Hello friends, and welcome to another episode of Ask Marco where I answer your investing related questions.
You know, I love the questions I get, unfortunately, I get so many of them. I’m having a hard time keeping up, but I do plan on booking an afternoon or a day just to record a whole bunch of them all at one time. So if you’ve submitted a question and I haven’t gotten to it yet, and I know I have some that date back about a month or so ago, a, I apologize in advance and I will try to get through all of them. So just hang in there. Today’s question comes from Jebrelle and he says, Hello Marco. I love your podcast. It provides so much actionable content for all levels of investors. My question is purely seeking your opinion. I have purchased a turnkey rental with Norada in Jackson, Mississippi and a property through another provider in St Louis, Missouri.
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I listened to a lot of podcasts and read a lot of articles and books. I often hear how using turnkey as your strategy is similar to quote riding a bike with training wheels. I’ve heard others say how an investor can’t get the equity capture, which is true and how that can slow down his or her progression. Okay, so I’m going to clarify that here in a minute. He says, I’m a w two employee. I teach middle school and I’m a part-time real estate agent in North Carolina. I have a wife and no kids, but I do value my free time in the evenings, away from work. I’ve been struggling with the idea of using turnkey throughout my investment journey or eventually stepping away and doing some more active things like the bur method and for those listening, the bird method is spelled BRRRR and that simply is an abbreviation for buy, rehab, rent, refinance, and repeat.
It’s, it’s an act of very active approach to real estate investing. He goes on to say, I really enjoyed working with one of your counselors throughout my buying process. It was so easy. That’s the thing. Turnkey worked so well for my lifestyle right now, but I’m torn between the potential equity capture and acceleration of my portfolio by using more active methods. I feel like a squirrel in the middle of the street not able to make up his mind so I’ll close now. Your input will be greatly appreciated. Thank you. All right. Jebrelle great question. Well very well-articulated so turnkey investing works very well for a lot of people. It is not ideal for everybody but it does work for everybody. It really is going to come down to two things. I think one are your expectations and two is what is your strategy? Are you a passive real estate investor and want to build it as quote unquote easily and passively you’ve done in working with us and your investment counselor here or are you a more hands-on slash active real estate investor and the, and that’s really the given the take there.
Do you want to take a passive role in investing or an active role? If you want to take a mostly passive investment role, then work with your team or work with a company like ours to build your, your portfolio as passively as possible, whether they’re rent-ready properties or turnkey properties. And I’ve talked about that in a previous episode. The flip side of that is if you have the time, the willingness, the desire, the resources, um, a certain level of education or, or understanding or knowledge the capital and the risk tolerance to be involved on the active side, whether it’s the bird method or something else, then try it out or maybe just go down that road. Now I, I will say this with strategies like the burn method where you’re buying, renovating, renting, refinancing and repeating that process. You need the right team and you definitely need to be in the right market or submarket.
So the numbers work and you certainly can’t make this work in a market where you have a lot of competition and or low inventory. The other thing with active methodologies is they don’t always work out the exact way you want them to. Now, I’ll be honest, I am doing a couple of, uh, bur method investments right now as we speak. And that involved having the right team in the right submarket. It’s a tertiary market, so it’s actually a very small market, uh, and being able to find the right distressed properties where I can go in, acquire it, put in enough capital to renovate it and then refinance it and, and try to pull out as much as I can, if not all of it. So truth be told that in years past, and this goes back, oh, probably two, three years ago, I’ve done some renovations with the intention of keeping those properties and they didn’t turn out.
And the reason for that is they took longer than expected. And I was into it for more than I expected it was. It was a larger outlay than the original scope of work. There were foundation issues. They were, there were issues in the sewer line. And so that had to be fixed, dug up and fixed. Um, and these things take thousands of dollars. So all of a sudden the equity that you think you’re going to have when all is said and done is no longer there. And that’s the risk you take. And I’m not saying, again, it’s not necessarily a bad thing, it’s just what is your strategy and how much risk and time do you want to take. Now, if you’re, you know, the type of person that you enjoy, your free time, like you said in the evenings, away from work and you struggle with the eye moving away from the idea of investing passively in turnkey rentals, then you know, that’s the journey that you will take and decision you need to make.
So the fact is is that the more active you are, theoretically, the more equity you should have in the property. Assuming that you’ve bought the property right, scoped the work properly, you have the right team to execute on that scope of work and get it done in a reasonable amount of time. So that way you don’t spend more than you have to in terms of interest and carry costs. And when all of a sudden done, you can keep that property or refinance that property with the equity you expect to have in it. Sure. This will help accelerate your equity growth from the outset, but it doesn’t necessarily mean that you’re going to have a better deal than some of the turnkey rentals that you’re gonna end up buying with a more passive approach. In working with a company like ours, I’d say the bottom line is this Jubril, if you have the time and the inclination, the knowledge, some working capital and the right team of people in the market that you can do a more active approach like the bird method or something similar, then give it a try and just be prepared and educate yourself as much as you can.
And there’s a lot of good information out there as you’ve discovered to be able to do something like that and see how it goes. Uh, you know, if, if, if you think you can do it, then you may be very successful at it. But if that’s not the direction you want to go, and that’s what your head and your gut are telling you, then maybe that’s not what you should do. So think about that. You know, that’s just really a decision you need to make and a lot of it is a personal decision, not just a business decision. So I hope that helps. If not, send me another email and I will dig deeper and clarify. That’s it for this episode. If you have a question about investing or finance or real estate that you’d like me to cover on the show, just go to passive real estate investing.com. Click the ask Marco Button. Submit that. If you haven’t already subscribed, please click that subscribe button. Help us share the show, share this with your friends. Leave us a rating review on iTunes. I greatly appreciate that and you guys are awesome. Thank you for listening and I will see you all on the next episode.
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