How to scale as a new investor and buy back time

Question

I have a well paying job, but it’s very demanding of my time.  My goal is to invest in real estate to eventually displace my W2 income to have more flexibility with my time and more time with my family. I live in southern NJ have about $140k to start off with. I’d like to invest close to home, but I understand taxes here will eat away at my cash flow.  This has led me to looking into an out of state BRRR strategy to scale quickly. I found Antoine Martel that has a turnkey business investing in the Midwest. I’ve also seen some people caution against turnkey because you would be buying the property at market value with a tenant who’s occupancy is uncertain. If I work on the back end with Antoine and buy these properties through his network, put in the capital to rehab, then have the option to sell or hold/rent, wouldn’t this remove that concern? To me the advantage is having a network of people to work through out of state and a mentor so to speak with being a first time real estate investor.  Would love some feedback and thoughts on this strategy or others that may be better considering my goals.

Nathan Gesner · Answer

I don't know Antoine, but I do know that you have to be very careful with turnkey providers. They make money by purchasing below market, renovating, and selling to investors. They make money by managing for you. And they make money with their construction crews. At no point in the process is there an outsider cross-checking them, making it very easy for them to take advantage of the investor.

If you can find an honest provider, I think it's a great option for getting started. I would really do my homework to ensure they are 100% legit.

Eliott Elias · Answer

You scale. by leveraging other people. You want to have people on your team that are a lot better than you at what you hired them to do. It costs to scale

Steve Donovan · Answer

Hello @Rob McCollum.  A good turnkey provider can take the guesswork out of investing from a distance.  While their pricing is much closer to retail than a BRRR project overall cost MIGHT be, the uncertainty of an investment is removed.  A good turnkey provider should have already completed the rehab, eliminating the opportunity for nasty surprises that often arise during a BRRR project. The property should be rented, eliminating the risk of income uncertainty and the property should be professionally managed, reducing the headaches brought on by self managing or trying to find a good property manager.  The management portion is oftentimes overlooked, but is really the key to a successful investment.  You can (and should) have the property inspected before purchase to make you aware of shoddy workmanship or work that should have been done, but wasn't.  You will have an appraisal done if you are financing the property to make you aware if the property is higher priced than other similar properties.  But there is nothing in the purchase process that helps you with the management piece of the puzzle.  The key to successful rental investments is the quality of the tenants and how the property is managed month to month and year to year.  A good property manager can help mitigate the downside of a bad investment and a bad property manager can cause the best property in the city to lose money.  Spend time carefully vetting the property management piece of your investment.  All the best in your investing future!

Rob McCollum · Answer

Would love to learn more.

Aj Parikh · Answer

Hi Rob, I have found value investing in Cleveland, OH because it is home to Cleveland Clinic, lot of good neighborhoods, landlord friendly laws, stable appreciation and good cash flowing properties. There are also abundant opportunities for small multi family andSFH. I have been able to scale up to 12 doors in 2 years so definitely recommend this area. Feel free to reach out and we can discuss.

Drew Sygit · Answer

@Rob McCollum It's tough to find a good Turnkey provider.

Martel is in the Detroit market and one of the keys here is passing Detroit's city required inspections to obtain a Certificate of Compliance for rental properties.

Another key is asking for periodic walk-thru videos so you can verify what's being done and the quality of the work.

Sam McCormack · Answer

@Rob McCollum

In Cincinnati, 140K with the right property, could get you some cash flow. It would be a SFH, and I have little knowledge about turnkey companies. If you are interested in Cincinnati, let me know! I also recommend Cleveland, I can direct you to someone for that as well!

Rob McCollum · Answer

Thank you for the reply and insight! From my initial call with the company it sounds like I’d be buying the properties, putting in the renovations, and then have the option to  sell to someone who would want a turnkey or I could keep the property and his property manager can help to find tenets. From there they can help to to connect me to a hard money lender to refinance and buy another property.  The advantage I see is having someone with the connections to help me through this process, especially out of state since NJ doesn’t seem the best to invest in.  I just want to make sure I’m seeing this through the right lense.

I have capital (~$140) to invest, and I’d like to scale that as quickly and efficiently as possible to eventually pull away from my W2 job. Open to any other suggestions as well!

How to scale as a new investor and buy back time

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