Mastering Turnkey Real Estate: Insights from the REsimpli Mastermind with John Blackburn and Sharad Mehta

Seasoned real estate investor John Blackburn visits CEO Sharad Mehta and shares his journey in this REsimpli Mastermind session. Having more than two decades of experience, John shows how he evolved from a traditional real estate agent to create a portfolio of fix-and-flips, wholesaling, and rental properties.

Turnkey investments, he says, offer the ideal solution for anyone seeking professionally managed, cash-flowing, completely renovated residences. By focusing on Midwest states including Indiana, Missouri, and Tennessee, and by developing appropriate pricing ranges and tenant-friendly policies, John has maximized income flow.

He stresses the significance of effective property management in guaranteeing long-term profitability and notes Roofstock and BiggerPockets to support buyer search. Changing with the times, John emphasizes the need of buying reasonably priced properties even with rising interest rates since rates can be refaced later.

John also talks about financing choices, suggests Kiavi, a hard money lender with adjustable credit limits, and gathers funds to fitably grow. Should investors finally see steady increase in their real estate career, he counsels them to concentrate on developing solid rapport with lenders, buyers, and property managers.

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Transcript:

Sharad Mehta  0:49  

hello, Hey. What’s up? John, doing well, how are you I’m doing really good. Man, doing really good. Yeah. How about you

John Blackburn  0:58  

doing good? Just started getting sick yesterday, so I’m working through that at the current moment, but we’ll, we’ll be all right. We’ll

Sharad Mehta  1:05  

man it up, yeah, covid or something, or just,

John Blackburn  1:09  

I mean, I usually get one to two, like sinus infections every year, so probably just one of those options. Yeah,

Sharad Mehta  1:16  

I’ve been doing, I don’t know if you’ve heard of Wim Hof. I’ve been doing his breathing exercise every day. And I swear, last four years, I’ve had covid Three times. And every time I’ve had covid, it’s when I stopped doing his breathing get out of here. Yeah. I mean, it could be a total coincidence, but it just, hey, one of

John Blackburn  1:37  

those, you’ve heard a lot of amazing things about the way off method, for sure. I’ve heard them, I don’t, I don’t practice it. But now you might, might need to do that.

Sharad Mehta  1:45  

Yeah, then I joined this place yesterday called Breathe degrees. You do basically 45 minutes of breathing exercise similar. It’s kind of based on Wim Hof breathing exercise. And then I do my, I did my first cold plunge yesterday at like 40 degree. Oh, man. It felt so good. I

John Blackburn  2:04  

mean, versus your first one ever, first one ever, I’m

Sharad Mehta  2:07  

going all right, yeah, it was really good. I felt so good after it, yeah, so I’m going back again today.

John Blackburn  2:12  

Yeah, I love it. What do you have one at your house now? Or do you have one at the gym where, no, no, no,

Sharad Mehta  2:17  

no, there’s, there’s a place called in Carlsbad, called brief degrees. So, yeah, I’ve

Unknown Speaker  2:22  

heard of that. Yeah,

Sharad Mehta  2:22  

oh yeah. It’s pretty good. So they do 40 minutes of breathing exercise, and then you do cold plunge and sauna. I’m just gonna go back for breathing exercise and cold plunge. That’s really good. That’s great, man. Cool. All right, yeah, we have couple of people on the call. It’s like the last week of summer, so a lot of people are now traveling on vacations and stuff. So but yeah, we’ll make I’m excited about this call for my own personal reasons. I do turnkey, and then I’m really curious about kind of what you’re noticing in the business. So John, just give us a little intro about yourself. Like, where do you live? What kind of investing do you do, and how long you’ve been investing for? And then we can jump into the Q and A session.

John Blackburn  3:06  

Yeah, absolutely. I’ve been investing. I’ve been real estate for about 17 or 18 years, ever since I was 20 years old. I started out as a traditional real estate agent Driving Miss Daisy around on Sunday to open houses and all that fun stuff. So been doing that for a very, very long time. I got into real estate investing, kind of as the market was taking a downturn. 2010 2011 timeframe, it’s been, it’s been a journey, right? We all, we all know what that’s that’s like for the most parts, and essentially, I’ve kind of gone through this the stages of an investor, right? You know, you start out wholesaling, rehabbing, and then what really kind of stuck with me was, was the buy and hold process. I think every experienced real estate investor has one regret, and that one regret is they wish they would have held more more of the properties that they wound up selling one. And I’m no different than than any of that, but for me personally, you know, I got really addicted to buying rental properties, which is, I guess, a good addiction to have. I measure everything now in rental property purchases, right? Like, Oh, I could buy a car, well, that’s actually another rental property. Or I could buy this. Well, that’s halfway to another rental property. So one of my focuses now with my real estate investment business is we still do fix and flips and wholesale specifically in Connecticut, and then we do acquisitions in like Arkansas, Mississippi, Tennessee, specifically for rental properties. So my business is designed around doing both rentals and fix and flips and wholesale deals. So that’s that’s how we’re set up now. And in addition to that, I have my own education program called rental property Pro, where we 100 Have focus on helping people build rental property portfolios, no, no active business investing, just, just all passive business investing, yep. So

Sharad Mehta  5:09  

you’re investing doing flips in Connecticut, and some buy and hold turnkey stuff in southern states. And which market do you actually live in, or it’s all out of state.

John Blackburn  5:20  

Everything is remote. So I live in San Diego, in Southern California here, and everything that I do, my closest rental property is like 15, 1600 miles away. So we, we do everything remotely for sure.

Sharad Mehta  5:35  

Yep, got it cool? And is that? Is that because you were living in San Diego, and you’re like, you know, the numbers are not going to make sense here. And then how did you come across like Connecticut, which is like, exact opposite of like, right now, you know where you live.

John Blackburn  5:52  

So I’m originally from the East Coast, so that’s how Connecticut came into play. So that’s, that’s how I have a relationship to that market. And then in terms of rental properties, you hit the nail right on the head, right? You know, San Diego’s beautiful place to live. It’s not a beautiful place to invest, at least, if you’d like money, if you like losing money, then sure you can invest here. But yeah, I mean, you know, everything that I like to do long term investing wise, is going to be in the Midwest, right? You know, way more favorable pricing. You know, rent to price ratio is way more, you know, exciting to me, at least. So that’s, that’s where that kind of came from, and

Sharad Mehta  6:30  

turnkey. It’s a very niche business. Like, how did you get into that? Was that by design or it just happened by accident for you?

John Blackburn  6:39  

Yeah. So, you know, first off, turnkey, that word gets thrown around a lot. You know, I think turnkey should have a very specific kind of connotation to it in terms of what you’re getting for the service that you’re paying for, if you will. And we can talk about that a little bit later. But, you know, I started my rental property investing, you know, path by doing turnkey, right? I do both turnkey and Burr investing right now, just because, you know, I’ve had the ability to build a team. But, you know, when I started my real estate investing company, you know, I at the end of a quarter, at the end of the year, or what have you, I’d have money left over, right? And, you know, I had money that I wanted to invest. And as a business owner, we get so caught up in running the business, sometimes we forget to invest. And I knew I wanted to invest in real estate, but I didn’t really have the time, effort or energy to kind of put into establishing myself in another market and doing all these things which would allow me to invest and make a good return. So that kind of went into the research of finding someone that could do it for me. So basically, I was just like, hey, if I can go and buy $130,000 house and put 20% down, you know, all I have to think about is coming up with that down payment, and I’m getting a fully renovated, cash flowing, professionally managed property ready to go, that I can hold on to. So that was, that was the thought and how I kind of got into it. I was introduced to the turnkey kind of methodology a little bit by chance, through Fortune Builders. If any of you guys have ever heard of or known Fortune Builders, and than Paul JD Conrad, I actually personally ran their after I got into the turnkey worlds, I started talking with the owners of Fortune Builders, and they wanted to start offering that to their students. So essentially, I built a turnkey division inside of Fortune Builders as well too. Where we I think we helped somewhere in a ballpark of 2500 investors buy turnkey rental properties over the course of, like, eight or 10 years. So pretty good.

Sharad Mehta  8:49  

Yeah. Are you still doing turnkey because, you know, with the higher interest rate, I mean, it’s, it’s always very dependent on the interest rate for the turnkey side of the business. Are you still doing that? Have you what have you noticed with the turnkey market?

John Blackburn  9:04  

Yeah, so it really all depends on the provider that you’re working with, right? There are turnkey providers, or what we call operators, out there that, you know, understand their client, right? As I said, turnkey gets thrown around a lot, and, you know, turnkey is sometimes this mixture of, oh, it’s just a house, and then you have to find your own management company, or maybe someone flips the house and then sells it to you, and then they hand it off to a third party management like there’s but the companies that get it, the companies that do it at a high level, right? They’re buying, renovating, selling three to 500 properties a year. The companies that have management in house, construction teams in house, right? They built this, you know, 30, $40 million business based on selling turnkey they understand their clients. One of the teams that I work with, they partnered with a bank. You can still go and. Buy a property from this team and get a 5% interest rate on 20% down 30 year fixed mortgage, right? Because they know that’s what their clients need in order to make that the numbers work for their deals. So that’s what they’ve put together. So you can still buy at good rates and get really good double digit returns, even in this marketplace,

Sharad Mehta  10:20  

to someone who’s looking to like for us, turnkey has been like, it’s added another exit strategy for us as an investor, because now and then, with the interest rate coming down, I think that’s going to become another option for us. Like, last six months to a year, we haven’t really looked at turnkey unless it’s like a really good two, three unit property. But every time we look at a property, we look at, okay, can we flip it? Can we sell it as a turnkey or can we keep it as a rental? So turnkey definitely adds another exit to our pipeline. But with the interest rate hire, you know, it wasn’t really a viable option for but interest is starting to come down. It’s amazing, at least in our experience, how much more money you can make doing turnkey and how much less headache you have. We have a property management in house, but you don’t necessarily need it. You can always work with a third party property management company and just add that another exit strategy to it. You know, with with investors that you’re working with. But someone who’s looking to do this, what’s the best way for them to find buyers for these turnkey properties in the in the market that they’re in?

John Blackburn  11:29  

Like meaning, if they want to start offering turnkey properties to an end consumer? I mean, to be honest with you, the best way to do this and connect with a large scale of investors all across the United States is bigger pockets. Bigger pockets is probably one of the number one, if not the number one, TURNKEY MARKETING hub and resource in the world, right? You know the all of the largest turnkey companies in the country, along with everybody else, all started sold, cut their teeth on bigger pockets with just providing value, you know, offering support. And you know, that’s where all the nine to five people that have jobs, that are looking to invest in real estate go to find, find resources. Yeah,

Sharad Mehta  12:22  

that’s been honestly, I didn’t even know about the turnkey business until I was on a bigger pockets podcast, and people started reaching out to me. I was just sharing kind of what I’m doing, and they’re like, Hey, can I buy your property that you have rented out? And that’s kind of how I was, you know, got into turnkey. So, yeah, bigger pockets definitely the number one source. It’s crazy. We still have people. I mean, this was a podcast I did seven eight years ago. I still have people reaching out to me from that podcast that I did seven eight years ago, wanting to buy properties from us. Crazy, right? Yeah, it’s crazy and then, but if you actively post on it, it’s a great way to get cash buyers. What about like someone who doesn’t have their own property management company? What’s the best way to just work with a third party company to add that as you know, it’s a resource, because you really need to have the management like, ideally, in house, but unless you get to, like, 5060, units, it’s kind of hard to justify that cost in house. How How would you go about that?

John Blackburn  13:21  

Yeah, kind of a few kind of key KPIs for a lot of property managers or turnkey providers, right? You know, for me personally, as an investor, when I’m going and interviewing or looking for a turnkey provider, what I want is, is a team that’s what I call vertically integrated, so they do everything from acquiring the home to renovating it, to placing the resident to then managing it. And the reason why I like that is because, you know, if the property is not in a good neighborhood, or the renovation is not done well, well, the management team is going to be pissed, right? So, you know, everyone’s kind of accountable for doing their job correctly, so the system works well, all right. For you guys, most of you will will be on the purchase and renovation side of things. Always, always, always go into this aspect of thinking about repeat buyers. If you want to get into the turnkey game as an inventory provider or property provider. You know the majority of your business long term is going to come from repeat buyers. So on the front end, you want to create a great property and a great neighborhood and a great experience, right? And then long term, the management team, right? The management team is the the individuals or the people that your client will be interacting the most and for the longest. All right? So vetting that property management team, if you are going to go third party, is going to be huge, just to ensure that they are going to provide you with the service that you want. And you know, property management, it’s, it’s an interview process, right? Like you’re just not calling someone, you’re going there with a set of questions. Questions, sitting down, meeting with the team, you know, doing an evaluation of their business and their business model. And then I always like to say, inspect what you expect, right? So I’ll go out and look at the properties that they have available for rents. I’ll, you know, call to see how quickly, how long does it take me to get into one of the properties to view it as a potential renter, right? What’s the current condition as they sit on the market? Right? Because that’s going to be your client’s property or your property at some point in the future. So always inspect what you expect and really do the due diligence that as much diligence as you can. Yeah,

Sharad Mehta  15:35  

and it’s so true, especially in the turnkey business. If you have a good experience upfront. You get so many repeat buyers. I’ve had investors that have purchased 2530, properties from us, and it’s very common for them. It’s we. We have very few investors that will just buy one property. Almost all of them will buy multiple properties because they’re looking to build their rental portfolio in an area. So if you provide them good service upfront, and you have a good management team on the back end. They’re going to just keep coming back, and not only themselves, they’ll have their other family and friends, you know, they’ll come in and invest with you also. So that’s a huge, huge part of the business. And at least in our experience, we’ve noticed the clients that are the biggest headaches are the ones that only have one property. That have multiple properties. I’m sure you’ve noticed the same thing in your business also, well, the people

John Blackburn  16:27  

with one property, they live and die by one property, right? They’re either having the best week of their life or month of their life, or it’s the worst, right? Because, you know, they’re they’re paying the the mortgage on the property. So, you know, with the clients that come to me to buy turnkey, you know, I always set the expectation like, hey, you know, if you can only buy one property today, that’s okay, right? But we want to make sure that our plan is to buy multiple we’re building a portfolio. So we’ll lay that out, that buying schedule, if you will, if they can only buy one today, just to make sure that they’re in the mindset that you know one is not acceptable, right? Because your experience is going to be way better if you do multiple.

Sharad Mehta  17:14  

Yeah and yeah, we tell the same thing. Because if you own enough properties, you have to look at the average rate of return. If you just have one, you may get lucky and the property performs exceptionally well. But on the flip side, you could have the property where it just because of the nature of the business, you may have a tenant comes in, leaves after two months, and then you may get another tenant who stays for three months and leave. But if you buy enough property, some are going to perform exceptionally well. Some are going to not perform up to the expectation. And some are going to be just average, but your overall portfolio will perform really well. It just kind of like investing in mutual funds. You know, some stocks will do really well, some not so well. Most will do average, and then if you average out good, yeah, we had one investor who was just being a big headache. And then, you know, he reached out to me personally. He said, hey, the tenant moved out after like, seven months. You should reimburse me for this and that, I said, But you know, we did our due diligence. We give six months warranty. I said, we can help you with some of the expenses, but so it’ll be best if you find a different property management company and and he’s like, Oh, I was, you know, I thought you were going to work with us, you know, give me some discount. I’m like, No, you know, if you’re not happy, then you should go find a different property management company. And it’s consistent, it’s the owner with one property that I’ve been an issue with us. Yeah, but one thing we’ve noticed is the the property management business is one business where no one is happy with you, not the tenant, not the investor, right? Yeah, yeah, they always have something to complain about it. Yeah, it’s such, such an interesting business, but, but with the, with the turnkey business, you know, with the interest rate, the where they are still over six, six and a half percent, where do you see the market going? You know that, like, we were definitely our number one preference when we bought properties was always to sell them as turnkey. They were higher profit. You don’t have to have an agent involved for the most deal. And you could make more money less headache in the long term. And then you had repeat buyers. But once the interest rate started going up, like all of my buyers basically are just sitting on the sidelines, like, where do you see the market going from here for turnkey buyers?

John Blackburn  19:27  

Yeah, you know, a few things here to speak on your last point, right? You know, if you buy 10, you know, turnkey is a very good process and system to easily get into rental properties. It’s not perfect, right? So I always tell my investors, hey, you’re going to buy, if you buy 10 turnkey properties, one of them’s going to suck, right? There’s, there’s going to be issues, but we don’t know when that one’s going to come. Is that going to come on your first one, or your 10th one, or your fifth one, right? So we just, we have to go in with that mindset, right? You know, this is a numbers game now in terms of where is the market going to go? So, you know they’re going to bring rates down. I mean, you know, Bank of America just announced the other day that they’re already pricing in and assuming that the Fed is going to lower interest rates by half a percent in September and again in November. So we’ll probably see an interest rate drop of one point by the end of the year. So interest rates are going to come back down. BlackRock is estimating that for every 1% that interest rates drop, you’re going to see a million new buyers enter into buying full for real estate. So it’s, it’s just, it’s going to go through the roof, right? And you know, you’re always paying a premium, guys like, you’re either paying a premium price or premium and rate right? You know, you just get to choose which one right. I prefer to pay a premium and rate right, because if I can buy a property at a slight discount, at an 8% interest rate, guess what? In 234, years, I can refinance that interest rate. I can’t refinance what I paid for the home. So when interest rates are in the twos, you’re paying a premium on price. When interest rates are high, you’re paying a premium on interest rate, but you’re getting usually some type of discounted price, right? So your choice, I like to pay a premium interest rate, so I’m still buying or I’m working with teams that are still providing a discounted interest rate. Either way, that’s, that’s always the way that I look at

Sharad Mehta  21:25  

it. And then, where have you noticed are the best markets to invest in for turnkey, you know, you know, we have a lot of investors that are doing nationwide and turnkey typically have noticed, like, the best markets are Midwest? Is that? What you’ve noticed in your experience? Like, you know, Indiana, Kansas, St Louis market. Are those the best packaging?

John Blackburn  21:47  

I mean, the Midwest, for sure. I think the Midwest is getting smaller and smaller and smaller based on certain things that are happening across the country, whether it’s pricing, insurance or property taxes, right? So, for example, you know, Florida and Texas, Kansas, you know, they used to be awesome, buying hold markets, right? But between, you know, insurance premiums doubling, you know, property taxes quadrupling, and property prices doubling, right? It doesn’t cash flow very well any longer. But still, like Missouri, Tennessee, Mississippi, Kentucky, Indiana, still, obviously, you know, all of those states are still, still really solid for rental property investing, Arkansas, so that’s, that’s where I like to hang my hat as much as possible, is in the Midwest.

Sharad Mehta  22:42  

Do you also look at, you know, again, not to get political, but at least in my experience, I’ve noticed, like the red states tend to perform much better as rental properties versus investing in like blue states. When I started investing, I used to live in Chicago, they were really good deals to be had, but the only reason I did not invest in Chicago was just the landlord laws. They were horrible. It could take you up to a year to get the tenant out, and even after a year, you may have to negotiate and give some money to the tenant just to get them out. That was the only reason I decided to invest in Indiana. Do you look at that, or you just go strictly based on, like, the cash flow numbers. Great

John Blackburn  23:24  

question. It’s actually one of the first things that I have all of my students look at whenever they’re deciding on an investment market, is to kind of see what, I don’t say politics, but see what state laws are, right? You know, a red states is usually a little bit more investor friendly, or at bare minimum fare rights, whereas a blue state is usually more resident friendly, if you will. In a perfect world, I like to always invest in a investor friendly market, which is normally a red state. Do I own rental properties in blue states? Absolutely. But in that, in that vein, at least, you know what you’re getting into, right? You maximize your earnest money deposit, like in all of my, all my rental properties that I own, and you know, resident friendly states, I have the state maximum for EMDs rights, you know, very stringent on my qualification process is just so that I’m, you know, really kind of holding their feet to the fire in terms of of making sure they they perform on the lease.

Sharad Mehta  24:29  

All right, yeah, no, I agree. Like it was just that’s, I got that information when I first started investing in bigger pockets like that was pretty much anybody experience it. Just invest in, make sure, if you’re buying rental properties be in landlord friendly states. It’s going to be, you know, even if you get lower return upfront, but it’s going to be such a less headache dealing with, even during covid, when we were investing, we could still get tenants out like two and three months typically, we get, you know. Evicted tenant in about a month. But even during covid, it was like two, three months, we’ll still able to get tenants that made a difference. And then, if you were investing in a market like Illinois, oh my god, I can’t even imagine how much money we would be losing on those deals, and then the headache we have, yeah, yeah. I also want to talk to you about, like, raising money so someone who’s investing in turnkey properties, you know, I mean, of course you need it’s flipping. But instead of flipping to homeowners, you’re flipping to other investors. So it’s still very high, you know, it’s a business where you need a lot of cash. How would you go about, like, raising money for these properties? What’s the best way to do that, like go down the route of private money, hard money. What have you noticed worked really well for turnkey investors?

John Blackburn  25:49  

Um, you know, there’s a few things going on in the market right now. That’s that I’ve been, you know, lucky enough to kind of experience and be a part of from a hard money standpoint as well. As, you know, I’ve always been a private money guy as well, too. So the easiest way to get funding is to do, you know, for an individual project, is to find a private money lender, right? Finding them can be a little bit difficult, but then normally, the qualification factor is needed to get the deal funded really easy. And the easiest way to do that is just always be raising money, right? You’re not a real estate investor. You’re a private money raiser. That’s, that’s your job definition, right? When someone asks you, what you do, I help. I help everyday people are in double digit, returns fully back, guaranteed by real estate, right? Like, that’s what you do. I’m not an investor. I help everyday people earn double digit returns, fully backed and guaranteed by real estate, right? Like, that’s the question, or that’s the answer. And we’re always, always, always raising money. So, you know, keep that at front of mind. There’s a race to the bottom right now with a lot of hard money lenders in terms of how much they’ll funds and the interest rates that they provide, at least. That’s been my experience over the last six to eight months. A really good private money or hard money lender that’s I’ve been working with is kiavi. They’re huge. I’m sure you guys have all heard of them, if not, go check them out right now, kiavi offers a kiavi Pro Plan. Basically, if you’ve done five deals in the last two years, 24 months, they’ll offer you a $3 million line of credit. I obviously qualify for that. So I’ve just been using their $3 million line of credit to snag all the properties that I can renovate them and refinance them out on the back end. If you haven’t done five years

Sharad Mehta  27:45  

on that, sorry. What are the terms on that? So it

John Blackburn  27:49  

is $3 million every time that you make a loan from that $3 million it’s a 12 month loan. And every property you borrow against, it’s nine and a quarter

Sharad Mehta  28:02  

and two points. That’s not a plan. It’s great.

John Blackburn  28:06  

I think it’s two maybe 1.1 or two points, I can’t remember, the interest rate will be determined based on your credits. I think the highest credit or the highest interest rates, like 11 and a quarter, which is still cheap in this world, if you haven’t done five deals last two years, they still offer 90% of purchase and 100% of renovation. So, you know, hard money lenders are just kind of racing to get market superiority, if you will. So take advantage of it as an investor, I mean, that’s that’s huge at this point in time. And then thirdly, you know what I teach a lot of my students is, is if they really want to go down that 100% financing route, and they don’t have the ability to really seek a private money lender, I’ll use a combination of hard money lending, right, like kiavi, which they’ll bring 90% of the purchase to the table, and I’ll finish off that last 10 to 15% with business funding. So go out gets, you know, get 5060, grand and business funding from like a fund and grow, or NB capital solutions or something like that. And then there’s your 100% financing for your your property. So that’s, that’s what I’ve been doing, having my students do,

Sharad Mehta  29:26  

yeah, I’m in couple of masterminds, and yeah, we is like a sponsor in those masterminds, and they’ve been pushing their 100% loans really hard. Yeah, they’re doing, like a like, you’re in collective invest, right? Collective genius and investor fuel. And they’ve been, they do 100 with you guys, yeah, which is so stupid. Like, amazing. It’s, it’s really good, like, it, it’s free money that you’re getting, like, you don’t put any money, yeah, yeah. And given where the market. It is right now, we’re noticing our flips, especially in the price point. If they’re in the median, at least in our market, like 150, to 250, under 300 price point, they’re moving pretty quickly. They’re still pretty decent demand, even with the interest rate where they are. If it’s a good house, especially in our market, if the rental would be pretty comparable to what the mortgage would come out to those houses move pretty quickly. That’s, that’s the price point we stay in. Yeah, yeah.

John Blackburn  30:31  

I’ve seen the same thing. I mean, we try to keep our ARVs for any of our rental or any of our flips that we do below 350 and, you know, we haven’t seen anything sit over a month at a price point below 350

Sharad Mehta  30:46  

and most of your FHA, what’s that I most of you buy us. FHA, at that price point, it’s probably 5050. Yeah. Okay, yeah.

John Blackburn  30:57  

You know one thing that I’ve saw give you guys an example of like, where private, private versus hard money is. I mean, it used to never be this way, right? You know, you’d wind up paying four points and 13% with a hard money lender. You know, I was, I’m doing an Airbnb. It’s a big purchase. It’s a $900,000 purchase and an $80,000 renovation. I was raising at 10% from private money lenders. And kiabi came to me and was like, well, we’ll give you 820,000 for the purchase. We’ll give you all the renovation. We’ll charge you nine a quarter. It’s like crazy. Sure. Great. Thanks. Later,

Sharad Mehta  31:34  

Wow, that’s crazy. Louis has a question. Can you tell us if fund and grow is worth looking into or better to do oneself.

John Blackburn  31:45  

Let me just go that kind of grows we’re looking into better to do oneself. Can I Shaw? Do you mind if I give a personal recommendation? Is that cool?

Sharad Mehta  31:56  

Yeah, totally cool.

John Blackburn  31:59  

Cool. Lewis, I work specifically with a company called MB mountain bike, MB capital solutions. They have a they don’t do, like a pay upfront process. They do a pay if you get funded process, which I really appreciate, because you don’t pay unless they get you money. So that’s who I work with. But I’ve heard a lot of really good things about fund and grow as well, too. So I haven’t heard anything negative about fund and grow. Put it that way, I’ve just never personally used them.

Sharad Mehta  32:35  

So fund and grow are they similar to kiavi? I’ve never

John Blackburn  32:39  

fund and grow it’s just a personal business, stacking type, okay, MB, capital solutions of fund and grow, just do business credit and all that stuff. Yeah, got

Sharad Mehta  32:49  

it? Okay, yeah, I’ve never used them, yeah. Kiavi, I’ve been hitting a lot of investor using them, like tons and tons of investor. I didn’t even know about their 3 million line of credit if you’ve done five deals in 24 months, which is like doing a deal every six months, basically, yeah, and you, yeah, that’s crazy. I’m gonna go apply for that. Yeah, absolutely.

John Blackburn  33:11  

I, I’m actually working to get their 100 100 with for all my students as well, too, right now. So it’s gonna be great. I

Sharad Mehta  33:19  

know they were pretty aggressive with the even with the interest rate on the rental properties. I’ve talked to some investors, and they’re giving even 30 year fixed on a pretty comparable rate to even, like, large lenders, which I was, like, really surprised about. I know some investors have used them for to get their loans on 30 year fixed rental properties. And they when they told me the rate, if

John Blackburn  33:43  

you use them for the purchase and renovation capital, and then you flip it into their DSCR loan long term. First off, the refinance is stupid cheap, because the money is already with them. They just need to rewrite dots. And number two, you know, I was seeing people get like, seven and a quarter on DSCR, 30 year fixed, like on that flip, which is really low considering, where I’m curious.

Sharad Mehta  34:11  

You mentioned earlier that you have one provider that you work with who has been able to secure with the local lenders, 30 year fixed at 5% How is that possible? Like? Is that? Is the lender still doing that 5% How? How did that relation come about?

John Blackburn  34:32  

Yeah, so basically, they went to this local lender and said, hey, you know, we will guarantee you two or three or $4 million a month in origination, you know, generation, right? And the locals lender said, but in order to guarantee that, we need to get an interest rate of five or five and a quarter, whatever it is, and we want our investors to only have to put 20% down, they still have to qualify, like with. Income and Right, right. But so basically, what happens is the provider pays up front for all the origination costs and fees. So basically, let’s say they secure $2 million the provider writes a check for $200,000 to secure all of the origination and then they basically have that line to write deals for their rental properties on

Sharad Mehta  35:21  

that’s a pretty good idea to do that, but then you’re committing to doing like, 20 to 3020, flips a month, basically, to get to that loan number. Yeah, cool. All right, guys, you have any other question for John? I want to be respectful of his time, and also he’s not feeling 100% so, oh, I’m

John Blackburn  35:40  

happy to answer anything. Yes, yeah, more than happy to

Guest 1  35:45  

support question. Much time. But what can you guys share thoughts about a flip? I’ve got a flip, but it’s in a bad area, and I’m thinking about just flipping out of it, because I don’t want to necessarily be in a bad area for a rental. But what can you guys, what thoughts can you guys share about about that if you guys weren’t in my situation, flipping a property in in a in a bad area, but instead of actually flipping it turning into a rental.

Sharad Mehta  36:22  

John, go ahead, yeah,

John Blackburn  36:24  

yeah, I’m more than happy to take that. You know, for me personally, the area in which I invest in is going to really determine how many headaches that I have, and the long term viability of the property rights. The worst the area, the higher the maintenance, the higher the vacancy is going to be, just because of the caliber of resimpliant that will be living in the property. So, you know, if it was a really bad area, I probably would just unload it versus, you know, keeping that headache long term. So that’s, that’s my personal thought, yeah.

Sharad Mehta  36:58  

And for me also, we own a property management company, and it’s just, you know, every we have four employees, all of them are female, so before we buy in an area that we’re not 100% confident with, I’ll call my property manager and say, Hey, would you manage this property? If they say, No, we just don’t even buy. But then, you know, as everything around in the market that we invest in, getting expenses, some of the areas where, honestly, like three, four years ago, even if someone gave me a house for free, I would not buy it. Now, we just bought a house couple of months ago, 35 we’re putting 100 into it. So we’ll be all in for about 135, and the house will be worth about 225, to 250, the market has changed, but I just dropped a link to roofstock.com that’s that’s a John. I don’t know if you’ve had any experience working with roofstock, but, you know, I mean, it’s slowed down because of the higher interest rate, but we’ll start listing our properties on roofstock. It’s basically a marketplace for turnkey providers and investors, high net worth individuals all across the country that are looking to buy turnkey properties. You could try listing it there. We’ve sold several properties, like dozens of properties on bookstore.com These are people that you have no existing relationship with. It it just needs to be good product. They do an inspection. So if you’re able to do that, and the cash flow makes sense, so you might get some luck finding that property. But at least in my experience, buying rental properties in an area that’s not good, the numbers will look good up front. But you know, I’ve heard stories where the tenants move out and they take the furnace with them. They take the AC with them, like, those are the stories. It’s not happened to us. I’m okay leaving a little bit money on the table, but just like lagging the market a little bit where I feel comfortable buying in the market, because, again, I live in San Diego area, investing in Indiana, so I’m okay not being super aggressive with the market that I’m buying in, so that it just works with me. But check out roofstock.com it’s been really good for us in the past.

John Blackburn  39:06  

Yeah, roofstocks, like the MLS for basically properties, exactly. The only, the only thing I always say about roofstock is just do your due diligence on the management team along with the area, right? So they have, I believe they have, like a neighborhood rating, like a BMC, whatever. But do your research on that. Do your research on the property management team that they’re recommending or potentially switch to a completely other one. But it makes, makes looking for turnkey rentals very, very easy, if you will. So, yeah, good stuff.

Sharad Mehta  39:38  

I Michael has a question. I have 28 doors in Northern Illinois. My goal is 50. Then sell the portfolio. Can I still manage them on my own? Or do you suggest hiding a management company? This is like, what the goal of exiting is, 50 properties.

John Blackburn  39:55  

Yeah, two things. I mean, one, you’re going. Going to probably see a higher value for the portfolio if it’s professionally managed, because it’s you can hand it off as a true turnkey number one. Number two, I would have started handing those things off property management company way before I got to 28 but my recommendation would be, is, is, you know, we don’t want to go ham, right? I would rather learn that a property management team sucks with two of my houses than with 28 of them, right? So, good point, you know, I would say, you know, if there’s, let’s say there’s three property management teams that you’re feeling very excited with, right? Like, give each one of them a couple properties, right? To manage them. See how their communication is, see how they, you know, do when they need to re rent or release or something like that, and then manage the rest yourself, until you’ve tested the one that you really like, and you’re like, Okay, this guy’s, this is the one. And then we move all of our properties there. Versus, you know, finding out that they’re not what they said they were, and we have 28 problems to deal with. Versus two.

Sharad Mehta  41:01  

And one other thing that I highly recommend is, if you can find out addresses of some of the properties they’re managing, drive by like, if they’re not in good condition, that’s exactly what your properties are going to look like. You know they’re not going to do anything special. Extra special for you, just how they’re managing any of their properties, is how your properties are going to look. So if you can somehow find out what other properties they’re managing, 100% drive by ask her as a question, is there resource training for someone that wants to start their own in house property management company? Don’t, don’t. Yeah, I was forced to do it because I had enough properties on my own. It was a headache, but, man, it’s such a tough business. Yeah, Oscar, do you have your own properties, or are you just looking to do it for others? You don’t get on mute. You’re not on a mute but for some reason you’re not audible.

John Blackburn  42:05  

No, can’t hear you. Man,

yeah, property management is an interesting beast, right? You know, you have, you have two clients, right? You have the investor, as well as the the residents, and, you know, everybody has stuff going on in their lives that you have to deal with on a day to day basis, along with the house, right? So,

Sharad Mehta  42:28  

I mean, so he’s gonna have, so he’s gonna have 21 this month, yeah. I mean, I think once you get to, like, 2530 where it makes, and not necessarily to, like, you know, start a property management company, but have someone in house manage on what are your thoughts on that? Yeah,

John Blackburn  42:46  

in house, you know, the average individual, and you can correct me on this as well trod if I feel like I overstep on on numbers here, but what I’ve heard and seen is like an individual can usually, if it’s their full time gig, manage about 150 doors, and you know, so you can bring someone in house and just, you know, think of, think of the basics, right? They have to be available to, you know, answer maintenance calls and emails, right? So they have to be able to connect contractors, organize people going through the home, sign leases, do walk throughs and resign leases or renew leases, right? So, like, you know, one thing that that I where I would start would just be sitting down and creating, kind of like a list of every duty that you would like to see someone do in order to manage your properties and how you would like to do it. Then, once those duties are all laid out, then we create an SOP for each one of them, right? What is your leasing process, right? What is your releasing process? How early do you call them before the lease expires? Right? So that’s, it’s, it’s, it’s a lot, man, like, it’s definitely a lot, but you can put someone in house and you can pay them through the rent, right? You know, charge 8% management fee, which pays them directly, plus a kickback for new leases or releases and stuff like that. So you can set up as in that way as well.

Sharad Mehta  44:07  

Yeah, one thing I will add to that number is, like the number is what area your properties are in. If they’re in like a class property, that number one individual would be able to manage more if they’re in D class neighborhood, then you would need more people to manage that 150 so just, just keep that in mind. Like, you know, the the property, the area, the kind of area your properties are in, but, yeah, once you get to, I mean, I brought management in house. Was any property management company work with, they’ll always have a markup on the repairs that they’re doing. Which is, which is reasonable, which is understood, you know, it takes their time and effort, which I’m okay with. But then the issue that we started running into was the property management company that we’re working with. Their family members were involved in in the business, and you, you know, you were not getting receipts, and you were not getting that. And it just, we decided. Do, and it was part of our turnkey business model. Also our clients started having bad experience. We decided to bring it in house. I would say like about that the number that you’re at, it makes sense, again, depending on what the average rent is of a property, you know where it may make sense to have someone in house, especially breaking to buy more properties, because no one will manage your properties as well as you will manage them in house. You know, just something to keep in mind, yeah, 2530 again, depending on the average rent, is where I would start looking at bring it in house and start negotiating with the contractors. You know, have the same set of guys that are going like plumber electricians, you know, filters and stuff. The biggest thing would be need a really good handyman who can take care of the turnovers and things that I would look at, that we look at in our property management company is from the time property is vacant. You know, how long does it take before someone goes out gives us an estimate from the time to give it as an estimate. How long does it take before they start working on it? How long does it take to finish? How long is the property rented? You know, just so that we can see where we have inefficiencies in our business. But, and if you want to ask or reach out to me, I can share some of the things we’re doing in our property management company, share some SOPs that we’re using, and then, you know, that can give you a good starting point. Yeah.

Guest 1  46:20  

Appreciate that. Yeah, yeah. So

Sharad Mehta  46:23  

a lot of that would depend on your average rent and other numbers that you have, yeah. And Michael said, great experience with kiawi, by the way, yeah, I’ve heard great things about kiawi, like, I have not heard anything bad about kiawi Given how much money they’re giving away. And he said residential capital is another great program for rentals, which I’ve never heard of, but you know, that’s another one to check out. Yeah, all

right, any other questions for John?

Guest 2  46:51  

You guys mind if I ask another question? Yeah, go for it. So regarding the the financing piece, John, do you, and I’m sorry I came a little bit late to the meeting. Do you, once you do your refinances or even your purchases, do you use, I know you mentioned you use kiavi. Do you use any local lenders? And if so, you know, what’s that experience? And is there any advice on proper entity setup, Hux? One, of the things that we realize is that we try to go through a local lender. We spend a bunch of time doing so, but of course, right doing that versus a hard money lender, they look at all your financials, including every member of the entity. So that was our experience. We ended up wasting a bunch of time at the end of the day. They didn’t like our entity. Set up, and they ended up just not moving forward with the loan. And funny enough, we just ended up refinancing with kiavi, and the terms weren’t bad, right to your point, but you know, if we can get 2% lower or even avoid origination costs, you know, that goes a long way, because, I mean, at the end of the day, it was a big portfolio for us, and we could have probably saved, I don’t know, maybe, like, 20, $30,000 in fees.

John Blackburn  48:08  

Yeah. I mean, you know, as as this marketing, as this market for lending, grows, right? You know, the the fabled hometown banks are definitely getting squeezed in that regard, because of companies like kiabi, where I think hometown banks kind of hold a, you know, kind of silver ace in a hole on like larger banks is the ability to finance portfolios in a lot of ways. Now, I know you kind of were in that process, right? And, you know, there can be a lot of hoops to jump through, but I still find that there is value in in working with those banks. What I try to do is, if I’m going to go into a market, I’m going to try to find and create all of the relationships I can, or at least kickstart those relationships prior to starting to buy properties, so I don’t put myself in a position where my back’s against the wall on closing day or something like that. But again, you know, when I’m using a local lender that’s mostly only going to be for the refinance side of things, so So usually I have time to put that deal together. But yeah, I think there’s a place for it, for sure, to use local lenders. I would encourage you to continue to reach out to them. You know, the good part about local lenders is, is they can, you know, kind of create their own load products based on where they feel the risk is in the portfolio that they’re lending on the bad part about local lenders is they can create their own underwriting guidelines as well too, right? Where they’re like, Oh, we don’t like this loan or this, this LLC structure, and you’re like, What are you talking about? Right? Like, that’s how everybody has this set up, right? So there’s, there’s pros and cons with it as well, too. But I would continue in that search for those types of lenders versus just giving up because you had this one bad experience. Aaron,

Sharad Mehta  50:01  

yeah, I would agree. We have a I own all my rental properties, or 95% of them are owned, free and clear. But I have a line of credit from a local lender that I use for my flips, and then I’m also working with that local lender to do cash out refinance on an 11 unit property that I bought. So it’s much easier. Once you build that relationship, they’ll give you a lot more flexibility. You get better interest rate in the long term. You know, better terms with them on the long term. But it’s just about building relationship. I mean, what, what I’ve done is, in the past, is like, if you’re working the local lender, you know, they have more influence on the loan. They don’t always, you know, especially if it’s a portfolio loan, where they just keep the loans in house, then they have a lot more influence on their loan. Yeah, I mean, honestly, like, what I’ve done in the past is, like, local lender, I would just send them, you know, nice bottle of wine over holidays. You know, it’s just, like, simple things, but they make a difference. You know, I personally noticed, like, last three years I was living in Canada, and this lender, you know, was a little flexible with me being out of country, you know, with some documentation and stuff, which, you know, I provided them, but, you know, with the timeline and stuff, definitely get a lot more leverage with them, versus working with a bank like Chase or Bank of America, for example. So work on building those relationships like this is literally what I want to send them, the gift, you know, bottle of wine. If they once a loan goes through, you know, I’m going to send this the person that I’m working with the bank, like a nice, you know, a gift. And then they remember those things and they help you out down the road. I mean, I have a cell phone number now, he’s a senior VP. If he has any questions. I mean, I just have to text him, Hey, I’m buying this property. Can you send this wire to this type of company, so makes much, much easier to do business in the long term.

Speaker 3  51:45  

Yeah, it’s not the first time I hear that, so I think those are great suggestions. Yeah,

John Blackburn  51:51  

it’s a pain to start the relationship, but the relationship will be definitely like, you won’t be able to beat it long term? Yeah?

Sharad Mehta  52:02  

I would, yeah. I would talk to like few different local lenders and ask them, Hey, this is what I’m doing, what sort of terms you can offer, and then you feel like one or two banks that you feel more comfortable with, and I’ll try to build on those relationships.

Speaker 3  52:16  

Awesome. Yeah, no, I appreciate that. Do you guys mind sharing what your entity structure looks like. Brief overview. Of course,

Sharad Mehta  52:25  

mine is pretty simple. I buy every property in a separate Land Trust, and then my LLC owns all the land trust. And same thing for my flips, you know, I have one flipping LLC. All the individual flips that I’m doing are owned in a land trust. Super simple. If you have a property in the contract, 123, Main Street are the entity will be one to three main street Land Trust. All my rental properties are in their own land trust, but one LLC owns all of the land trust. That’s That’s my entity structure, yeah, John, what about you?

John Blackburn  52:58  

Uh, normally this never happens, but same exact one. Usually when you put, you know, 1010, estate attorneys in one room, you’ll get 10 different answers on how to do this. But yeah, so I have my LLC, Juliana investments, which is my rental property LLC that I own wholly it is the owner of all of the land trusts that my rental properties reside in. So that’s how it’s set up. Yeah,

Guest 2  53:24  

awesome. Appreciate you guys.

Sharad Mehta  53:25  

Cool. Awesome. All right, any final question for John?

Well, awesome, John. John,

thank you so much for jumping on the call. I know you’re not getting 100% but I appreciate you taking time to you, you know, share your experience and answering questions here, it was a fantastic call. Yeah, what’s the best way for someone to connect with you a little bit more about kind of what you’ve got going on?

John Blackburn  53:51  

Yeah, absolutely. If you guys have turnkey questions or want to talk about the different teams that I work with, you’re more than welcome to reach out. The best way to reach me is John J O, H N at rental, prop pro.com I will throw that in the chat here for you guys. It’s in there. Just feel free to shoot me an email. Just say, yeah, you saw me on the webinar here today, and we can connect and chat more about turnkey, if you want cool,

Sharad Mehta  54:22  

awesome. Thank you John. Thank you guys. Thank you everyone for being on the call asking great questions. See you guys on the next week called. Thanks. So yes, you.