Scott Stanfield - From PhD to Turnkey Rentals
LISTEN TO THE FULL EPISODE ON:
Scott A Stanfield started his professional path by earning a PhD in Engineering, which led to 15 years as a research scientist and the Air Force Research Laboratory. He published 14 scientific journal articles and presented over 30 papers at scientific conferences. However, his desire to live life on his terms led him to real estate in 2010. He started with it being a side investment, and by 2017 he was in 7 states, and had amassed a portfolio of over $3M through turnkey rentals. His latest venture is founding Tuxedo Press and published his book "Passive Profits: The Turnkey Rental Investor's Guide," which encapsulates his real estate investment expertise and success. His goal is to empower individuals to achieve financial independence through informed, strategic investments in turnkey properties and other investment vehicles.
In this episode, you will be able to:
- Master the art of turnkey rental property investment for consistent passive income.
- Uncover the secrets to finding trustworthy turnkey providers for stress-free property acquisition.
- Discover effective techniques for diversifying your real estate portfolio to maximize returns and minimize risk.
- Learn how to efficiently manage turnkey properties from afar, ensuring smooth operations and profitability.
- Explore flexible financing options tailored for turnkey real estate investments to optimize your investment potential.
The key moments in this episode are:
00:00:00 - Getting Started in Real Estate Investing
00:05:31 - Sourcing and Vetting Turnkey Properties
00:11:07 - Market Diversification and Industry Analysis
00:14:05 - Investing in Properties from Afar
00:15:27 - Financing Options for Real Estate Investments
00:19:04 - Overcoming Property Challenges
00:22:25 - Writing a Book to Help Others
00:25:10 - Connect with Scott Stanfield
Follow Scott 👇
https://www.facebook.com/TheTurnkeyRentalGuide/
https://www.linkedin.com/in/scott-stanfield/
SUBSCRIBE IF YOU'RE LOOKING TO BUILD WEALTH THROUGH OPPORTUNITIES IN THE REAL ESTATE INDUSTRY
✅ http://relfreedom.tv
GET STARTED INVESTING TODAY AND ACCESS OUR DEAL LIST!
📈 http://investwithelite.com
PARTNER WITH US ON BIG DEALS!
💵 https://eliteadvantagepropertieshq.com
BUILD YOUR REAL ESTATE AGENT CAREER WORKING WITH INVESTORS
👨👩👧👦 http://eliteadvantageagent.com
LEARN ABOUT REL FREEDOM & HEAR MORE REAL LIFE STORIES
🎙️ http://www.relfreedom.com
FREEBIES: DOWNLOAD YOUR FREE FREEDOM FOUNDATION BLUEPRINT
💵 https://www.relfreedom.com/blueprint
LOOKING FOR A REAL ESTATE AGENT ANYWHERE IN THE US? FIND A TOP AGENT IN YOUR COMMUNITY
🏠 http://www.eliteagentreferral.com
JOIN OUR FACEBOOK COMMUNITY
👨👩👧👦 https://www.facebook.com/groups/relfreedom
SUBSCRIBE TO THE REL FREEDOM PODCAST
🎧 Apple Podcasts: https://podcasts.apple.com/us/podcast/rel-freedom-podcast/id1535281574
🎧 Google Podcasts: https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5idXp6c3Byb3V0LmNvbS8xNDA3NjIyLnJzcw==
🎧 Spotify: https://open.spotify.com/show/5nXA5hLHbDzRwxypc2wLur
LET'S CONNECT
👉 Facebook: https://www.facebook.com/mswenson13
👉 Instagram: https://www.instagram.com/getrelfreedom/
👉 TikTok: https://www.tiktok.com/@relfreedom
🏠 Minnesota Real Estate: https://www.eliteadvantageteam.com
Scott Stanfield
I started buying property, kind of like they tell you, find a good location, buy property, self manage it, what have you. But I didn't have time for that. That takes a lot of effort to, you know, find your own deals and then manage them and manage renovations, etcetera. So I got tired of going there and painting, you know, flipping it for the next tenant. So I started looking into other ways of, of doing it. I came across turnkey real estate.
Mike Swenson
Welcome to the REL Freedom show, where we inspire you to pursue your passion to gain time and financial freedom through opportunities and real estate. I'm your host, Mike Swenson. Let's get some REL Freedom together. Hello, everybody. Welcome to another episode of real, REL Freedom, where we talk about building time and financial freedom through different opportunities in real estate. I'm your host, Mike Swenson. If you want to get started on your real estate investing journey, check out our website, freedomthroughrealestate.com. that's freedomthroughrealestate.com Dot. We have a lot of great information on there, blog posts, articles, videos of our past episodes. So a great way to kind of see where you want to fit in, in your real estate investing journey. And today we are going to talk with Scott Stanfield. Excited for this episode because so many people in real estate come from other industries and have a reason and a passion for getting into real estate. And so that's Scott's story as well. A dedicated research scientist with a PhD in engineering. You were a research scientist and also worked at the Air Force Research laboratory. Got into real estate on the side, and now your focus is turnkey rental properties, which we'll talk about as well as other things. So definitely somebody that's put a lot of thought and research behind what they do, how they do it. He's not just going willy nilly here, so if you want to find out all the detail behind it. Happy to talk to Scott. Excited to have you on the show.
Scott Stanfield
Thank you for having me. Excited to be here.
Mike Swenson
So just start and kind of give us a little bit about your background before getting into real estate and, uh, you know, wanting to get into real estate, and we'll just take it from there.
Scott Stanfield
Yeah, sure. So I guess professionally, I got started back about 2002. I was a co op with the air force. This was when I was working on my bachelor's degree for mechanical engineering, and that really turned out to be very good for me. And my career just kind of took off from there, had, you know, enjoyed that. And then I went to grad school. Finished my PhD, engineering at Wright State. This is in the Dayton area. And then I stayed with the Air Force for pretty much 15 years after that and worked long, extensive career that way, and a lot of interesting projects. And like all jobs, there was a lot of stuff that I liked, a lot of stuff I didn't like, and that's really what led me to real estate. There were parts that I didn't like, and I knew that someday I'd like to have control over whether I worked or not. So if I was enjoying my job, then I just keep working. And if not, well, I had income. And so I guess I went the more traditional route with real estate. I started buying property and kind of like they tell you, find a good location, buy property, self manage it, and what have you. But I didn't have time for that. That takes a lot of effort to find your own deals and then manage them and manage renovations, et cetera. So I got tired of going there and painting, flipping it for the next tenant. I started looking into other ways of doing it. I came across turnkey real estate, which is what I do now. And thats really been my bread and butter. So with turnkey, its real similar. Its just another long term rental strategy. And the difference is how you source your deals with turnkey, youre buying them from a turnkey provider, which is just somebody who specializes in finding property that is below market value. They do the renovations, they place a tenant, and then they sell it to an investor. And so for me, as the investor, it outsources the entire rental business in just one simple transaction. And it's has been very lucrative for me. I've definitely benefited from how it works. And for people who are interested, if you go and you start looking at Turnkey real estate, you look at just reviews and whatnot. It's a mixed bag. You'll see some people say, oh, I've done really well with this, or other people say, well, you know, the properties don't appraise or the renovations are cheap. And there's truth to all of that, right? It is a mixed bag. And so if you want to get into turnkey investing, it's really important to understand how to minimize those risks. How are you going to really look at the renovation and make sure that it's not too cheap? How are you going to vet these turnkey providers to make sure that their management teams are very good? And so that's really the key with it. And so I started that back in 2017, and I've expanded my portfolio and I have houses that are all across the country and specific states, specific metros. And so that's how I got started and that's where I'm at today. I do invest in some other strategies, but for real estate, it's really turnkey. And that, and that is my preferred investment strategy.
Mike Swenson
So, yeah, I totally understand the sourcing, especially if you're going outside of your own market, it's really difficult to find deals and find people that you can work through. So going through like a turnkey company could be a good option because they may find, you know, properties in different states and different areas. And if you just latch onto that company, then you can diversify. But yeah, talk about that process of the early stages of finding your first deal and vetting out those opportunities.
Scott Stanfield
Yes, with Turnkey, it was really about just looking at all the different providers and getting a feel for which ones were actually doing a good job and then coming up with systems to make sure I could check the renovations. And again, manager, those are two of the big things. And then also the appraisal process can be an issue too. Right? I don't buy anything unless it actually appraises. That is, I don't want to have to bring extra money for that down payment because the purchase price is below the appraised or, I'm sorry, above the appraised value. So that's really the main key. So how did I go about sourcing this? Well, I actually didn't start with turnkey providers. I started looking at metropolitan areas that I was interested in. And this probably won't surprise anybody, but I have a very statistical approach that I take to that. I look at mostly population and population growth. I don't want metropolitan areas that have only a few people there. I want a large urban area where statistics are going to matter. And then I look at all the other relevant components that what is the purchase price, what are the rent price ratios, that sort of thing. And I have very specific criteria on what I'm looking for. And then I'm really looking for metropolitan areas that meet those criteria, that have a large population center with growing gdp, growing population base. And that's really my approach to finding a metropolitan area. Now, once I have a metropolitan area that I'm interested in, that's when I start to dig deeper. And then I start looking for a turnkey provider in that area. And so I do work with multiple turnkey providers, but the reality is I look for a turnkey provider in that area. Then I have a very specific questionnaire that I use to vet turnkey providers. And then of course, obviously there's other pieces to the purchase process being the most time consuming. But another piece is how are you going to inspect these? I'm not tracking traveling to these cities to check them out. And so there's a huge process on how I vet and hire a property inspector. And of course I want that to be independent of the turnkey provider. Right. I want to make sure I get a very good inspection. And I, you know, I prefer to talk to the inspector. I like to tell them what it is I'm really looking for. I want to make sure I understand everything that was done with the renovations. I want to make sure I understand, you know, what the service life is or expected remaining service life, rather, of these expensive components like the roof, the hot water tank, the H vac system. Right. And I have, again, very specific criteria on what I'll buy. If it has an old H vac system or an aging roof, I don't buy it. It's really that simple. And with turnkey providers, they have so many properties, you can be very selective. That's actually one of the advantages of a turnkey provider, is that there are a lot of properties and so that's somewhat goes into it. And then obviously there's a financial component to it. Right. You have to have some idea of what to expect and then select metrics that are going to, you know, hit the upper end of what a turnkey property is going to produce. And then, of course, located in the right spot, too. So one thing about turnkey providers, if you find a good one, they know their markets very, very well. They know where you should be buying houses. They know where you should avoid in their area. And so you can learn a lot from them. So when you hire a turnkey, you're really leveraging their network, their expertise. And that, that's a key thing. Like, like you mentioned, I, you know, these are in other places how my sourcing is, how do I learn about these areas? And so that's actually the answer. I really leverage the turnkey provider. Of course, it all starts with picking the right provider. That's a big, big piece to that.
Mike Swenson
Yeah. And in a lot of ways, you're combining a lot of things into one because if I were to go find a property, let's say, locally here.
Scott Stanfield
Yeah.
Mike Swenson
I got to source it somehow, and then you've got to find the management company and then there's all the backend stuff. So the nice thing is the turnkey can roll a lot of things together. Like you mentioned, finding a turnkey provider that you really like and really worry well for you and hits the metrics that you want to hit. That's the key piece because you're working through that relationship as serving multiple purposes and it's got to be a really strong relationship.
Scott Stanfield
It does, it does, it does. You want to have a turnkey provider that's going to manage the asset going forward. You want them to stay vested in the property. You also want to build a relationship with a provider that you can trust and that you like so that you can build a portfolio through them. That's another important piece. I should have mentioned that.
Scott Stanfield
So I look pretty much clear across the nation. I do not buy in states that are going to be tenant friendly. I buy in landlord friendly states. It makes perfect sense. You know, you want to, you want your managers be able to actually manage your tenants and if they're not paying, you don't want them to stay there for a year or however long it is. And, you know, some of these more tenant friendly states. So that's a big deal. You got to make sure you buy in landlord friendly places. I own property in Arkansas, Alabama, Georgia, Oklahoma. I do have property in Ohio and Missouri. There's another one, Kansas City, missing one. If I don't have my sheet, I tend to miss a few. But those are some of the areas that I am, uh, invest in.
Mike Swenson
Yeah, it gives folks a sense of, yeah, you're, you're all over the place. And from a diversification standpoint, like, that's helpful too, because for some people absolutely might like an area they're familiar with and want to grow deeper on it. For some people, they want a little bit of diversity because, yeah, if something changes in one state or one market or a major employer moves out, you've at least balanced things out a little bit versus being heavily invested into one particular area, and then something comes up and can really rock the boat.
Scott Stanfield
Yeah. And that's actually another really important piece. So when I select these areas, I look at the industries that are there, and I try to find metropolitan areas that have different industries to just further diversify. And then another thing I like is state capital because you have a lot of government jobs there. And so if you've ever worked for the government, you know this, it's about impossible to get fired. And what's good about that, if you're a landlord and your tenants are government employees, they have a pretty steady paying job. And so that's actually can be very good, especially if you're going into a recession. So I do like state capitals in places like that as well. So again, all for diversification.
Mike Swenson
What are some lessons that you've learned or what are maybe some challenges that have come up on properties or just being able to feel like you know, what's going on when you're not in a city that you're close to? Because I see how people would maybe find that to be a challenge. So maybe talk about kind of working through that.
Scott Stanfield
Yeah. So for me, and I put a lot of research into an area when I actually want to invest there. Now, you can research it as much as you want. You will never know it better than somebody who grew up there. It's just not going to happen. They're going to know all the local dives, all the areas to stay out of that sort of thing. But you can get a pretty good feel for city by just researching. And you can look at a lot of the values. And when you have this idea of what to expect with a lot of different parameters that go into, again, like what the rental rates are on average, that sort of thing, the dynamics that shaped that market, you're going to make, the assumptions are going to continue to shape that market going forward. And so to me, it actually is fairly predictable. The bigger hurdle is really just staying ahead of the market and understanding where the market's going. And that's a more challenging thing, especially when your government takes a sledgehammer to adjust. As recently with a lot of the interest rate stuff now, not so much the interest rates, but what led us to needing to raise these interest rates to control inflation.
Mike Swenson
Talk about the financing of that for some people that might wonder, how do I make that happen? Obviously, turnkey providers may have some opportunities of people to point you to, but kind of talk about how you're able to work through the financing of those.
Scott Stanfield
Yeah. So the reality is turnkey providers, they want to sell you houses, so they're going to make arrangements with lenders. And these lenders, some of them are going to keep these inside their own portfolio, right? So they may be a little more flexible. Some of them are going to just, you know, they want to do a conventional loan so they can bundle it up and sell it. A lot of them are going to try to keep that option. And, you know, these lenders that they put you in contact with, they already know the business that is for the turnkey providers business. So they have a good understanding of the risk. It's actually not as hard to get approved when you have a bank that actually understands what it is you're doing. My experience has been that their lenders are pretty good, the ones that for a lot of these turnkey providers, and if you were to look at the interest rates and compare it with other banks, it's actually quite comparable, especially on a conventional loan. Right now, if it was a non conforming loan insurer, it's something that they're keeping in house for their own investment, that is the bank. And so there, the terms can vary quite wildly. But yeah, when it comes to conventional loan, it's pretty much standard. It's really going to just tie back to the like Fannie Mae, Freddie Mac underwriting guidelines. So, you know, it's going to be 20% down payment, you know, that sort of thing. And there'll be, you know, specific rules on how you have to title it, right. You're going to have title it in your name, and then afterwards, since it was purchased as an investment, then you can move it into your I LLC or land trust or what have you. So it really comes down to that now. You don't have to use their lender. You can always go out and find a lender. And I actually like to work with a mortgage broker for that purpose as somebody who's actually certified to loan in all these different states, because then when I need to do something, maybe more than just trying to buy, like if I'm trying to refinance or I, maybe I want to get a loan based on just the equity in my properties, they already have relationships with a lot of banks and they know what a lot of those terms are that is what they're willing to do. For an in house loan, this would be like a non conforming loan or a portfolio loan or what have you. But the point is making that relationship with a loan broker is very helpful. They can find your creative ways for you to get financing for deals. And I know some people, they're probably, well, I don't have the credit. Your credit doesn't have to be that high to work with a loan broker on a lot of these different portfolio type loans. I think it's about 620 is what I recently saw, or higher. So if you're below that, yeah, you'll have to think of what you want to do. But for most people, having a credit score of 620 or higher isn't it, isn't that challenging what something bad happened or maybe there's some sort of fraud or something like that on your, on your ledger, but not that you committed personally, but maybe, you know, somebody identity theft or what have you.
Mike Swenson
What's maybe a challenge that's come up with a property that you've had to work around, maybe where something didn't go as planned and you've had to adjust. Just curious to hear, you know, maybe.
Scott Stanfield
You'Re always, there's always going to be stuff that you don't have plan for. I mean, that's every business. When I bought a house in Kansas City, and this is actually the first house in Kansas City, I had vetted out a turnkey provider and thought they were very good and that their property management would be very good. And I was wrong on the management, completely wrong. And that cost me a little bit of money in the beginning. I had to find a new property manager, hire them, and they performed fine after that, the new management team, so then that property was fine. But you do have to be nimble that way. Property management is key, so you really got to monitor everything every month and make sure that you ask questions. So every month I set aside time. I manage what I'm doing, I look at all the financials and if I have questions, I call it simple as that. And if property management isn't working, don't hope they're going to get better. They're not. You need to cut your losses quick instead of letting them compound and then simply, you know, start interviewing other property management companies and hire somebody that, you know, makes sense. And for that process, I actually have a questionnaire that I use when I screen property management. So that's, that's how I do it. And that was, I think, one of the biggest challenges really is property management, because if it's a true turnkey business, you're not doing any of that kind of work. You have managers that are solving your problems that way. They're letting you know about them. They're the ones that are solving them for you, and that's why you pay them. That's what they're for. These are professionals who, you know, they have their own brokerage, right. And what they specialize in, at least the ones I like to hire, is management. That's what they do. And they know, you know, their local laws inside and out for, you know, for their riddle business. And, you know, I let them take care of, let them solve it. And so I just keep on top of it, make sure I understand it. But that, that's really it. So it's really all about having good management. You have a great house in a great location and your management is not very good. You lose money. Simple as that. You have great management. Youll do just fine.
Mike Swenson
Well, and that is the key piece because I think sometimes people feel like maybe management is just making sure the units full and its like, no, theres so much more than that. Even though you have paying tenants because they are responsible for your asset from the time that you purchase it to the time you sell it, they're the key piece of that process. And so finding great solid management is a really, really big deal.
Scott Stanfield
Oh, it's, it's everything. Like I said, best property, best location, terrible management, forget it. You've lost. But it's not over. Right. You get rid of the bad manager and go find a good one and then everything will be fine. But you got to identify that as quickly as you can. And it really is huge.
Mike Swenson
Now I see that you have a book that you wrote about the turnkey process. What started that idea of, okay, now I'd like to be able to put together a book of hopefully my knowledge and experience to be able to help other people.
Scott Stanfield
Well, actually I had no intention of writing a book, and it really came out of just helping friends and family. So I had success, obviously, with turnkey rentals, and it's really done quite well for me and it's changed my life and for the best. Right. And so obviously I'm going to talk to friends and family about it and of course they want to know, how did you do it? What are you doing that sort? So I had notes when I read, so I read a lot of material. I did a lot of studying and looking at data and whatnot, and a lot of that went into notes, and from there I developed checklists and questionnaires and stuff to do all the different processes. So then I started packaging that up into a book so that I could share with family and friends, actually was the first motive for it. I have helped five people so far, actually create portfolios like mine, and they've done very well with them. And that's actually very rewarding. I like that a lot. Like I said, it helped me a lot when I did mine. And then helping some other people. And these are really all friends. I haven't helped any family members yet. They do trust me. They just don't have the money to get started. But the point is that I've helped friends and they've done very well with it, and it makes me feel really good. So it's like, well, you know what? I bet other people would be interested in this, too. And so that was the motive behind the book. So I spent quite a bit of time, really, to take, you know, what essentially were just my notes and turn it into something that really gives you the entire process. Like, all my checklists are in there, all the questionnaires I use, my actual purchase criteria, all of it. I didn't hold anything back. It's just in there. And then, you know, if you go to my website, for example, all the tools that you need to execute any of that, they're just there and they're free. Don't charge for any of that stuff. I would rather see people save their money, go out and invest instead. And so that's really the motive behind the book and why I wrote it.
Mike Swenson
That's awesome. And I love, there's so many great people in real estate that just want to help other people do the same because, you know, your life's been impacted by it and you want to just see other people do the same. And so awesome. That's really great. And, yeah, congratulations for being able to put that together and doing it for a good reason as well. Thank you so much for coming on and sharing for people that do want to reach out to you, learn more about the book or learn more about your process. How can they do that?
Scott Stanfield
Yeah. So the best place to learn more about me and just what I'm doing and how to reach me. If you go to my website, which is Scott astanfield.com, you know, there's about me section. There's a way to get a hold of me. So if you have questions, ask. I answer all emails. I want to help. So, you know, take advantage of that. And then there's information about the book, there's tools and services there. There's a blog there. I'm slowly getting moving on social media, that's not my thing, but I'm doing it. But really, the website is the best place.
Mike Swenson
Great. Well, thank you so much for coming on and sharing. Excited to see what you're building and best of luck to you in the future.
