Investing in Turnkey Rentals – feat. Ali Boone | Aspen Funds
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Investing in Turnkey Rentals – feat. Ali Boone

With the rental industry becoming more and more competitive, it’s important that you know what to look out for. In this episode, co-hosts Ben Fraser and Jim Maffuccio interview Ali Boone of Hipster Investments. Ali gave great insights into the turnkey rental industry and shared her experiences in rentals over time. She also discussed the advantages of the industry and some common challenges you might face along this path.

Get instant access to your FREE copy of Ali Boone’s “NOT Your-How To Guide to Real Estate Investing”. https://www.hipsterinvestments.com/billionaire

Connect with Ali on Linkedin – https://www.linkedin.com/in/ali-boone/ Learn more about Hipster Investment – https://www.hipsterinvestments.com/about/

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Investing in Turnkey Rentals feat. Ali Boone

Hello, Future Billionaires! Welcome back to another episode of Invest Like a Billionaire. Uh, Jim and I had a really fun interview with Ali Boone of Hipster Investments and, uh, she’s talking mostly all about. Turn key rentals and turnkey rental real estate. And so I’ll admit this was something that I was a little bit skeptical of, um, just, and I share some that in the interview of, of, uh, you know, my experience just seeing this, uh, space for a while.

But she’s a big believer in it and, um, you know, has been doing this for a long time and has some great insights that I definitely learned. A few things about this space. Um, Jim, I know you’ve kind of had different experiences with rentals and things over time. What was some of your takeaways in the interview?

Jim Maffuccio

Yeah, I think she, I think she did a good job and I think we, you know, pulled out of her also the, you know, some of the reality that, some of the things to look out for and, and some of the reasons to actually use a service like hers actually and connect with somebody. Cuz there are some pitfalls and there are some hidden traps.

But, uh, you know, everything looks good on paper till you, till you dig in. But, so I think it’s, I think it’s good actionable, um,

Ben Fraser

content. Yeah, so it, it’s a fun interview. Ali’s got a lot of energy, a lot of personality. It’s really fun. And as always, little disclaimer for anyone that we bring on this podcast that is either, you know, selling something or has investment opportunities, um, this is not a stamp of approval that we are, um, have done all the due diligence and vetted them.

This is on, uh, our listeners to do that. So this is interesting to you. Obviously. Please due due diligence and, uh, vet out every. Person that we bring on thoroughly. Um, if that’s something that you, you’re interested in. Um, and finally, uh, we recently just launched our new podcast website, uh, at the billionaire podcast.com, so the billionaire podcast.com.

The. Please check it out. It’s, it’s really cool. Um, it has all the episodes there. It’s really easy to, uh, listen to ’em all if you wanna binge some, some great content. And we’ve also started a new thing called Ask Anything. And so if you’ve been listening to this podcast for a while, we have a series called Top of Mind Series.

Where we will take kind of bite size little topics and questions and, and create some, some thoughts and content around that. And we really want this to start to become a, um, kind of back and forth and in, uh, you know, community provided, uh, content. So if you guys have questions, if you have thoughts on the market, on the economy, on different asset classes, whatever it.

Please go to that website, click on that link, submit uh, your thoughts, your questions. We’d love to see that. And, uh, it may even be featured on the Future podcast. Um, so with that, we really appreciate listening to this episode and enjoy Ali Boone.

This is the Invest Like a Billionaire podcast, where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you’ll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, Uncover strategies of the ultra wealthy, discuss economics and interview successful investors.

Ben Fraser

Record.

Welcome back to the Invest Like a Billionaire podcast. I am your co-host, Ben Frazier, joined by fellow co-host Jim Maio, and today we are talking with Allie Boone of hipster investments.com. Allie, how’s it

Ali Boone

going? It’s going, How are you guys? I’m excited to be,

Ben Fraser

Yes, Yes. We’re excited to, to talk with you. So you’re, you’re in California, right?

You’re in a beautiful part of the country. How’s, how’s it going?

Ali Boone

Uh, California’s going great. My real, I was, You guys are distracting me from a really gnarly eviction situation. I’m like, whew. I get to not think about it from like, what do you guys wanna talk about? Wait. No, don’t stop talking. Keep asking me questions cuz other, when I’m done with this, I get to go back to, uh, rental property drama, which is very exciting, but California.

Great

Ben Fraser

. That’s awesome. Yeah. We’ll, we’ll get into all of it I’m sure, but just it’s really fun Little background on Allie and uh, she’s a real estate investor. And she’s got a pretty cool story, which I want her to share a little bit and will even be giving away a little freebie at the end of the interview.

So stay tuned for that. Um, but her, her story is kind of crazy. She, uh, went from food stamps to becoming an entrepreneur in real estate and, uh, having a very successful, uh, career, uh, really in turnkey rentals as well as coaching and. Um, there’s lots of cool stuff about you. I think you got a master’s degree in aerospace and spiritual psychology, and so all these kind of cool things meld together to make Ali Boone.

So Allie, tell us a little bit about yourself and kind of how you got to where you’re

Ali Boone

at. Sure. Well, both those, those degrees are two separate degrees. I can picture someone being like a master’s in aerospace, spiritual psychology. What, who offers that? Where, Where can I get one of those? Like, or do I want a couple ways?

People are gonna think I’m a total nut. They’re like, What in the world? Who, who signed that certificate? Um, yeah. So my story is that I grew up kind of with a typical old school mindset. Go to school, get good grades, get a secure job. Retire when you’re 65. That whole thing and that worked out well for a while and I followed that path.

But it, I think even before I really dove into that path, I knew it probably wasn’t the path for me, but it, I did it. And before I ever sat down at my first cubicle, I knew it wasn’t for me. Like I had just gone to school. That was the master’s aerospace engineering. I just gotten a hired by the dream company.

You know, the whole thing was like, had dream job written all over it, but I very quickly realized, Someone’s dream, just not mine. And so before I ever sat down on the cubicle, I was like, Uhoh, I gotta get outta here. If for no other reason, I’ve always been rebellious and I’m much better at working for myself versus reporting to other people.

It’s just kind of not my, not my thing. And I knew that. And here I was early in the morning, I had business casual clothes on. I was like, This is terrible. And so the problem was when I knew I wanted out of corporate before I even got my first paycheck, I didn’t know how to get out of corporate because at the time I had just come to school for engineering.

I honestly was not really a good engineer. I can still make a mean spreadsheet, but past that, I actually wasn’t a good engineer. And before that I was flying airplanes and. So I obviously could work some jobs with those skills, but as far as setting out on my own, none of that really translated to something that would get me outta corporate.

So I was like, Okay, I gotta figure this out. Fast forward, it took me five years. I was reading every book I could find. I was networking, I was just trying to find answers of how I was gonna get out. And ironically, I, some real estate investing opportunities landed in my inbox while I was trying to figure this out.

I was not putting two and two together that those would be my ticket out. But I thought to myself, Well, I still have a W two paycheck, like a solid paycheck every Friday. I might as well do something smart with it because whenever I figure my way out of here, I may not have that money or mortgage ability or anything else.

So I started investing and through investing just as a side thing, again, it was just something smart to do with my money. I started meeting all sorts of people and one thing led to another and you know, we can go into details of the story later. It was just through who I was meeting, turnkey rental properties really came into the picture.

And if you had asked me beforehand if I ever thought that turnkey would get me out appropriate, I absolutely would’ve said no because it’s just not, Those two things don’t really go together. But the way that it all came up, I became such a kind of go-to person for turnkey, cuz I was. So freaking excited about ’em.

I was telling anyone who would listen. So suddenly everyone was coming to me asking, Who are you buying through? What are they? Wait, what are you doing? And that’s what really picked up the momentum to end up having a business. And I, I still didn’t know that that was gonna get me outta corporate, but eventually it did.

And for the first few years, I was solely focused on turnkey. I’m still very much dealing with turn keys all day, every day, if not the majority of my time. But over the last few years, it’s graduated into. Turnkey attract a lot of newer investors and a lot of new investors are fearful. They’re overwhelmed.

They have no idea what’s going on. And I know that when I was a new investor, I was lacking a lot of information and a lot of support. And in this industry it’s like, who do you trust? Like do I trust this dude in a suit who sorts financial freedom like. There’s no checks and balances really. So it was intimidating.

And so I’ve kind of graduated alongside doing turnkey is I really love help coaching people. And it isn’t, It’s not just new investors, it’s people who are doing whatever strategy. They run up against an obstacle. And I love being able to help out with that. So that’s kind of where. It’s gone to now where most of my time is spent doing turnkey and coaching, which I love the coaching factor cuz I get to talk about a lot of things not involving turnkey and meet new people, help new people, see everyone along their journey, which is so fun for me.

So that’s kind of where I am now.

Jim Maffuccio

Let me, let me roll the clock back a little bit. That’s awesome. But let me just ask you, uh, when you say you, you, you know, opportunity came to your inbox, was it actually to be a passive investor in a turnkey property or was it to learn how to do the business of providing turnkey investments to others?

Cause those are, that’s, that’s quite a big. Difference

Ali Boone

between. Yeah, and that’s a great question. So it was funny because I was so bored at my dream job for, I get it, five years. I had subscribed to every newsletter po. Now I unsubscribe to every newsletter I possibly can. But at the time I was like, Bring ’em to me.

I don’t know what’s getting me outta here. And what’s funny is the, I think it was a Think Realty newsletter that ended up in my inbox and the advertisement for. Now the preface to this, before I tell you what it was, I had just gone down with a real estate agent. I live in LA and I went down to Orange County looking at possible rental properties.

I knew nothing about rental properties. I didn’t know how to run the numbers. I didn’t know anything. And all I could see were these very expensive, dilapidated houses that I would have to rehab. And then the rents weren’t that high, and I was like, Head scratcher. I was like, I don’t know how rental properties profit, but I don’t see how these numbers work out.

Yeah. Orange County’s not a good starter market for rent. No, it’s a terrible starter market. Like the cheapest property we looked at was $271,000 and there was, But you probably

Jim Maffuccio

wish you bought a boatload of those then.

Ali Boone

Right. No, no, I’m good. I’m good. . I don’t actually, Now you say that I what those properties are worth now.

And so right before this Think Realty thing showed up on the inbox, I was like $271,000 for a shack like, ugh. So the advertisement was beachfront bungalows, uh, for $99,000 in Nicaragua. And I’ve always been a rebel and I love doing things that make people’s heads turned. And after I Googled, I was like, Where’s Nicaragua?

Oh, Central America, the third world country. That’s kinda what I was thinking, but I wasn’t sure if that’s actually what we were talking about. So it was a preconstruction development and I love the beach and I was like, Wait a minute. $99,000 with seller financing. I think it was 30% down or something like that, but seller financing on a beach in a third world country.

I was. Done. Actually, I take that back. I didn’t say done. I was like, Scam, absolute scam, but I’m gonna pursue it because if for some reason it’s not a scam. That was very exciting. So I went forward on it, honestly, assuming it was a scam. But the more I met the people, the more I saw the contract, the more like Windham Hotels was in on this thing.

Jack Nicholas golf course design was on this development. I was. Dang, that’s kind of fun. So I went forward on it, but the people who were working on that project were also involved with turnkey. And so the whole time this was going on, they were, they kept bringing up turnkey, and I was like, That sounds so boring compared to beachfront property in a third world country.

I was like, I have no interest in this turnkey thing. So I was looking at all these investments just as things for me to invest my money. And one day the guy said, Listen, we know you’re not into turnkey. Totally fine, but just wanna give you a heads up that the next big market is Atlanta. Because I knew I was from Atlanta and I was like, Oh, well if it’s in Atlanta though, like I’d be kind of dumb to not just, I go to Atlanta all the time, like I should at least look at these things.

So boring, but whatever, I’ll check them out. That was literally my mindset. And so I went to Atlanta. I bought my first turnkey immediately. I was like, Oh my God, how can I get however many of these? And so the answer to your question is, it was solely from a what can I invest in myself? Because the big appeal about the turnkey to me after I put aside the rebellious, adventurous side of third world country preconstruction developments, um, was first of all, they were so.

But the big thing, but for a good house, fully rehab tenants in place. And I was like, Well, this seems too gonna be true. Cause this was 2011, right in the middle of the crash. Everything was cheap and. But they think for me, and especially compared to those Orange County houses, there was no rehab needed.

Like my goal of getting out of corporate was never to go get another job. I didn’t, I’m not very handy. I don’t like managing contractors. I didn’t any of that. And I think that’s what held me out of real estate for a while because it seemed like everything I could have done involved that kind of work.

And I was like, I’m just not, well, it’s not my strong suit. I’m not good at it. So all of a sudden turnkey come around and I’m like, wait a. So I can still get a good investment and not have to do any of that. And that’s what got me hooked from the get go. So I started buying turnkey and that’s when just casually, I was telling so many people about it.

Like my cousin ended up buying one, my mom’s friend bought one and I started writing about it online. And that’s when bigger pockets found me. They asked me to be a writer from them, and that’s what propelled it because it was not so much me buying the turnkey that got me out of corporate, which that helped.

But it was really everyone coming to me as suddenly kind of this. Turnkey guru because turnkey have been around for a long time, but I don’t think people were really talking about ’em in, you know, in mass quantities. Okay.

Jim Maffuccio

So on on that note, I gotta ask you a question cuz there’s, there’s probably. A small percentage of people that are listening that have heard you say turnkey now about 35 times.

Just in a

Ben Fraser

nutshell, its like a nutshell. What is turnkey? I mean, it’s almost Thanksgiving, so maybe she’s saying Yeah, exactly.

Jim Maffuccio

Turnkey everybody, not Turkey. Okay.

Ali Boone

I, Yeah. Well, and I cannot write anything about Thanksgiving, but I. Type Turkey. Like it’s all like, I’m like, it’s always an ending. Oh, don’t you know?

How was your turnkey dinner? Or like, It’s ruined me for Turkey . And it’s funny too because I feel like I eat, sleep and breathe turnkeys and I forget sometimes that some people have no idea what that term means. So, The turn. Turnkey is a turnkey rental property. The turn turnkey itself refers to the condition of a property.

So the metaphor is that you stick a key in the door, you turn it, and you’re making cash flow on day one. And what’s

Jim Maffuccio

required to do this is typically rehabed, if not new construction, tenant in place, property management in place. Yep. It’s truly, it’s as passive as you can get in real estate. Mm-hmm. versus investing in a real estate fund or something like that.

Cuz you. The buyer, the turnkey investor actually owns the home. Yep. And that’s about it,

Ali Boone

right? Yeah. For you to personally own the home, it’s about as passive, passive as you can get. Like if you do syndications or notes or whatever, that can be more passive for sure, but for you to own real property. And it’s definitely not 100% passive.

As I’ve said, I have eviction drama going on right now, and it does require your brain to be involved. And the most important thing is you doing due diligence. Because what I’ve learned over the years is that when we call. Passive and hands off and all that kinda stuff, which I’m one of the culprits of calling on that, that it gives people this message that they just never have to do anything.

It’s like that’s not good. But the turn turnkey itself, while it technically refers to the condition, like you said, it’s rehab 10 and some place property managers. When people are talking about turnkey rental properties, like you could own you, there could be a property right next to you that is a turnkey property cuz it’s in that condition.

But when you hear people talk about turnkey and turnkey rental properties, they’re most likely talking about the properties that come from turnkey providers. So these companies go out, they buy distressed properties in bulk. They rehab ’em, they place tenants, they have property management set up, and you the buyer are buying it from this company.

So they’re really just glorified flippers. They’re focusing on flipping to investors. But it’s very rare that I, while the term technically just refers to the condition, it’s very rare that I hear people talk about turnkeys that are outside of. Coming from these turnkey companies. So the strategy as people know it, is buying these properties from the turnkey providers.

You get the turnkey property and then you go forward on it. Got. And for the record, just to clarify for people too, I try and tell people this all the time, is that turnkey is only a method of buying a rental property. It’s not a method of owning a rental property. Once you buy the property, you own it just like you would any other rental property you can use, any property manager you want, you can hire and fire people like you are in charge of the property.

The turnkey model and the turnkey strategy is just a vehicle for people to be able to get rental properties a little bit easier. You know, if you’re not wanting to swing hammers and all that kind of stuff.

Ben Fraser

Yeah, so, so my perception, I’ve never invested in a turnkey. I’ve, you know, not been really involved in it.

So I was interested to have you on, because my perception kind of, maybe your perception of the Nicaragua opportunity is, it’s, it’s kind of similar to turnkeys for me, cuz it mm-hmm. , I think I’ve been on these lists where it, it, it kind of, I think is over marketed overhyped. Yeah. That it is. Completely passive.

And, and we all know real estate’s is a hundred percent passive. Even if you’re passively investing in syndications, you’re still, there’s still some active involvement that you have to, to have. Right? Yeah. And there’s, there’s kind of degrees, but, and then also some of the, the returns that, you know, you see projected and, you know, 15% cash on cash and.

Thing that my mind think is, is this is in slope, this is in the ghetto. Like this is, you know, you can’t get that. And, um, so, so what have you kind of learned, I mean, I know that’s not the case. You’ve had, you’ve been successful, you’ve done this, and so you like, help me re reframe my perception of it by, you know, what are the things that maybe you’ve learned along the way that.

Kinda getting into it is, is seeing these kind of fancy ads and these emails that are saying, Hey, come find the best opportunity since life spread. Mm-hmm. . Um, because there are some benefits of it, but to me it’s more a determination of. You know, margins would probably be a little bit less if you are buying term key, I would imagine, because you’re buying it from someone that’s already rehabbed, that they have to make a profit.

You have a property manager in place, which you’re paying, you know, a percentage of the, of the, uh, rents. And so you’re, you’re giving up some profit, but you’re trading your time Yeah. For the, those costs. Whereas you can be more active, do all those different parts yourself and make more money. So it’s really a dis, a determination.

How active do you wanna be? But the original question is what, what have you kinda learned along the way over the past, you know, several years that have maybe shifted your perspective on what are the things to look out for? What are the opportunities? You know, obviously Atlanta is a great example of being in a growth market, I would imagine is, is a way to, to really, uh, position yourself in success, uh, in this space.

Ali Boone

Yeah, I mean, kind of what you’re, What I heard that you’re asking, and correct me if I’m wrong, is basically like, like yeah, you say there’s an ad that comes across your inbox. It’s like passive income, 15% cash in account. Like what could go wrong? And one of the big questions that has come up over the years are our turnkey, our turnkey’s too.

Good to be true. Because on just exactly to your point is you get an ad about it and it all sounds perfect. It’s like what could go wrong? Just like with anything else, that’s absolutely not true and I could only wish that they were too good to be true. And the reason I told people that they’re not is because there are humans in the equation.

And I say that as long as humans are involved, things are gonna go wrong, period . It doesn’t. It doesn’t matter how good someone’s intentions are or whatever things go wrong, this is still real estate investing. And I think turnkeys over the years have been painted to some degree as this like picture perfect, hands off, passive opportunity.

So the two major things that I’ll say in response to that is, number one, the down there is a downside to ’em, which you kind of alluded to. It, is the typical mindset or typical, um, investment that investors are pitched is the value add deal. So you go by just the distress property for $60,000, you put $20,000 into it, so you’re only 80,000 in, and suddenly it’s worth a hundred or 120.

Everyone preaches that you should do that because that initial forced appreciation and that equity is a big part of your return. Yeah, that’s phenomenal. That’s great. But there are tradeoffs with everything and with a turnkey, you’re gonna pay market value. So instead of paying, you know, being 80,000 in and it’s worth a hundred or 120, you’re gonna pay that a hundred or 120.

So you’re not gonna have that initial equity. But that doesn’t mean it’s not gonna be profitable. That’s the big argument you’re gonna hear against turnkeys is most investors are trained to not buy anything at market value. But there’s, in my opinion, there’s a whole education with that of like, okay, yeah, don’t pay market value for something distressed, but you’re paying what it’s, it’s worth the market value.

So that’s the big complaint you’ll hear about turn keys, why they’re not too good to be. Then the second thing is where I’ve seen people go wrong and detrimentally. So in 10 years, and I kind, I kind of alluded to this earlier, is it’s not a hundred percent hands off. And I even have a turnkey ebook call, like turnkey rental properties.

The hands something to the hands off pro. I even call it hands off and I don’t remember the name of my own ebook . Um, but what I learned is people take that too seriously and so they buy this property, they sign on the do line, and they’re like, Oh, no problem. And the two things they don’t do is, number one, when you’re buying the property, you wanna do full due diligence on that property just like you would if you were going out on your own.

And the reason people don’t is because of that marketing ad you’re talking about saying, Oh, these people are gonna do all the work for you. Here’s what you’re getting. Here’s the picture, here’s the proforma. Dumb and people don’t realize that you need to check all of that on your own. Mistakes happen on performance, property can do it.

It just doesn’t always come as advertised. So number one, people completely forget to ever do or never think to do it in the first place of due diligence. And that can get people in trouble. Cuz once you own that property, It’s on you. Whatever goes on with it. So then the other one is after you own it, not being willing to stand up to the manager.

Cuz yes, the property manager should be doing everything for you, but ultimately it’s up to you because the property manager’s not perfect either. So if they start to suck at some point. You’ve gotta be willing to step in. Like right now I just, I have an eviction situation going on where the property manager’s doing one thing and I have to participate in the situation.

I can’t just sit back and leave it. So I think when people come into turnkeys, there’s this almost inherent mindset that everything’s gonna show up perfect and you don’t have to do anything because that’s how they’re advertised. And that is 100% not accurate. This is still rental, uh, real estate investing.

It’s still rental properties. It’s still owning properties. Things are gonna go wrong. It’s not even if they’re gonna go wrong, they’re gonna go wrong at some point. And you’ve gotta be willing to put your big boy or big girl pants on to do it. And I think turnkeys just come with a message for whatever reason that tell people they don’t have to do that.

Right.

Ben Fraser

What? What do you, Oh, sorry. Go ahead then. Go ahead, Jim.

Jim Maffuccio

Well, I was just gonna say, I think one of the big determinants, it’s one of the greatest positives of turnkey that can also be one of the strongest negatives, is the ability to invest in remote markets. Yeah, and I’ll cover the negative part first.

You know, we’ve, we’ve been, is in a marketplace there and I came from a marketplace in the Kansas City Metro where you can have really, really crummy neighborhoods within a half a mile of super, super great neighborhoods. And you can make anything look good and you can put a renter in even at a high great cash flow numbers.

But it’s, it, you know, you really have to study, This is the active part. You have to do your due. Know that that market’s good. That being said, if you have a, a, a market that you would love to invest in, and you just, how do I invest in, you know, in South Florida, how do I invest in, you know, North Carolina?

Well, if there’s a turnkey operator there mm-hmm. that knows that market that you trust and you’ve vetted the location, it, it is actually a way to. Quasi passively. Yeah. At least you don’t have to know the contractor and line up all that. And so you’re investing in the real estate. You’re not trying to, you’re not trying to be a flipper.

You’re not trying to make value add profit. You just want decent cash flow. Yeah. And really a placeholder because now you’ve invested in a market that you feel strongly is going to appreciate or at least hold its value. And what do you wanna do? Keep your cash sitting in a bank account where it’s burning up at 8% a year.

Minimal. Or have it have it parked somewhere. So to me that’s one of the, the great strengths of it is like I have access as long as I have a turnkey operator that I can trust in

Ali Boone

that marketplace. Yeah. Well, and to your point too, that people forget, like when people are comparing turnkey to value add deals, yeah, it sucks to pay market, but just if you do the distress route and the value add route, it’s not that black and white because with those returns come, comes.

And so you are taking on additional risk if you don’t totally know what you’re doing or even if you know what you’re doing. And at the point you’re talking about out of state, like what you’re talking about is that if you’re gonna try and rehab a property out of state, great, but there are added risk and there is a level of involvement and effort.

And in my case, sanity, I lose sanity way quicker than I lose anything else. And so like people, they, there’s pros and cons to every single strategy. Like there is no strategy. That I will say is wrong or bad or whatever. There is a pro and com to every single one, and you wanna look at those term keys, have comms also, but they have pros.

Value add is not all just like, Oh, highest returns, and this’ll be great. There’s a whole risk category that people forget to take into consideration. So sure, you know, everyone like it all looks good on paper, but if you go do that extensive rehab deal, especially if it’s outta state and something goes wrong, Guess what your returns suddenly, you know, those turnkey returns are suddenly looking real nice like, you know, again, even if everything goes as planned with that value add deal, how much time and energy and everything else are you putting into it?

Because it’s not $120,000 versus $80,000. You have to account for your time and everything and the risk you took on. It’s not a one to one comparison type of thing, and, but again, you know, I’ll have people call. And when I hear them talk, I’ll think that they have the ability and the interest to do value add.

And I’ll say, I don’t think you should buy a turnkey. And they’re like, Isn’t that what you sell? And I’m. It doesn’t matter. Like I want everyone doing what’s gonna work for them. Turnkey fit for a lot of people and I think they get a lot of people into real estate investing who may not otherwise get into it, but they’re not for everybody.

No worries.

Jim Maffuccio

Value back get, Most of our audience is truly our people that, that are pa looking for passive investment. They’re, they’re not, you know, you don’t learn to invest investing like a billionaire isn’t flipping houses. Okay. That’s exactly Billionaire. Billionaires aren’t rehabbing houses. So, but people that.

You know, some capital and they, they want to put that capital to work. That’s where passive investment

Ali Boone

comes in. So yeah, turnkey are phenomen. You know, I’ve had people, I’ve had some, I’ve had some people call me saying they have a full-time job and a family of five and they want wholesale, and I’m like, Do you like when, like, do you like borrow a magical week, a month or like when, When exactly would you do that?

And so that’s the, you know, the passive investors turnkey can be so good cuz not everyone wants a job in real estate investing. That’s my argument against the flippers and everything. Great if you wanna do that. But for the passive people, Why force the round peg into the squared hole or whatever, because you want passive, so do something passive.

It’s when you start swimming upstream and suddenly you’re taking on all this active stuff and you’re trying to be passive again. That’s where turnkey come in. Phenomenal, because it allows you to actually have that passivity. And I’ll tell you on normal years with my properties, I don’t spend five minutes on them.

I mean it’s of course it’s, you know, all the properties that go belly up in one year, which is what just happened. I’ve been, have had a very busy summer. But you know, for the most part it is pa. So as passive as it’s gonna get and even when things are hitting the fan, I’m managing all of it with my phone.

Like I’m not right. It’s been very rare that I’ve had to travel to do anything with my property that’s still pretty dag on passive. So, you know, people don’t say what they want about value add, but I love the passivity.

Ben Fraser

Well, I think too, back to the earlier point of being able to invest in other markets.

Yeah. You know, with a pretty low, you know, barrier to entry is a really big pro to, it’s huge turnkeys because a lot of people don’t realize, or maybe they do, but haven’t thought through that. Investing in your local market isn’t always the best strategy, right? I mean, Al you live in California, , it’s not, not a great cash flow market, right?

Yeah. So, you know, so you’ve gotta go find other markets and you know, there’s different strategies where you’re gonna emphasize cash flow, emphasize growth, appreciation, um, and so, but you can kind of. Almost modularly put together a portfolio based on, you know, market exposure, which, which markets you believe

Ali Boone

in.

Um, well, and the big thing to piggyback off of that is, yeah, there’s the initial decision. Do I wanna invest locally? Do I wanna invest outta state? Okay, great. And turnkey allow you to go outta state pretty easily. But the other thing that they allow you to do, which is really important, Is markets change all the time.

So back in those days when I started investing in Atlanta, I mean the price to rent ratios, the cash flow was crazy. I still have all those properties. I man almighty. But Atlanta now, if you try to invest, there’s no cash flow. So if you are investing out state and you have to have a team, you’ve gotta have the people to find the properties, you have to find the rehabers or the contractors, the property managers, all of that markets are always changing.

So not only to turnkeys allow you to invest outta state initially, but it allows you to change markets too, because. If you were to change markets on your own, you have to reestablish a whole team, which is very, I mean, anyone who’s been in this industry or probably any industry, it’s hard to find good team members and people who you can trust, especially if you’re outta state.

So when Atlanta lost all its cash flow, are you gonna go put another team together in another market? How are you gonna figure out those neighborhoods, how you’re gonna have to start all over? Where turnkey, the teams are already built in. And so really, instead of finding those teams, you just have to verify that those teams are good.

Just do a little due diligence, make sure they’re doing their job, but the teams are already put together for you so you can bounce markets, which means you can maximize your strategy like. If you bought in Atlanta, when I did appreciation, all my properties are worth three or four times what they were before.

That was again, during the crash. Dallas, for example, was a big cash flow market prior to 2014 and 14, I think it was 14, hit a huge boom and it’s a completely different market now, but, so it’s like if I taste Kelly,

Jim Maffuccio

that that brings up a. A point, so talk to, cuz I’m sure there’s a lot of people wondering then like, well, it sounds like I missed the boat.

You know, you’re talking about properties that have doubled, tripled, and the cash flow’s not there anymore. Yet you’re still in the turnkey provider and coaching business. So give some hope, give some hope to people that are just, they’re just getting the email and their inbox today and they’re like, Oh crap.

Did I miss it?

Ali Boone

To explain why they do, I, I have people reach out and they’ll say, Well, what are the cash numbers on your properties? I, trust me, you

Ben Fraser

don’t want, you don’t wanna, you don’t wanna

Ali Boone

and you know, all of that to say that’s your motivation. If we do go, if for some reason another crash were to happen, buy real estate, it’s very beneficial.

Um, but we’re not there anymore. And what’s happened over the last 10 years since the crash is my experience the last 10 years is that anyone could be an investor. Everything was cheap, interest rates were low, everything was only ever going. Cash was king. The whole thing, it was so easy to be an investor.

It was like a padded product, and now we’re not there anymore. We’re back to the pre-crash type of dynamics, whatever. And there’s a lot of people out there who are essentially jaded about the last 10 years cuz they’re like, Well, but I can’t get that anymore. I can’t get the same cash flow. I can’t get that 15% cash on cash return.

And I’m here to tell everyone, I’m trying to shout it from the rooftops is, that was all a bonus for from the beginning of time. People have been incredibly. Uh, financially benefited by real estate. It didn’t. That crash was very specific before that people still make gobs of money in real estate. So it’s just a different outlook of how you make money.

Like, I won’t go into the details unless you guys want me to, but like a rental property, for example, makes money in five different ways. And so it’s not just the cash flow numbers. Yeah, I got great cash flow on my properties. Yeah, they appreciate it. But again, that was like bonus levels of appreciation.

If you buy a property now. Rental properties are long term holds, period. People have a tendency to wanna think about more short term, like flipping or whatever, or, Oh, like this eviction I’m going through now. Like I could look at that and be like, Oh man, I’m gonna lose so much money this year on this property.

I should sell it or I should get out of it. No, anything bad that’s ever happened on my property. These are long term investments, and over time those profit centers work so hard at getting you returns. It puts this whole like last 10 years. I don’t wanna say it a shame cuz it’s, I was actually very nice.

But it is absolutely possible and likely that you’re gonna profit plenty off of properties now. And with interest rates going up, people are like, Well I’m gonna hold off and see if we have another crash. I hate to tell you there’s not a crash on the Verizon right now. And so the longer you hold off, the interest rates are gonna keep getting higher.

It’s a long term hold. It’s a big pictured thing. It’s not individual detail by individual detail at all. So yeah, you miss the heyday. Honestly, I feel like I missed it if I knew everything I knew. Now, back when, when I started buying. I would’ve done it totally different. We’ve all, we all missed it to some degree, don’t you worry.

Not alone. So

Jim Maffuccio

maybe the, maybe the person who, maybe the guy who’s or gal who’s the aerospace engineer right now that really wants the exit, wants to get out of that. Maybe that kind of a window where you had this incredible appreciation would’ve been that, you know, moment and window of opportunity where if you actually picked up a portfolio of turn.

Properties and, and the cash flow’s phenomenal. And maybe they refi out some of that and now they got some savings, some war chest, Hey, I’d actually facilitated you making the exit from the, from the workplace quicker. But to your point, and I, I’m a believer in it cause I’ve been full-time. Self-employed in the real estate world for, you know, 36 years.

So I’m a believer, I’ve been through the ups and downs and I, by the way, I exited an engineering career too, and I don’t know why I became an engineer. I was a square peg in around hole the whole time. But for six years I did that and I jumped out and did, did real estate and I’ve been doing it ever since.

So I will say yes, it’s been, it’s a very good place to be. And it’s a very broad topic. Yeah. And, and rental real estate, I mean, has probably created more wealth to the, to the, to. Would’ve been average person. Uh, yeah. I mean, there’s people that found tech companies and have patents and things. There’s other ways to get, get extremely wealthy, maybe faster, but for the long haul.

You just can’t, it doesn’t get better. They’re not making any more of it, you know?

Ali Boone

So, and I think really what it comes down to, and what I’m really trying to teach people now, I’ve said it for the last 10 years, but I didn’t realize how important it was until right now, is really having people get educated on how properties really make money.

I say rental properties is, that’s what I work with. If you know, flipping and all that’s kind of different, but rental properties, how they make money. Is so key to understand how to invest in them. Because right now what I’m seeing happen is there’s a separation. All of those people who are kind of pretending to be investors for the last 10 years are dropping off because now you are forced to understand how properties actually make money in order to go forward.

Because you have to understand that. Cause otherwise you’re gonna be like, I don’t see how it’s making money. But they totally are like one of the big ones that I discounted over the last 10. Our rent increases, the rents on my properties have increased so much that my cash flow margins have gotten stupid.

And that’s true. That doesn’t matter if you bought in a crash or not. The rents didn’t crash during the crash. So my properties were rented at perfectly normal amounts, and now fast forward 10 years, the cash flow margins I’m experiencing are crazy. And I did not think about that until the 10 year mark.

And so now looking back at the 10 year, look back on the whole thing. Never mind the appreciation because of, you know, that was crash based and all that kinda stuff. But I mean, the tax benefits inflation, right now, if you have a fixed rate loan on rental properties, you’re beating the pants off inflation and then the rent increases.

Like that’s what’s required now to be an investor is to really understand, because when you’re willing to get that knowledge and understand those things, You will profit? Absolutely. Hands down. No question in my mind.

Ben Fraser

I love that. So how, how has your approach kind of shifted, you know, over the past 10 years and in this current environment?

I mean, let’s bring it to the present because it is a different environment now. I mean, where we stand right now, the recording this podcast, mortgage rates, you know, just high sixes and ju just clip 7%. And so it, it is more difficult to make deals, cash flow, but to your point. You know, even 7% debt, uh, over the long haul and you’re paying down principle.

You can, you know, create more margin over time through rental increases. You know, if you can eventually go full time into real estate investing even passively and get the real estate professional, uh, status. Uh, the, the, the, the tax benefits are incredible. Talk about how you’re, how you know, personal strategy, but also how you’re coaching your clients to what types of markets should they be looking at?

Where’s the opportunity right now? How are you, how are you, or where are you seeing the opportunity in turn keys in the current environment with interest rates being where they’re at and potentially going up a little bit.

Ali Boone

Yeah. So the two things that I’m really telling people, it’s really all about cash flow.

Because when turnkey start getting marketed, everyone was saying cash flow is king. And I’m a little bitter towards the messaging because it’s put this idea in people’s head, like the 1% rule, for example, if you’ve heard that, everyone’s like, I have to have a property that meets the 1% rule. Oh, okay. Well there’s a lot of problems with that message.

Like it’s, it’s um, everything. Turnkey were pitched as cash flow properties. And so everyone’s focus was on the cash flow. Okay, cool. So now like you said, the cash flow is not there like it used to be. So what do we do? And the two things that I say to that are, number one, like I was talking about, the rent increases.

The cash flow today is temporary. When you get the rent increases and now you know we do. I very much acknowledge that. We’re starting to get into more speculation cuz it’s like, wow, I assume the rent will increase to this and here’s then what be my return. But what if it. It may not. Like what if it doesn’t?

That is a valid question. But rent increases over time with inflation appreciation. Everything else, the cash flow today is not gonna be the same cash flow in 10 years. And that’s where it’s important to remember this long term strategy that cash flow is gonna continue to build because I can give you a quick example.

One of my break even properties, this is not a turnkey, it was my actual house was, my mortgage was 9 95, the rent was 9 95. So technically it was negative after maintenance and vacancy and all. Fast forward. The mortgage on that has only gone up with escrow changing to 1100. We just rented it out for 1800.

So that’s the difference is that your fixed expenses are not gonna get as hot. They’re not gonna grow at the same exponential rate as the rent increases. So, The cash flow today is temporary. That’s message number one. Number two, going back to this, the ways the rental property profits, it’s in five different ways.

Cash flow, appreciation, tax benefits, equity bill via mortgage, pay down, and hedging against inflation. And I won’t go into the details of all of those, but appreciation, for example. Five, 10 years ago, you could invest in a sketchy street in a sketchy property cuz the cash flow was so high and the property price was so cheap it didn’t really matter if it appreciated later or many things happen, like cash flow was king and you had so much cash flow that it kind of made up for the other things.

So now if you picture like the five I, I wish I had, oh, there’s five, like a five thing bar graph of the different profit centers. Appreciation is now becoming more important. It was always a bonus before, but because the cash bar has come down, You wanna buy, This is my personal philosophy, you don’t have to listen to me, but it’s a lot more important for me now to look at the bigger picture of a property.

What neighborhood is it in? Is it in a growth area? What market is it in? Because from that speculation perspective, which is what appreciation is based off of, I want to ensure that at this property has the best chance. To increase in value for two reasons. Number one, property value. Number two, rent increases because I don’t have as much cash flow as I had before, I want the other profit centers to make up for that.

This year, inflation, for example, that bar for profit has gone tremendously up because of how high inflation has gone. So I’m looking now, before when I brought properties, I was. Good cash flow done, sold and it’s cute property. That was my criteria, , and it worked. But now cash and cute. Cash flow and cute, that’s all.

I was like a girl. I can bring some kind of girl into this, but now it’s because the cash flow is lower. It’s important to look at the bigger picture. Again, circling, coming full circle back to you’ve gotta be a real investor and understand those other profit centers and what things are gonna contribute to those other profit centers to make up for that cash flow.

Ben Fraser

We, we could probably do a whole part too on this topic that I’m gonna ask you, but just the, the five minute version. For someone that is new to turnkey rentals, what are the biggest pitfalls in the due diligence that you need to be checking when you’re looking at, at a a property?

Ali Boone

The biggest pitfall in turn, keep due diligence, is that people don’t do it.

number one, do it. Message number one, do it. Uh, . So the big things, the two major things that you want, well, 1, 2, 3 major things. Let’s go with three. Number one, the property condition. You’re gonna get this property advertised. It should be fully rehabbed, yada, yada, yada. But it’s up to you to ensure the condition of the property and make sure that there’s no looming and maintenance items.

So get a third party property inspection. Have the inspector go out, identify everything, you put all the recommended repairs into a list, submit it to the provider, ensure that those have been fixed. Cool. And with turnkey in particular, you’ll see it in the marketing that all major items, if you are familiar with the term CapEx or capital expenditure expenditures, this is why I call it CapEx.

Anything that is really expensive. Roof plumbing, hot watering heaters, major appliances, HVAC systems, that’s considered CapEx, which is. More than a general, um, repair. It’s a big ticket item, and turnkey. All of those items should be brand new or have at least 10 to 15 years life left on ’em, because what you don’t wanna do is buy this property and then the entire HVAC goes out.

The whole idea is to save you that money, as long as you know, at least for another lifetime of those appliances. So, property condition number. And I’ve even had a property where I thought everything was checked and then it turned out the heating unit was not, it was $3,500. I was like, Ouch. So if property condition is number one, number two, absolutely verify the numbers on the proforma.

I don’t know any turnkey provider that intentional. Well, that’s actually not true. Some people try to fluff number. I’m like, I was about to give way too much credit there, and none of the turnkey providers I work with would ever intentionally mislead you on a proforma. But sometimes mistakes happen.

People are moving fast. Maybe they put the wrong property tax amount, whatever. Maybe the rent estimate’s not quite right. So you wanna ver, there’s very few numbers that you can’t verify. It’s really only estimates for maintenance and vacancy that you can’t verify. You can go to the tax assessor’s website for the property tax.

You can call and get an actual insurance quote. Make sure all of the numbers in the proforma are what you believe to be true and you have verified all of them. Don’t take anyone’s word for it. And then the third thing, I almost left this one out, but this one’s critical, is property management. Because once you own that property, Property management, no pressure is going to make or break your investment.

And I don’t say that lightly like it. They will destroy your investment if they’re allowed to. Like it’s terrible. I mean, well, excuse me, it can be terrible . And so you want to be incredibly confident on which property manager that you use, and that may change over time. I’ve had really good managers suddenly not be very good, and I’ve had to fire them and get a new one.

But turnkeys come with property management and it’s up to you to talk to that property management company, and I recommend you talk to a couple other ones because ultimately you own this property. You should choose who you feel most comfortable with because I’m not putting guarantees on any property manager that comes with a turnkey and you shouldn’t either.

So you wanna make sure that the property manager who is about to manage your investment, you feel really good about. So, You know, there’s other things to do. Due diligence on there’s, you know, details of how to do it in more depth. But if you can at least hit the property condition, the property management and the proforma numbers, you’ll have bravely decreased your risk.

Because those three things are the three things, hands down, that I see people getting the most trouble with.

Ben Fraser

Very cool. Okay, La last question. This one was in your bio, and I’m a little curious. You said, Oh, the ultimate goal is to one day challenge Tim Ferris at a lifestyle design dual. What, what the heck does that even mean?

Ali Boone

Well, I will admit, I wrote that, uh, a few years ago when I was a much more adventurous person. Uh, when I first read the four Hour work Week, Tim Ferris, I was. Is he my spirit animal? Like he reminded me, a lot of me, like, you know, like I said, I was like, Oh, what could go wrong with my first investment, a third world?

You know, I like doing rowdy stuff. I like adventurous stuff. And he has always been the exact same way. And my goal when I got into real estate and left corporate and started my company, I wanted to be the female Tim Ferris. And so over the years, you know, I did all the adventurous stuff and I was not trying to copy his life, but I was kind of doing my own version of it.

And I. I’ll challenge him. You know, he’s all popular for this. I, I can, I can match that. No problem. I admit in, as I’ve gotten a little bit older, I’ve calmed down. I think actually Tim has two from the people I know who know him, he’s kind of calmed down, so maybe we’re still kinda, you know, uh, on par with each other.

But yeah, that was always kind of, cause my big thing. Real estate is great, but for me it’s a vehicle. And the vehicle it’s for is lifestyle design. And what I mean by that is I wanna live my life how I wanna live my life on my schedule, on my terms. Can’t imagine why I couldn’t work for a boss in corporate.

And I wanna do the things that I wanna do. I don’t wanna wait till I’m 65 and retired to do all that. I wanna do it now. And even though I have my company and I work like a ban, I do it on my schedule. I, if I’m gonna go do something during the day, I just go do it and I work later, or I can work where I want to.

I literally am living how I want to live. And so that was my inspiration with Tim Ferris is he was really kind of saying the same thing. And that’s kind of my underlying motivation for real estate is to allow for that. You know, people say they want financial freedom. It’s not actually financial freedom.

They want, they want time freedom and they just need the finances to do it. And so that’s kind of the, that’s where I felt like I collect with good old Tim.

Ben Fraser

Good old Tim. That’s awesome. Well, I thank you so much for, uh, for sharing your wisdom and knowledge on this space with us, and super fun to have you on the podcast.

Thanks so much for coming. Yeah,

Ali Boone

thanks for having, Oh, wait, remember I have a gift for everything. Oh my

Ben Fraser

goodness. I almost forgot the, I almost

Ali Boone

forgot too. I hope you can

Ben Fraser

remember the name of this book,

Ali Boone

So, a couple years ago I did put out my first book. It’s called Not Your How to Guide to Real Estate Investing Life Lessons On Hacking Your Mind Before You Hack Your Wallet.

I talk about the real estate investing industry, a lot of what we talked about today, how to make it in it, but also how to, you know, bring that lifestyle design component into it. So it is for sale on Amazon, but I set up a link just for your folks. So my company’s name is Hipster Investments. So if you go to hipster investments.com/billionaire, just double checking my link here.

You can get a free digital copy of the book if you’re like me and you have to hold something physical in your hand. There’s an Amazon link there also if you want the paper bag. But that’s the best way. I love hearing from people. Reach out any time I contact information’s in there. So go get the copy of the free book and say hi.

Ben Fraser

Awesome. We’ll put that link in the show notes too, to make it easy. And, uh, thanks so much for, for coming out and giving the freebie to our listeners. You bet. It was so fun to be on. Thank you. A thank you.

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