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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.

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The Price of a Cup Of Coffee: Why Investing is Critical

investing coffee analogy

This popular blog from last year bears repeating. Please enjoy again, preferably with a cup of coffee in hand. 

 

We’ve talked in the past about the importance of investing in real estate to protect your wealth from inflation. Considering the ever-rising rates of inflation, we’ve simplified the perils of inflation using a simple metaphor — the rising price of a cup of coffee and how it relates to real estate investing.

How Inflation Erodes Purchasing Power

Let’s say the average cost of a cup of coffee at Starbucks is $5. If inflation averages 8% over the next 2 years, two years from now, that same cup of coffee will cost $5.83. 

 

Boo hoo, right? Maybe you’ll have gotten a raise, or tightened your belt, or won the lottery, or moved to South America, and you’ve been meaning to cut back on caffeine anyway. Why worry?

 

Let’s apply the cup of coffee metaphor to your wealth and net worth… 

 

You have $25,000. How many cups of coffee can you afford today? 5,000 cups of coffee at $5 a cup.

 

Let’s say you decide to keep that $25,000 in the bank, how many cups of coffee can you afford two years from now? Only 4,288 cups of coffee. 712 fewer cups of coffee in 2 years! The same amount of money buys less coffee. Effectively, you’re a lot poorer than you were two years ago. The solution and your goal should be to invest your money to outpace inflation.

Chasing After Yield

Let’s say you invest in a security that has a 9% yield, which is an average stock market return. In two years, your $25,000 is worth $29,700.

 

How many cups of coffee can you buy then? You have enough for 5,094 coffees at $5.83 a cup. The challenge here is to consistently achieve high returns. Can you achieve 9% return on your investment every year? 

The Power of Real Estate

Here’s the amazing thing about real estate investing in times of inflation — it causes asset values to increase, but it causes the value of debt to decrease. After all, that debt is measured in dollars, which has lost purchasing power at a rate of 8% per year!

 

Let’s say you use your $25,000 to purchase a real estate rental property worth $100,000. You pay $5,000 in closing costs, put $20,000 as down payment, and get a $80,000 mortgage. 

 

If this property appreciates at a modest 2% a year, your property is worth $104,000 two years from now. During that same period the property was rented out. The rent you collected paid for your mortgage, taxes, insurance and property management fees, AND over 2 years, you generated $6,000 in positive cash flow. On top of that, the rent also reduced the amount of your loan to $78,500 (you paid down $1,500.)

 

Now, how much is your investment worth? At the end of two years your $25,000 investment is worth $32,500.

 

How many Starbucks can you afford now? Over 5,574! 480 more cups of caffeine than the stock market investment. In a very short two year period, you increased your purchasing power significantly, whereas in the first two examples (stashing cash and a 9% stock market investment) you either lost purchasing power or barely maintained it by taking significant risks.

 

And guess what — it gets even more excitingly dramatic as you increase the investment period. The most positive results are possible through appreciation and leverage.

 

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If you know it’s time to get serious about inflation, reach out to MartelTurnkey today. We have cash-flowing, renovated homes  with tenants in place, available for investors. Protect your wealth the wise way. And as a bonus, our cash flow spreadsheets, which are easily downloadable for every property, include 10-year projections.

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How to Safely Buy a Turnkey Rental Sight Unseen

Buy turnkey house sight with confidence

You can buy almost anything online these days, including real estate. People do it every day, all over the world. Still, if buying a turnkey rental property is new to you, you may wonder how safe it is to buy this kind of real estate sight unseen.

 

On the surface, it might sound scary. But there are ways to protect yourself—and your money—when buying investment property without seeing it first. Lots of people are making passive income with turnkey rentals even though they never clapped eyes on the property in person. You can, too!

Benefits of Buying a Turnkey Rental Out of State

 

The idea of buying a rental property without viewing it first implies that it’s located out of state, or far enough away that it’s not a simple matter to get to from where you live. But the real key is that buying turnkey rentals out of state allows you to get in on a real estate market that’s better than the one where you reside. 

 

So even if you live in a beautiful area where the property values are sky high—and out of your reach—you can still have a profitable real estate venture. 

 

You Can Trust MartelTurnkey Because We Did it Ourselves

 

For example, at MartelTurnkey, our family attempted to delve into the real estate business in the San Francisco Bay area, where we lived. Looking back it’s rather shocking to recount how “putting in an offer” worked. 

 

Hearing of a home for sale, herds of people appeared at the Open House. Even without a sign indicating the open house, there were a few key indicators you were within close proximity to the house:  One was the lack of parking, or rather, cars (and flatbed trucks) parked triple deep on a narrow street; and the other indicator was by the crowd of people gathered on a driveway, or porch, or snooping around the yard, impatiently waiting to get access to the forlorn house. (Admittance was often restricted and regulated to a few people at a time.) Frequently we found ourselves offering way too much for fixer-uppers, which required extreme repair, and then waiting a few days to see if we were the lucky ones whose offer was accepted. Most times, it was not. 

 

We persevered, and eventually experimented buying out of state properties in areas that were affordable and you didn’t have to fight as hard to successfully buy. With a remarkable amount of actuarial research, analysis and grit, we focused on a few cities where we still work today. These markets were not HOT at the time, but ripe for the picking. Markets like Memphis, and Cleveland to start with, and eventually we expanded.

 

The rest is history. For eight years, we have been busy building a multimillion dollar company, helping rookies and experienced investors alike, to reach their goals in real estate, through ownership of turnkey rental properties. Our reputation and genuine concern for our clients has resulted in great things for many people.

 

So when you want to know how to safely buy turnkey rental property without seeing it, your first step is—you probably already guessed it—

Buy from an experienced, reputable and highly-respected company. MartelTurnkey.

 

What Else Do I Get With a MartelTurnkey Property?

 

There are other reasons to buy your turnkey rental from MartelTurnkey when you’re buying an investment property sight unseen. 

 

– We Help Find Financing Options

 

Buying investment property sometimes poses a challenge for borrowers. And if you’re not someone with W-2 income, well, that’s another challenge. We have established lenders that we will introduce you to. Lenders who are experienced in investment properties and lend in the states where we do business.

 

– We Put Tenants in Place

 

A turnkey rental isn’t going to generate passive income without a paying tenant. All the rentals we sell have paying tenants in place with a lease, and that all goes to you when you buy a turnkey rental from us.

 

– We Put Property Management in Place

 

The same thing goes with passive income. It’s not passive if you’re the one collecting the rent and fielding tenant calls. All of our properties come with a property management company already doing the heavy lifting. They’re yours to continue a relationship with if you want.

 

We hope this makes you feel more confident about safely buying a turnkey sight unseen. 

 

What other questions can we answer for you? Use our online contact form to schedule a call or go ahead and browse our available turnkey rentals right now. We look forward to doing business with you!



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

Due Diligence MTK

“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.

 

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As you can see, there’s no great mystery to due diligence. It has defined stages, and you can rely on professional help at most of those stages, especially if you are new to the landlord game.  MartelTurnkey makes it even easier. With our portfolio of available turnkey rentals, we have done much of the due diligence for you. Contact us today — we’re happy to show our work and explain everything to you until you are ready to buy with confidence, satisfied that you have “done your due diligence.”