COVER STORY
RETURN ON RENTALS
ago, we could hop online, contact local bird dogs, dig up deals by the dozens. Now, it’s a little harder. You have to think a little farther outside the box. “We only operate in markets where we have 100-percent confidence. If we don’t have it or something changes our outlook, we move somewhere else.” Given that Dallas and Fuller per- sonally vouch for every property they sell, this level of caution and measured consideration is not surprising. Interestingly, both founders are con- stantly on the lookout for signs in any market that a ceiling is approaching in home values, despite their model focus- ing on cash flow rather than apprecia- tion. Many turnkey operators, including the Return on Rentals founders, refer to appreciation over the short- or long-term as “the cherry on top” of any turnkey rental purchase. This is because as prices rise, inventory tends to become tighter across the spectrum, particularly at the “starter home” level, which is where most turnkey rental properties reside. As long as the properties are cash-flowing, many investors will sacri- fice buying at a deep discount in favor of reliable monthly income. Return on Rentals, however, prefers to snag both for investors whenever possible. “The key to getting around that issue and keeping our inventory available to our investors is creative purchasing,” said Hall. “For example, we have a great rela- tionship with the land bank in Detroit, which lets us buy direct and for less in a market that we expect to have a long run remaining.”
WHEN GARRETT FULLER AND DALLAS HALL, co-founders of Return on Rentals, talk about their company, the first thing you hear is “no limits.” Immediately thereafter, the two enthusi- astically delve into the near-obsessively organized process they use to purchase, rehab, lease, and sell hundreds of turnkey properties annually to inves- tors building their portfolios though cash-flowing, turnkey rentals in mul- tiple markets around the country. “We cast a very large net and we are clock- work,” said Hall of the process, which the two built together starting in 2010. “We have a very simplistic model. We have the same metrics, the same rehab standards in every city, and we have boots on the ground in every one of our markets,” he continued. “It means that we can move a very large quantity of properties to real estate investors both within the United States and interna- tionally. We’re meeting the demand for turnkey, cash-flowing rental properties in very competitive, attractive markets and providing investors access to the deals that they really want to buy.” WHERE IT’SWORKING Return on Rentals currently has a presence in three major markets and those markets’ commuter suburbs: Detroit, Michigan; Cleveland, Ohio, and Buffalo/Niagara Falls, New York. “We are constantly creating new avenues of acquisition that allow us to continue generating the volume of properties our investors expect from us,” said Hall, noting that the company has largely moved out of its fourth market, India- napolis, Indiana, thanks to oversatura- tion and inflated pricing. “We are always working to generate new, creative networks that help us find better and better ways to buy properties at a discount,” added Fuller. “The housing market is constantly evolving. Four years
plague turnkey providers. “There are a lot of turnkey companies out there that are vertically integrated, both selling the properties and running the companies that manage those properties for inves- tors. For me, though, that model simply does not make sense,” said Hall. Hall and Fuller believe property man- agement, like property acquisition, is best left to the experts. “Property man- agement is a very tough business. I have a property manager for my investment properties and I recommend property managers unassociated with Return on Rentals for my investors because that way there is no overlap of interest. We are for our investors. Period. If they’re not collecting rents, then we don’t have a business model, and that’s the end of the story,” explained Fuller. Another benefit of staying firmly in one lane is the amount of investor support that the company can offer its investors after they make a purchase. “The property man- agers we recommend are uncontrolled third H all and Fuller believe that successful investing hinges on consistency. Part of that “clock- work” relies on all parties in a transaction being clear about a couple key definitions. TURNKEYRENTAL: a real estate investment purchased rent-ready, often with a tenant already in place and paying rent. CASH-FLOWING PROPERTY: a property that is generating regular income at time of purchase.
ESTABLISHING CLEAR DEFINITIONS
Hall and Fuller credit much of their success in the turnkey industry to their dedication to sticking with the parts of the process they are good at and avoid- ing the many distractions that often
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