you can take. We explain depreciation in this article.

Appreciation Analysis

Decide how many years you expect to hold the property. Three years? Five years? Ten years? It’s up to you. You can always change it later; this is just for the purposes of due diligence.

Determine how much you expect your property to appreciate in value each year. Also, set a number for how much you expect your rent and expenses to increase each year, and project those numbers for however many years you decide to hold the investment.

Now take the total appreciation, cash flow, and tax savings over the time horizon you identified and add it all together. Throw in the mortgage principal paydown you expect over that period while you’re at it. How much bigger is that number than your down payment, closing costs, and initial repair budget? Use that number to determine your total projected return on the investment.

2. Physical Due Diligence

Physical due diligence means inspecting the property itself to determine its condition. Our lenders do not require a professional property inspection but you are able to coordinate one if you choose to do so.

Issues relayed in the inspection may affect the calculations that go into financial due diligence, including your budget for future repairs and maintenance.

3. Legal Due Diligence

Legal due diligence determines whether the property can legally be transferred to you. Determinations from legal due diligence include verifying that the seller is the legal owner and has the right to sell you the property. Legal due diligence also reveals whether the property is subject to any easements, liens, covenants, or other encumbrances that might affect the sale or the value of the property.

Legal due diligence is actually the easiest part — the title company handles this for you, during escrow.