COVER STORY
RETURN ON RENTALS
working together, they were colleagues at a large turnkey company based not in the real estate business, but rather in what Hall refers to as “the seminar busi- ness.” The company that employed them presented turnkey opportunities to real estate investors in an educational setting. Over time, they worked together with their team to build up that company’s property division and eventually created Return on Rentals as an independent company. “It was so important to me to have control of the assets and be able to personally vouch for every piece of product that was sold,” explained Hall. “I had to have my own company so we could raise money, build teams, and scale our networks.” Hall and Fuller agreed at the outset that everyone working within their company and with their investors would have to have skin in the game in order to create and maintain a relationship with their new company. “It’s not just for our needs, but for the clients’ needs as well,” Fuller said. “Everyone is fully vested, and no one is middle-manning deals. We’re fully committed to the success of our clients and everyone in the company understands that their success and the business’ success hinges on client success.” This philosophy has led to a unique brand of what Hall and Fuller refer to as “post-settlement care,” wherein Return on Rentals helps hold all parties involved in the transaction account- able and keeps things transparent even after a property has closed. “When you run a high volume, there are going to be issues from time to time. Not all tenants are perfect. We pride ourselves in helping people through those issues, especially in that first six to 12 months when the property and process may be new to the investor,” said Hall. A CORE OF CREATIVITY In a business so dedicated to focusing on its specialty, it may be surprising to discover a layer of creativity lurking just beneath the surface of the highly
NOBODY’S PERFECT: A PICTURE OF POST-SETTLEMENT CARE
R eturn on Rentals prides itself on steering clear of conflicts of interest by focusing solely on providing turnkey rentals to clients rather than getting involved with any other aspect of turnkey rental service. However, that focus sometimes means they find themselves in the role of advocate for a client during the post-settlement period. Garrett Fuller pulled back the curtain on what that role may look like with a recent, real-life example: “Last year, we had a client buy a property. The tenant had been in place about three months before there was a divorce and the husband left. The wife tried to keep up with the rent but ultimately came to the manager and told him she simply had to give up. She left her deposit and she moved out. “Within 72 hours of her departure, the home was burglarized and the fur- nace was stolen. There was already going to be downtime since the tenant left on short notice so this made the experience a really rough run, especially for a new buyer. This is the type of situation where Return on Rentals might step in. “In that case, we helped with rent concessions, provided some insight and guidance on the remodel, and we assisted with some of the fees associated with re-leasing the property as well. “We’re not obligated to do any of that. Post-settlement, the deal is legally done, but we understand that customer experience is what makes or breaks a company long-term, so we and our partners are always willing to work together to try to help investors out. “That’s where the benefits of everyone being vested in the company really come out: When we all work together to try to turn a really negative experience that no one could have controlled into a positive one that protects our investor’s interests and our own.”
Return on Rentals moved into the Buffalo/Niagara Falls area just after the housing crisis. Fuller credits state tax incentives, an expanding technology corridor, and a growing professional population for the ongoing demand in the area for rental properties.
SIGNS OF THE TIMES
D allas Hall and Garrett Fuller run their market research division based on Warren Buffett’s famous statement, “Be fearful when others are greedy and greedy when others are fearful.” To that end, many of the signs most investors believe indicate “trouble” pending in a market are, for Hall and Fuller, signs that things are about to get interesting and potentially profitable. “These are things that happened in the wake of the housing market melt- down that were pointed out as terrible signs of the times at the time,” said Hall. “In reality, those things opened up the markets for our investors and we really took off. It was like shooting fish in a barrel for our clients to get great
properties at incredible prices.” The two cited three signs that typically are inter- preted as bad news for a market that can be good news for real estate investors: • Increased inventory levels • Massive foreclosures and distressed property sales • Significant decrease in home ownership “When these three things coincide in the same market, it sends a lot of people running scared for the sidelines,” explained Hall. “However, for a turnkey rental owner or provider, these signs indicate that a
market is ripe for entry because as people leave their homes they need rental hous- ing, which pushes rents up, and at the same time it is easier at this point than any other point in the housing cycle to get deep, deep discounts on properties that are ideally suited to be cash-flowing rentals. “In markets where these three things come together, you’ll see rent premi- ums skyrocket and, with them, investor rates of return. “Of course, you must remember that we are operating in a very specialized position. We don’t flip to the retail mar- ket. The majority of our investors are cash buyers that realize when a market is in trouble, the iron may be hot for them to invest.”
parties and we get no financial benefit from an investor’s relationship with them, which frees us up to fully support our investors if they do have a problem,” said Hall. “There will be issues that no one sees coming from time to time when you do the volume of deals that we do,” he added. “Our model delivers a cash-flow property with tenants in place, but if you end up with an issue with the management company or an unforeseen complication, we’re able to step in and help you precisely because we do not owe the management company anything.” Hall cited a company practice that will, in some cases, allow investors to use Return on Rentals’ contractors rather than handling
repairs though the property management company. This can save serious expense on a major repair job because property manag- ers are often paid a percentage-based fee for handling this type of work. “Our managers expect this from us because they know at the end of the day, our objective is clear: keep costs as low as possible for our clients. That may mean we’re available with our crews to make sure they can get discounted work, materials, and labor,” he said.
NO MIDDLE-MANNING HERE When Hall and Fuller first began
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