FOLLOW UP WITH YOUR INVESTMENTS

Two brothers-in-law, Steve and David, invested with our company. Steve was a highly engaged investor who was in contact with us monthly. David, not so much. Steve was also excellent at managing his manager—meaning that he always examined his monthly statements, and if we made an error he was going to catch it. I liked that about him. It showed that while he may be an active investor, his turnkey portfolio was the key to his vision and he stayed on top of it.

I was personally in contact with Steve every few months as he and I had become friends. One day, during a conversation, Steve mentioned to me that David wasn’t happy with his investments.

“David just got a $250 maintenance bill,” Steve said. “He’s really upset. He says he doesn’t think turnkey is a good investment for him, and he’s thinking of selling everything.”

I promised Steve that I would look into it and find out what was going on.

And I did. When I pulled David’s records up, I found that he owned 14 properties with us—and he knew almost nothing about them. He never took our monthly phone calls. He was very poor at responding to emails. He hardly ever spoke with us throughout the year at all. I assumed after looking at his track record of communication that he was probably not looking at his monthly statements either. It was a safe assumption.

David was making an impressive 15.5 percent return on his money every year. You don’t find investments like those very often. Anyone would jump at the chance to take assets performing that well off his hands. The $250 bill he had gotten was a drop in the bucket when it came to the big scope of his portfolio.

But David had no idea how well he was doing because he never followed up. He had put himself in a position where he was ready to drop thousands of dollars in profit over a $250 footnote.

And that’s only the beginning of why staying engaged with your turnkey portfolio is critical to your long-term success as an investor.

PREPARE TO ENGAGE

The term passive investing often gives people an incorrect idea of what turnkey real estate involves. Passive in this case applies to the way you acquire and build a portfolio. It doesn’t describe the process you use to manage that portfolio once you own it.

In fact, the opposite is true: once you have your portfolio, you need to be consistently proactive in following up with it. This is a key step in the Turnkey Safely System. You always have to check the returns and economics of your investments. Paperwork, insurance, tax statements—these are just a few of the things you have to stay on top of as a turnkey investor over the long term.

Why? Even the best companies out there are subject to human error. That’s why you should take nothing on faith. You can’t afford to assume that you weren’t double charged for a management fee or a maintenance item. You can’t assume that you received everything you’re supposed to receive each month. You can’t assume that you have the best insurance rate or that your property taxes shouldn’t have been lowered. These are small items, but they add up to a very big picture. You, as the investor, have to take a look at each little way you can squeeze out a little more return. Just a once-a-year checkup can make a world of difference.

Not only should you keep an eye on where you can save, you have to check your statements and take the calls from your turnkey partner, even if you think everything is going well. When you take the time to follow up on a regular basis, you’ll find that your comfort level is much higher and the stress level of owning a $100,000 property from a thousand miles away is erased. Not only will you sleep better at night, but you’ll empower yourself to make good decisions about the long-term goals of your personal turnkey revolution.

You won’t want to throw out investments that are giving you 15 percent returns, even if you do get a $250 maintenance bill now and then.

In this chapter, I’ll take you through the checklist of how to follow up with your turnkey investments and show you why communication with your company can be a make-or-break factor in your long-term success.

THE FOLLOW-UP CHECKLIST

Your turnkey follow-up checklist is a process that works on three levels: things you need to follow up with on a monthly basis, a yearly basis, and an ongoing basis over time.

Monthly follow-up

On a monthly basis, you need to review the rental ledger that your management company sends you.

Your ledger should include rent collected for the current month, rent collected for previous months, management fees, and maintenance issues. When you look at the ledger, you’re checking for any missing rents, duplicate charges, or overcharges. As I stated before, this is a people business, and human error is involved almost daily. There are a lot of moving parts, and small $50 charges add up over time. You have to pay attention to the invoices, maintenance bills, and management charges. This takes a few minutes each month.

Your turnkey partner should also call you once a month to update you on your investment. You need to make sure you take that call so that your company can update you on anything unusual that’s going on with your property. This is also your opportunity to ask questions about your portfolio. Having this live communication with your turnkey partner is one of the most critical parts of managing your investments successfully. I’ll explain this in greater depth later in this chapter.

Yearly follow-up

You also need to review certain aspects of your investments on an annual basis.

I explained why this review normally includes seeing if you can reduce your insurance costs and taxes. It’s important that you don’t forget taxes and insurance. These are some of the only fixed costs you have when you invest in turnkey, so it can be easy not to think about them, but they do matter. Even if you have to change insurance carriers to get a lower rate, it’s worth it, because anything you save on insurance and taxes flows straight to your bottom line.

Your turnkey partner can usually help you with both insurance and taxes. An established company has leverage in these areas because of its size and track record. For instance, Memphis Invest was managing more than 3,000 properties in 2015. Our houses are managed well, with few vacancies and very low vandalism rates—things that are music to an insurance company’s ears.

We approached a national insurance provider and worked with it to create an insurance product based on our portfolio. That insurance program helped drive down insurance costs for owners by over 20 percent. Now, not everyone uses our insurance, but there is an option, and if it saves an investor money and increases his return, then our size and record helped us to improve the investor’s experience. That is what you are looking for: a company that can use its leverage to improve your experience as a real estate investor.

Your company’s scale can help you in the tax area as well. Again, to take Memphis Invest as an example, if half of our 3,000 owners wanted to challenge the values of their properties to lower their property taxes, our company would be able to negotiate a low fee for a local attorney to handle that for them. In almost all of those scenarios, the attorney charges only if she is able to reduce the tax percentage, so our clients don’t even need to pay that fee if the challenge isn’t successful.

Don’t get complacent about what seem like small charges such as insurance and taxes, because they can save you thousands of dollars in the long run. Too often, real estate investors pay close attention to rental amounts and interest rates, which are very important. But, the often-overlooked expenses need to be checked on a regular basis as well. Every year, look for ways to save on your fixed investment costs, and take action if you have to.

Ongoing follow-up

In addition to your monthly and yearly reviews, you also need to manage certain things about your investments that change over time. Specifically, you want to be aware of tier pricing options with your turnkey company.

Tier pricing is common to most management companies. The company will charge you certain rates for specific services when you have one or two houses with it, but offer you discounts on those same services as you add to your portfolio. For example, the management fee for one house may be 10 percent, but it may drop to 9 percent when you own five houses, or 8 percent when you own ten. Or the company may waive its standard convenience fee with a resident to extend his lease. These fees are often waived or lowered for an investor with a larger portfolio.

Find out what your turnkey partner’s benchmarks are for tier pricing, and keep tabs on them. If your partner doesn’t have a set program, then volume purchasing and management may be items you can negotiate. Most major companies are going to offer tier pricing discounts. Do you hit the next tier and start getting discounts when you hit five houses? Seven houses? Ten houses? Once you reach those milestones, it reduces the cost of your whole portfolio. Just like staying on top of your taxes and insurance, anything you save here will flow straight to your bottom line.

You never want to throw your plan out the window just to hit tier pricing benchmarks. However, if you’ve been following up and you see that you’re not stretching yourself too much, it’s okay to push to get to the next milestone a little earlier to drive down your overall cost.

KEEP IN TOUCH

You went through a lot to find and choose a good turnkey partner for your investments. The follow-up stage of the process is where you hold that partner accountable for all the things it agreed to do for you when you signed on with the company.

I explained in Chapter 6 why choosing a good partner is a make-or-break factor in your success as a turnkey investor. You may be investing in a property hundreds or thousands of miles away from you, over which you do not have direct physical control. You cannot afford to accept bad management, period. Staying in touch with your company on a regular basis is how you verify that you’re getting the service you need and deserve.

Your turnkey company should make it easy for you to stay in touch. It should have an online portal where you can print your statements and see what’s going on with your account in real time regarding rents collected, bills, and notices sent to residents. Remember the phone call I told you to ask about receiving? Not only should you receive a phone call every single month, but that phone call should be from the same person each time so that you can build a relationship with someone who understands your specific needs.

Almost every time we have an issue with a client, it’s just the result of poor communication. And on the flip side of that coin, the vast majority of our clients who are happy with their investments have terrific relationships with their customer service contacts in our company.

When you consistently engage with your turnkey partner team members, they will fight for you. At Memphis Invest, our customer service team members come to us on a daily basis and say, “I just got off the phone with this client, and an issue came up with his property. I’ve been speaking to him every month for the last year, and I’d like to help him out.” The rep asks if she can waive a maintenance fee, or if the company can cover an unexpected cost.

It goes beyond management. Things happen in our clients’ lives every day: babies are born, people get married, people pass away. When those events occur, our reps come to us and say, “I’d like to send flowers,” or “This person just had a baby. Can we send her a onesie that says ‘future investor’?” These little things bring great joy to us as a company, and they happen only because of the bond we build with our investors.

So, for your own satisfaction, always pick up the phone when your turnkey company rep calls you each month. Talk to your partner. See how things are going. Your level of trust and comfort with your company will rise every time you do.

As long as you follow this process, from setting a strong vision before you start to keeping in touch with your company after the investments have been made, you will set yourself up for the best possible experience investing in turnkey real estate. And once you have this system in place, it can expand as your vision does. I’ll explain the limitless potential of the turnkey revolution in the next chapter.