Global Investors Podcast
GI23: Epic Turnkey Cashflow Investing After 2000+ Properties with Mercedes Torres
November 27, 2019
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GI23: Epic Turnkey Cashflow Investing After 2000+ Properties with Mercedes Torres

In her very first two years in the world of Real Estate, Mercedes purchased and flipped 24 properties. Now, she has 2000+ real estate transactions to her name. She’s appeared on the A&E show Flip That House, graduated from UCLA — and is currently divulging all her life’s lessons and real estate savvy to followers, clients, and connections. If you see her on the town she’ll be sipping a spicy margarita while dreaming up that next big deal.

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Transcript:

Announcer: Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles: Welcome to another episode of the Global Investors Podcast. I’m your host Charles Carillo. Today we have Mercedes Torres. Mercedes graduated from UCLA and her first two years in real estate, Mercedes purchase and flip 24 properties. Now she has 2000 real estate transactions to her name. She’s appeared on the A&E show, Flip That House. She manages her home portfolio while being the cofounder and vice president of Epic Real Estate & CashFlow Savvy while hosting the Epic Real Estate Investing Podcast, a top 30 podcast with over 300,000 downloads per month. That’s she’s been hosting since 2007. Is that correct?

Mercedes: That is correct. I will say I am not the main voice or brain behind that podcast. It’s actually my husband Matt Terrio. I do a turn key segment. We call it Turnkey Tuesdays or I just talk about Turnkey Real Estate Investing. But the podcast is on a daily release and there’s daily content about real estate investing and every day is something different. So money is Money Mondays, Tuesday is Turnkey Tuesday, Friday, Financial Freedom Friday. So every day caters to a different type of real estate investor. And yes, we’ve been doing it since 2007. Can you believe that?

Charles: Wow. That’s right. Need heyday, right when the iPhone was coming out, right.

Mercedes: That’s when we got started. In fact, what Matt started the podcast one day he came home and he’s like, Mercedes, I’m going to start a podcast. I said, great. What’s a podcast? Cause I had no idea what it was.

Charles: I was at a meetup and someone was telling me that they started one when they had to do what it had to connect to your it’s still had a connect to your computer to download or something crazy. And I was like, Oh my God. But I’m so great. Well, thank you very much for being on this show. And I briefly spoke about your past, but can you expand on your previous professional experience prior to starting to invest in real estate?

Mercedes: Yeah, believe it or not, I got into law school and I say, believe it or not because I’m one of the few that got a full ride to an amazing law school and I dropped out. I hated it. And it took me one week to realize that I had made the wrong decision. I came from a family where, you know, you work hard, you get good grades and you get a good job. And so that’s what I did. And when I got into law school, it was one of those things where no one in my family had ever done that. And so it was just one of those things that I wanted to do to say that I can do it. So when I quit, I had to have a good reason to drop out and to let go of a full scholarship. So I told my parents that I landed an amazing job, which the amazing job was a processor at a subprime mortgage company because that’s where I had to start. I started at the way bottom and I just kept coming up the corporate ladder. But, you know, my experience in that world of baking and financing and subprime, I was there for almost 11 years. It taught me absolutely everything I needed to know about finances, about money, about business that I never learned in high school or college because they don’t teach it unless you’re a finance major in college, you don’t get taught that in high school. You know, you don’t get taught how to balance a checkbook. So fast forward, I climbed up the corporate ladder. I was a processor, then I became a Docker where you drew docks on DAS. Remember that age myself. But I became, they called me the subprime queen because I learned how teachers and babysitters and people that were barely qualifying for loans. They were buying properties and then refinancing six months into it, taking the money out and then investing in an investment property. And I kept watching that over and over again. And one day it dawned on me, I was like, well, I worked for the bank. I have a pay stub and a W2, why can’t I qualify for it? So while I was working for the bank making $30,000 a year, I purchased my first investment property saying that I was going to live in it. I mean, I really was going to live in it. I fixed it up and I turned around and flipped it. And on my first flip, I made $80,000. My view, I was making $35,000 a year and I thought, Oh my God, this is it. I need to become a real estate investor. So one of the reasons I was really lucky to flip 24 houses is because I learned how to buy right. Owner occupied and then flipping and moving up in the world of financing. So I bought a four unit and then I upgraded to a three nicer unit and then a two unit and I just kept flipping them the entire time. And the rest is history. I quickly learned I was sitting on the wrong side of the desk, so I think six months into my endeavor I quit my job and I became a full time real estate investor and then I was forced to flip houses, which changes everything.

Charles: When you were a, so you have your Epic Real Estate, which is your education company, and then you have your CashFlow Savvy, which is a turnkey company. Is that correct?

Mercedes: That is correct.

Charles: Can you explain just turnkey investing just quickly? It was, people have heard of that term before.

Mercedes: Yeah, so turnkey investing is really investing done for you and what a turnkey operation will do for you is they will find a property for you, fix it up, place tenants in it, and most importantly manage the property to make sure that they collect your rents and then forward the reds to the investor. Yeah. Hopefully the turnkey operation is investing in a hot market where the purchase price and the rent ratio are going to give you a solid return and that’s why I named my business CashFlow Savvy because we focus on creating cashflow for our investors.

Charles: When you were flipping your properties, were you holding on to any of them just refinancing them out for any type of passive cashflow or were they all completely sold after your [inaudible],

Mercedes: I wish I held everything. No, when I started, all I knew how to do was buy it, fix it up and sell it. I wasn’t savvy enough to know that the key to creating wealth is buying and holding. Especially if you can leverage other people’s money. I just started fixing and flipping. You know, when I started, it was the height of the market. So I mean I was buying 50 cents on the dollar lawyer cause I was buying distressful and I literally would flip it for a substantial profit. What year was this approximately? So I started flipping in like 2003, 2004. And then when the market shifted in 2007, which is [inaudible] when Epic real estate started, I mean, Epic real estate started because I had a need. There were no more deals to be found. I couldn’t flip if my life depended on it because the market crashed. I was really lucky. I didn’t have a whole lot of inventory. I was only doing one or two at a time cause I was a small shop, if you will. So my last flip, I projected to make about 94,000. I made roughly speaking about $12,000 on it. That just shows you how drastic and how quick the market shifted.

Charles: Wow. And how much was, how much was that house? What did you sell it for?

Mercedes: So I remember, I the last house that I did, I bought it for $465,000. And then we put about $50,000 in it and I sold it for right around five and a half.

Charles: So very, very tight numbers.

Mercedes: Tght numbers. The projection was if the market was still into it, I could have sold it for easily about 600,000.

Charles: Geez. Now, where now you talked about different markets where was this happening and where are you guys focused on now for purchasing turnkey properties? I know there’s a number of different markets now.

Mercedes: There is. So when I started, I’m a native of Los Angeles, California, probably one of the only hundred natives born and raised. And so I started my real estate investing career in Los Angeles. And what I quickly learned there after I flipped and the market dried up, I couldn’t cashflow in that market if my life depended on it. The purchase price and the rent ratio in California is really difficult to cashflow. So we did the next best thing in that I knew there were markets in middle America where people could buy houses for 60, 70, $80,000. Now, in California, that’s unheard of. Or there is hardly a market where you can buy an $80,000 three bedroom, two bath, single family residence, thousand square feet, impossible. But I knew there were markets out there that did focus on that. So we will actually say, Matt created an algorithm that allowed us to focus on markets in middle America where the purchase price and rent ratio, we’re going to give us a return. But I was looking for predominantly rental markets because by that time I had learned that the key to wealth is buying and holding. And so I focused on those markets that are predominantly rental markets where there’s no shortage of tenants and where that purchase price and rate ratio, we’re going to allow me to cash flow and that’s how Cashflow Savvy was born. Exactly. Our recipe, our numbers and we just folded it out to middle America by accident if you will.

Charles: So it’s, it’s the Midwest you’re looking at. I was seeing some, you have some Florida as well, I think central Florida stuff that is on your website. You have a number of different markets. So was really that you put it through your algorithm and you see exactly what makes the most sense for, and then obviously you need to have a whole team on the ground to, to source them to do it. So you have how many different teams and areas are you guys set up in?

Mercedes: So we’re in 10 markets, but we’re extremely active in five and I only do five at a time because the market shifts. So although we have properties and teams in 10 markets, if you decided that you wanted to buy a property from us, you’re only gonna see properties from about five or six markets just because they’re making the most financial sense at the moment. So our hot markets are hot markets, I should say are st Louis, Missouri, Kansas city, Missouri, little rock, Arkansas. Well, let me get him Alabama and Indianapolis, Indiana listeners write that down there. Hot markets. Yeah, I’m giving you a freebie there. And I define a hot market by really allowing the population to rent my house so that I can cash flow or so that my clients can cashflow. So I’m in markets where there are no shortage of tenants because remember at the end of the day, Oh, I want to do with cash flow. I sell properties so that you could buy them and hold them. I mean ideally forever, but if you hold them for 15 years, it’s going to produce a return for you every single month ongoing until you own the properties. So hot markets are defined for us markets that are not going to have shortage of tenants and where I know tenants are going to be able to afford my rent.

Charles: Yeah. And those are also very landlord friendly areas, especially Arkansas and Alabama, which is always nice.

Mercedes: Yes, I often talk about that. But really more importantly, Charles is the team on the ground. You know, if you do not have a solid team on the ground that is going to serve as a property manager. And I mean they have to get it, they have to understand the investing game. They have to cater to the tenants and then answer to an investor. Because at the end of the day, you know, you can have a beautiful property in a great, you know, suburb. But if no one’s renting it, what’s the point? So we focus on stay in markets where our teams get it. So our property management teams, they’re incentivize by collected our tenants rent. Because if they didn’t collect the rent, but nobody makes money, including our property managers. So once I find the market, I really dive into the team on the ground because if you don’t have a team, no matter how great your property is, they have to get it to perform.

Charles: Yeah. They also have to be very familiar with what they’re renting out. If it’s single family houses, if it’s A, B, C, D, you know, apartments, they have to, because an A manager is not gonna be able to do a C property and vice versa. And dealing with the class of tenant as well is very important. If you’re an A manager and you’re just thinking, you just receive automatic payments that come in and compare it to a C property where there’s more, let’s say handholding when collection comes on the first of the month, hopefully. Yeah, that’s a, it’s definitely true. So how do you protect your investors from downside risks when they invest with you? Or what precautions does your company take to ensure that your, your investors are going to be profitable for the most part when they invest?

Mercedes: Yeah. So that’s a great question, Charles, because I had a whole episode on this, on my podcast last week because I talk about buying, right? If you are buying for cash flow and the numbers make sense when you purchase, especially if you’re purchasing for cashflow, it doesn’t matter what the market does because if the market flops and you bought right and you bought for cashflow, that cashflow is your buffer in the worst possible scenario. So let’s just, you know, talk about numbers. That $80,000 property, you know, you’re going to come in and purchase $16,500 for the down payment if you qualify for a Freddie or Fannie loan plus closing cost about five grand. So you’re all into this $80,000 property for about $21,000. It rents for about 800 bucks a month. So after you pay your taxes, your insurance, your everything, you’re going to cashflow about $200 a month. Meaning that, let’s just say the market is to crash and it goes terrible and you have to drop your rent to 600 bucks. You’re still cash flowing $100 even in a downmarket. So my precaution is know your numbers. When you buy and you buy, right? You buy for cashflow. I don’t care about appreciation, I don’t care about cap rates. I don’t even care if Amazon is coming into employ all the people in Birmingham, which is actually happening. I don’t care about that. That’s a plus. I care about when I buy am I going to cash flow? What’s my ROI? What’s that return on investment and how long can I write it? And that’s what I care about. So that’s the number one risk. I will sit down with every employee or not every employee, every investor, and I will understand why they’re investing. And I want to understand that they’re going to have enough cushion in their investment as cash flow, if you will. We also offer warranties. You know, we offer warranty, we warranty the work that we rehab for a year. We also have guarantees. So, you know, we’ll pay your rent if we don’t have a tenant for you. But 95% of my properties are tentative at closing. So again, you know, we are cashflow savvy because I want you to cashflow from the get go.

Charles: Right. The other good thing about having the one unit, the four unit properties that you specialize in is that you can get that longterm fixed debt because really the value of the property only matters when you’re buying. You’re selling, you’re refinancing. I mean, during the rest of the mortgage, it doesn’t really matter. I mean it just matters on your mortgage payment and what you’re renting. And for the now you have investors that are coming. You say you have a lot of foreign investors and since the theme of our, of our podcast is forming, investing in the US where did a lot of your international investors come from that are investing into your properties in the US.

Mercedes: Great question. I have a lot of Canadians and then I have a lot of people from the China, I also to a couple people in Russia, Signapore as well. And then I have people from down under, so I’m again, they hear me on podcasts. And, and those are a little bit more challenging cause there’s a little bit more setting up. It’s not impossible. You know, once we set you up one time you can continue to buy and continue to I have a few European investors as well. And they’re, they kind of go on autopilot. Like once we set it up, you know, once they pre-qualify and then they set up their bank account, my typical foreign investor will purchase three properties from us a year because it’s really easy to do.

Charles: Are they purchasing those primarily in cash or with some debt as well?

Mercedes: Yeah. I promote diversifying as much as possible. Yes. Out of the three property, they will tend to buy one in cash and then two with financing and financing for a foreign investor for their first time is often 50% down. So for an $80,000 property, you’re going to need 50% debt.

Charles: Yeah. And then they might be able to get that down to, I imagine 30% down, something like that.

Mercedes: Once they establish a relationship with our bakers after a year, I encourage them to do a cash out refinance if it makes sense. If not, then we get them to go for a second round and yeah, I’ve seen it go as low as 30% but yes, very possible.

Charles: Yeah, that’s awesome. Can you explain briefly about the setup process and what that consists of?

Mercedes: Yeah, so our turn key operation is a little bit different and the reason it’s different is because I offer exclusivity to my clients. So what does that mean? That means that you can go on my website to see available properties. You actually have to go through our office and prequalify for lending or show us proof of funds before we show you anything in our inventory. Once that is set up, we then have you open escrow with a $2,500 fully refundable deposit. But what that does is that goes towards the purchase of your property and then that puts you into our investors’ queue. What that means is all the properties that come in on any given day go to investor number one in the queue, whatever investor number one sees, that’s theirs for 24 hours. There is no bidding on the property. It’s yours. Nobody can take it from you. The price is the price. You get exclusivity for 24 hours. You don’t like that property. You just pass with it within a day or two, maybe three days. Depending on what becomes available. You will get your next set of properties. Someday you’ll see one or two properties. Other days you’ll see five property, otherwise you won’t see any property. So it really depends on what’s available and what’s coming down the pipeline. One thing I have done is I have eliminated the bidding war because it drives me insane. In order to see our inventory, you have to show us proof of funds or pre-qualify and then open escrow with a refundable deposit that places you into our queue so you could see our exclusive.

Charles: That’s a great way of doing it because if you are an investor, you now are taking completely serious right after completing that. Whereas when you’re buying property for first time as an investor they don’t know if you’re, they’ll give you not the greatest properties. Let’s say if they give you any and there they want to make sure just not take, you know, kicking tires. So I mean that, that’d be great if we could do it with like multifamily properties where you just hand them, you know, Larger properties, you can hand them a deposit and they would take you seriously. It’s not, not so much the case, but that’s an awesome way of doing it. Especially for a first time investor that might not be as well versed in the whole situation, the whole process. And they’re able to review the property in 24 hours does give you a good, good amount of time to review the property in depth with whoever you’re investing with.

Mercedes: And that’s just your preliminary review. Like once you decide that you’re going to move forward on that property, well you’re going to get a 10 day due diligence period just like you should. And we give you full access to the property. So you know, Charles, the biggest mistake I made when I started investing back in the day, I acted too fast on a property so I made stupid mistakes and I ended up paying too much for properties. I wanted to eliminate that for our investors as much as possible. So sure our investors are paying full market value for our properties, but I’ve done everything to the property including I stuck a tenant in there, there’s going to stay there for a year. So I try to minimize the risk. But in return I had to weed out the non serious investor and I had to help. But you were investor that was not able to drive to the property cause it’s not down the street. So whether you’re in, you know, China or whether you’re in Australia or whether you’re, you know, the next state over, you have the confidence of taking the time to do your basic due diligence. And then if you wanted to fly in to go see it, great. You could because you get 10 days after that. But a less than 1% of my investors actually ever see their property. So kind of funny.

Charles: Yeah, I would imagine so. I mean, it just doesn’t work out the best. If they’re gonna, if they’re investing in maybe a number of them in the same town, maybe they might, but I could see that. Yeah. I mean, I’ve invested in stuff and I’ve never, I’ve never been there, you know what I mean? Invested passively and stuff and I’ve never seen the property. But so for new investors that come to you, potential investors, what books do you suggest for them to review, to read if they’re even if they’re going to be active?

Mercedes: Do you know? I have to say that if you are going to be a passive investor and even just an active investors, I think it’s really important that you understand, not so much the how, the why. I’m a big fan of Robert Kiyosaki. So my whole investment trajectory started with the book rich dad, poor dad. You know, he’s a, he’s an amazing illustrator if you will, because you get to see here, read in that book, hear or read now it’s here, but read how money can work for you instead of you working for your money. And since I focus on passive investing, it’s really important to me that you really understand the [inaudible] why you’re doing it and then how to make your money work for you. So if anything, if you’re going to be a passive investor, understand the difference of you working for your money and your money working for you.

Charles: Yeah, no, gets them out of that employee mindset, which is probably the most important thing you have to do when transitioning someone to investing passively or investing in real estate at all and investing into a business, which it really is. So it’s a mini business.

Mercedes: It took me two years to get over that hump because when I started flipping, I mean I was making $80,000 a flip. Of course I was living in California. And when you go and make $300 in cashflow, I mean to wrap your brain around. Like I remember Matt said, Oh, we just, you know, close on a house and we’re going to make $200 a month. And I was like [inaudible], that’s not even my Starbucks bill, you know, a month. And like it took me forever, I mean two years. And it, what really did it for me is that Matt had to buy, like we had eight maybe nine properties before it dawned on me. Oh my God, there mysteriously is $25,000 in my bank account and I don’t even know where it came from. And it took me literally, Charles, two years to wrap my brain around that. And once you get over that hump and you just look at what the potential of one investment property can do for you, what investment property a year or just period, what it can do for you in 20 years. I mean, it literally is life changing. It could pay for your children’s college education. So think about that. So changing that chip in your brain is for me, one of the most important thing for newer investors that are looking to passively invest.

New Speaker: Yeah. Yeah. It’s really just learning to, it’s learning to Kind of generate income without you being present, which most people are used to if they’ve invested maybe through a 401k or something like that. But real estate is definitely, I mean, with the tax benefits and with the financing, with the leverage, it’s, there’s really nothing that comes close to the power of investing in real estate. I was listening to someone else speaking. They’re saying they’d rather make $300 a month passively than work for $30,000 a month. So in you, that doesn’t really, that takes a little while to set in, but that’s that mentality. Like as you said, 10 houses, 15 houses in, you go, wow, that’s, now I see the power of this, you know. Well, that’s awesome. Well, thank you very much. I appreciate you being on the show today. And how can people learn more about your companies and yourself?

Mercedes: Oh, that’s awesome. So you can reach out and go to my website. It’s cashflowsavvy.com and that savvy with two V’s and you can download our Frustrated Investor’s Guide to Passive Income. I literally show you step by step how to get out of the rat race and really how to create passive income for yourself and for your family for your future. Or you can email me at [email protected] and that’s Epic, E. P. I. C.

Charles: Okay. And I will put all those links below in the podcast and also in the YouTube notes. So I wanna thank you again for being on the show and I’m, I look forward to meeting up with you soon.

Mercedes: I love that Charles. Have a great day and to our listeners, have an Epic day.

Charles: Okay. Thank you very much.

Mercedes: You’re welcome. Bye bye.

Charles: Hi guys, this is Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in investing in real estate and you don’t know where to begin, set up a free 15 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com.

Announcer: Thank you for listening to the Global Investors Podcast. If you’d like to show, be sure to subscribe on iTunes or Google play to get new weekly episodes. For more resources and to receive our newsletter, please visit global investor podcast.com and don’t forget to join us next week for another episode.

Announcer: Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of harborside partners incorporated exclusively.

Speaker 4: [Inaudible].

Links and Contact Information Mentioned In The Episode:

About Mercedes Torres

In her very first two years in the world of Real Estate, Mercedes purchased and flipped 24 properties. Now, she has 2000+ real estate transactions to her name. She’s appeared on the A&E show Flip That House, graduated from UCLA — and is currently divulging all her life’s lessons and real estate savvy to followers, clients, and connections. If you see her on the town she’ll be sipping a spicy margarita while dreaming up that next big deal.

“Family first, then financial freedom” is her motto. And… she does more than speak those words, she lives by them. In the real estate world, Mercedes is known as a fierce and relentless Latin leader that lives a fully focused and mindful life. She knows how to ‘step away’ from work when she’s with the family. And at work, she uncovers solutions that deliver wins for everybody — wins that create lasting relationships built around more than just table talk.

Mercedes is an active player in the real estate game. She still runs her own portfolio while she is the Co-Founder & Vice President of Epic Real Estate & CashFlow Savvy.

She develops, grows, and add profit producing properties to their income stream while she helps others do the same. She loves nothing more than taking someone from “this isn’t possible” to “finally, I’ve escaped the rat race”.

Mercedes travels the world giving educational speeches that inspire breaking free from the normal routine with strategically planned real estate success. Catch her live every Tuesday on the Epic Real Estate Investing Podcast — a top 30 podcast with over 300K downloads per month.

A lover of life. Relentless. Passionate. Inspiring. Committed. Wife. Mother. Tycoon. AND absolutely loves, creating cash flow!

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