5 Ways Rental Properties Build Wealth Beyond Appreciation

Matthew Bowles (00:00)
And then, you know, one of the least understood profit centers of buying and holding residential investment property is that you can actually profit from inflation, right? So as we see inflation going up.

A lot of people, for good reason, are really concerned about that because usually inflation is very insidious. And if you have just your money sitting in a bank account, it’s just going to diminish your buying power and destroy your wealth. However, if you take that money out of a bank account and you put it into a rental property, all of a sudden you have just moved yourself to the other side of the inflation equation because home prices rise with inflation, rents also.

Rise with inflation.

Dylan Silver (02:16)
Hey folks, welcome back to the show. Today we’re joined by Matt Bowles, who co-founded Maverick Investor Group, a remote real estate brokerage that helps investors acquire cash flowing rental properties in some of the most investor friendly markets across the United States. Matt, thanks for joining us here today.

Matthew Bowles (02:34)
Dylan, great to be here. Thanks for having me.

Dylan Silver (02:37)
Now, what made you focus in on the investor niche when starting Maverick?

Matthew Bowles (02:44)
So I bought my very first rental property way back in the day, around 2004. And I ended up buying a four-bedroom house to live in. And I rented out three bedrooms to friends of mine. And at the time I was working in the nonprofit industry and I wasn’t making a lot of money at my job. And all of a sudden, my house appreciated more in one year than my entire annual salary at my job. And I said, Well, that’s really interesting. Let me see if I can do that again.

So I did a cash out refinance and I started buying rental properties in out-of-state markets. Then my friends came to me and they were like, dude, how are you buying these rental properties? Like you work at a nonprofit, man. What are you doing? Can you show us how to buy these rental properties? I said, sure, I’ll show you what I’m doing. And you can buy the same type of stuff I’m buying. So my help started to help my friends buy rental properties. Now, fast forward a few years, I was changing jobs. I moved out to California. And shortly after moving there,

I got let go from my this brand new job that I had just moved out there for. And all of a sudden I said, What do I do now? And I said, you know what? This is 2007. I said, I’m gonna start my own business. And I said, I don’t know how to start a business, though. I only have a nonprofit background. But my friends are already asking me to help them to buy rental properties. And I’m already doing that for free. And what I realized was when these real estate brokers were helping us to identify these properties.

They were getting paid a commission or a referral fee, but we were not the ones paying it because the seller was paying all the real estate commissions. So I it occurred to me, I was like, if I could just get a real estate brokerage license and start a real estate brokerage company, I could literally just keep helping my friends buy real estate, keep charging them nothing, and all of a sudden have a business. So I was like, that is what I want to do. I’ll be contributing by helping people to build their wealth through rental properties.

I’ll be able to, you know, build this in a location-independent way so that we can be market agnostic. We’re not convincing people to buy in the one and only market that we have access to. We can put the real estate investor first and help them to buy in the best real estate markets when they’re ready to buy, which of course change over time and change with property cycles. And so, you know, 19 years into this now, we have worked in 15 different US states. And so when people come to us and they’re looking to buy rental properties, we can help them to buy.

in the most investor advantaged markets at the time that they’re ready to buy. And we don’t have those geographic restrictions that a lot of traditional real estate brokerages or companies have.

Dylan Silver (06:04)
A remote real estate brokerage, you know, today there’s a lot of people saying that they’re doing it, but you’re putting it into practice in a way that others are not. And you’re able to do this because you’re an investor yourself, right? If you’re looking at the full landscape of real estate investing today and you’re looking at the best

opportunities to buy single family homes or you know one to four unit properties. Are there any specific markets that you love to look at deals in or if someone’s asking you, hey, where should I be investing, you might point them to, you know, one or several markets.

Matthew Bowles (06:41)
Yeah, so depending on when you hear this interview, this answer may change. as I said, we’ve been doing this since two thousand and seven. So this was before the great, you know, real estate crash, great recession of 08 and stuff. So, you know, you go back in time and it’s like, where was the best place to buy in 2010? Well, Phoenix, Arizona was our most popular market that year because there were all these new construction homes. You could get them below builder replacement cost because everything had just gone through the floor and it were great price to rent ratios, but then soon

Those prices went way back up and the rents didn’t keep pace. So you had this process of yield compression. And it was no longer as advantageous to keep buying there. Our clients that bought there did amazing. But but then we, you know, it was markets like, you know, Houston and markets like Atlanta and those kind of places we went to next. And then all of a sudden, same thing happened there. So then, you know, as time goes on and these market cycles change.

You know, the price to rent ratios in some of these markets change as well, right? So today, if you’re asking me, a lot of our most popular markets are either Midwestern markets like Cleveland, St. Louis, Indianapolis, or southern markets like in the southeast, like Alabama. You know, it’s some of those types of markets which have added investor advantages like very low property taxes, very low cost of living, you know.

Job creation, very low unemployment, right? Thinking about where are people moving to, where are the jobs being created, and where are those price to rent ratios optimized.

Dylan Silver (08:14)
When property values are appreciating ⁓ very heavily, it it makes up for a lot of ⁓ potential poor underwriting. It also makes up for you know potentially going over budget on a rehab right. But when they’re not, it can be of course ⁓ a point of ⁓ pain, honestly, for investors. And we’ve seen over the last several years many flippers struggle. We’ve seen people who are looking for shorter term returns.

struggle. And so when you’re talking with folks and they’re trying to determine their strategy, do these conversations come up if they’re, you know, dead set on one specific strategy and that might not be the best fit for the market that they’re in?

Matthew Bowles (08:56)
Absolutely. And so one of the important things that we teach that we help our clients to do is to make their money when they buy so that they don’t have to speculate on future appreciation and they don’t have to be concerned about a market downturn because they are going to profit right through it. And the way that that works is we help people to buy what we call turnkey rental properties. So that means they’re either new construction or fully renovated with a long term tenant.

Already in place on a lease and a local professional property management company already collecting the rent, handling the maintenance calls, all of that kind of stuff. So you’re buying a performing property. And if you buy that in an investor-advantaged market, you’re able to make your money when you buy because number one, you’re gonna have an immediate stream of positive cash flow from day one if you buy right. Okay. So that is your income stream. Then you are going to have your tenant.

Paying down your mortgage principal. Every single month, your rent is gonna cover all your expenses, including your principal and interest mortgage payment. So you’re building equity through mortgage principal paydown, which your tenant is doing for you. So you hold this property for 30 years, you’ll own it free and clear. You built all that equity without any market appreciation at all. It’s a separate profit center. Then you have your tax benefits and you start taking those from the day you close, right?

You can depreciate the value of your property, even if it’s going up in value. You got to break out the value of the land, of course, but the structure of your property, you can depreciate that. Take it as what’s called a phantom loss, because you didn’t actually lose anything against your income that would otherwise be taxable, and keep that money in your pocket.

And then, you know, one of the least understood profit centers of buying and holding residential investment property is that you can actually profit from inflation, right? So as we see inflation going up.

A lot of people, for good reason, are really concerned about that because usually inflation is very insidious. And if you have just your money sitting in a bank account, it’s just going to diminish your buying power and destroy your wealth. However, if you take that money out of a bank account and you put it into a rental property, all of a sudden you have just moved yourself to the other side of the inflation equation because home prices rise with inflation, rents also.

Rise with inflation.

And if you took out a 30-year fixed rate mortgage, you borrowed that money in today’s real dollars, but you’re paying it back in future diminished nominal dollars that are worth less than the ones you borrowed. So instead of destroying your wealth, inflation is now debasing your debt and working in your favor. So if you understand these five profit centers that you get from owning a rental property, normally most investments you get one.

Right. You buy something and you hope and pray it goes up in value. If it doesn’t, you’re out of luck. With real estate, you have five profit centers. So even if one of them doesn’t work well for you in a particular year, the market doesn’t go up in value or, you know, something like that, you have all of these other profit centers working for you. So your overall return on investment can be absolutely net positive, even if the market is flat or dipping.

Dylan Silver (12:45)
You know, you mentioned being able to ride inflation really, and that’s that’s the investor’s appreciation is everyone else’s inflation, right? And so when you get to the other side of the equation, you start to see things totally differently. How many of your clients historically and then today are newer investors versus folks who are more established and looking for, you know, opportunities maybe in markets that they don’t have exposure to?

Matthew Bowles (13:12)
We have a full range. I actually have a free fireside chat video on our website with one of our clients that built a 64 property portfolio with single family rentals. And we have plenty of clients where it’s their very first rental property and they are just looking to diversify and not have all of their savings and investments in stocks or, you know, mutual funds, and they’d like to own their first rental property. So everyone in between that

⁓ entire range is welcome at Maverick, and we do individualized consultations with each person to understand where are you in your real estate investing journey? What are your goals? And our goal as a company is to be working with you 20 years from the day that you come in our door. And so I told you about, you know, back in 2010, we’re helping people to buy in Phoenix. Well, one of our clients who bought a few properties from us in Phoenix in 2010.

is still buying from us today in twenty twenty six in different markets and building and diversifying his portfolio. And that’s how we think about and what we hope to be doing with every single one of our clients.

Dylan Silver (14:24)
What’s ⁓ something every ⁓ potential turnkey investor should know before buying a turnkey property?

Matthew Bowles (15:14)
Well, I think, you know, you mentioned different types of real estate investors and different types of criteria that people have, right? So there are some people that like to go out there and try to find a distressed property. And then they like to go there and they like to do the renovations themselves and maybe participate. They’re watching the shows on TV, you know, like the shows where people are in the houses and they’re designing the stuff and they’re renovating it. And there’s some people that like that, right? And there’s some people that want to do that as they’re

job and they want a self-employed situation where I want to leave my my office job so that I can go and renovate houses and I can do this kind of stuff or have this particular ⁓ model that I want to do. And so there’s tons of ways to make money in real estate. And they’re you know that’s great for all different types of people. And so for us, I think the question that people want to ask for for turnkey is is that investing model appealing to you? Because our clients are like, I do not

Want to be taking calls from tenants in the middle of the night and being a landlord and managing the property myself. I do not want to be out at the property overseeing renovation crews and swinging a hammer myself or doing any of this kind of stuff. But I know that I do want the benefits of owning the real estate, the hard asset, the deeded real estate. I don’t want to own a real estate-backed security or a REIT or something like that. I want to own the physical house, but I don’t want to do all the stuff that goes with it.

I want to own in the best markets, but I don’t necessarily want to live in those markets. I want to, you know, live near my family or live in my favorite city or be a digital nomad and travel the world or do whatever I want to do, but I want to own in the markets that make sense financially. Right. So for us, that’s our client. It’s somebody that does not want to put a lot of their own time into this, you know, renovating and landlording and all that kind of stuff, but they want the

benefits of it. And so that’s not everybody, but if that’s you, then that is our ideal client.

Dylan Silver (17:16)
How do you find great property managers these days?

Matthew Bowles (17:20)
Yeah. So one of the things that we do is we work with local market specialists in each city that we are working in. I’ve mentioned some of those cities. And one of the things is, you know, you can think about incentive structures for property managers, right? Why is so much property management so bad? Well, one of the reasons is because it’s not very lucrative to be in that industry. And a lot of the more talented people in real estate go into other industries that are more lucrative, right? And so

That’s just sort of a economic reality. And so then you think about okay, what are some of the incentive structures, right, that could change some of those dynamics, right? And you start thinking about, well, some of the companies we work with have vertically integrated property management companies, right? So the the the company that is buying and renovating at scale a bunch of these properties also have a vertically integrated property management company in their company. Now, how is their incentive structure going to be different?

From a regular property management company. Well, instead of making just the 10% of your gross monthly rent, right, ⁓ every single month, this company realizes that if they can manage your property and get it to perform as good or better than you expect, guess what you’re very likely to do? Buy another property from them. And that profit margin.

Is dramatically larger. That is where they’re really making their money, right? So if they can, so they are now much more heavily incentivized to manage your property well and make it perform than just a you know typical regular property management company. That’s one example. There are other examples, but think always thinking about the incentive and structure and incentive structure and having your interests and incentives aligned with anyone that’s working with you or for you.

Dylan Silver (19:11)
Now, when folks are going about this process and determining, you know, should I invest locally? Should I invest out of state? One of the fears that people have is well, I don’t know about this area that I’m necessarily investing in. I don’t have boots on the ground. How do you have those conversations with folks when they may experience some level of skepticism about out of state investing?

Matthew Bowles (19:34)
Sure. Yeah. So in terms of due diligence, you know, one of the things that I tell people is that your due diligence on an out-of-state rental property should be identical to your due diligence on a property that is right down the street from where you live, which is to say that unless you personally are a professional home inspector, you should always be hiring third-party, independent professionals to

Do the due diligence on your property and that work for you, not for the seller, they work for you. And so you should always hire a home inspector. You should always hire an appraiser, right? Your lender’s gonna require that if you’re getting a mortgage, right? And then there’s a couple of other things that you can do. I mean, there’s plenty of online ⁓ services now. You know, you can use like rent range or rent fax or some of these that can give you neighborhood information, they can give you ⁓ local fair market rents and vacancy rates and all of that. But one of the hacks that I tell people.

which I encourage our clients to do all the time, is call up one or two local property management companies that have nothing at all to do with this property. Like they do not care if you buy this property, they’re not affiliated with the seller. You just found them on the internet. Call them up and ask them, how much do you think you could rent this property for? Give them the address and the information. And how quickly do you think you could get a tenant in there, you know, and and get those kind of questions answered. And even when

You’re selecting a property in an out-of-state market. Let’s say you’re choosing between like two or three properties, ask a totally unrelated third-party property management company. Say, I’m interviewing property management companies to, you know, potentially manage one of my properties I’m gonna buy. If I were to pick one of these two to three addresses to buy, which one would you be most excited about managing? And could you rent the quickest? And why? And

Do that kind of due diligence. So you’re now you’re relying on third party professionals. And to be honest, even if you’re buying in your own city, do the same thing.

Dylan Silver (21:34)
When folks are thinking about self managing, ⁓ how might this change the conversation? Obviously you’re focused on ⁓ turnkey rental properties, but if someone was coming to you and saying, You know, I I’m really thinking about managing my own rental property and this is gonna be my first deal, ⁓ what advice or feedback might you have for that individual?

Matthew Bowles (21:58)
I mean, you’re welcome to do whatever you want. I mean, you know, once you buy the house, it’s yours. You own it. You can live in it, you can keep it vacant as a second home. You can rent it out to somebody, you can make it a short term rental, you Airbnb, but you can do anything you want with it. It is your house. And so, ⁓ you know, we provide opportunities to try to make things easier for people, right? So if you want to manage the property yourself and you

You know, you’re you’re part of that group that we just talked about and you’re excited about being the landlord and dealing with the tenant and all that kind of stuff. Some people do that. So I’m not gonna dissuade you from doing something that you researched and you want to do and you’re passionate about doing. If you want to try it out, you’re welcome to try that out. And then always, though, have a backup plan, always have one to two property management companies.

that if something goes wrong or, you know, you decide, you know what, this is more work ⁓ than I wanted. I didn’t want to get that call about the plumber in the middle of the night, actually. So why don’t I turn this over to a local professional? You’ll have people standing in the wings that you can do that.

Dylan Silver (23:01)
That is probably one of the biggest ⁓ and most underdiscussed ⁓ sources of of pain as a real estate investor is you can become a tired landlord, right? Just like you could become a tired realtor or a tired, you know, mortgage loan originator. You can become a tired landlord. And you could have several properties and you’re having, you know, tenants call you and it becomes a situation where something that was supposed to be securing your financial freedom is now a time, you know.

suck really. And so that can be something that becomes very tricky for people, especially if their identity gets wrapped up into it. When for you did turnkey become such a important component of your business?

Matthew Bowles (23:44)
From day one. I mean, this was what enabled me to buy out of state rental properties. Like this was the whole unlock, right? How do you not just buy in your local neighborhood and become a rehab or and become a landlord and do all this traditional stuff, right? Turnkey was the unlock. This is what allows you to buy out of state. You don’t have to oversee the renovations. You don’t have to manage it yourself. You can just set this whole thing up. And then I was like, ⁓ got it.

And so then my friends started buying, and then you know, we just started helping our clients buy it. And we’ve been doing it for 19 years now. And as you said, you know, it there’s different types of real estate strategies for different types of people. So we don’t ever try to say, ⁓ this is for every single person and you shouldn’t do that and you should do what we did. Like none of that. Like we, our ideal clients, or we tell them about this and they’re like, my gosh, I had no idea.

That I could own real estate, not have to live near it, not have to manage it, not have to renovate it, have it all professionally managed, but get all the benefits of that and close on a performing property and cash flow from day one. Had no idea I could do that, but I’m all in because my time is my greatest asset, right? That’s really what our clients are. They’re either busy with their work and their job, or they just want the time to spend on their with their family and travel the world or play golf or do whatever they do and they don’t want to spend it on this, but they know the

benefits of building a rental property portfolio. And so for us from day one, it was just catering to those people that want that particular product. And that’s what we’ve been doing.

Dylan Silver (25:15)
we are coming up on time here. any new projects that you’re working on and then also anything you’d like to mention directly to our audience.

Matthew Bowles (25:22)
Yeah, absolutely. So, first of all, we would love to get to know you individually, one-on-one basis. We offer completely free video consultations, and it’s always gonna be free to work with my company, Maverick Investor Group. I told you at the beginning how and why we started this, right? And the whole idea is we put the onus on ourselves to deliver value. So we will do free consultation with you. We will we have all kinds of educational resources and things that we do.

And we work with you step by step to make sure that you’re able to identify the markets that are the best for you, the properties that are best for you. And only if and when you actually close on a property because it met all your criteria and passed all your due diligence and you closed, only then do we get paid, but not by you, by the seller 100%. And so if we can’t deliver that value, we make no money at all. And I think that’s the way it should be, because we haven’t delivered value to you. If we do

We that’s how we make money, but you never pay us any money. So it’s always free to work with us. So just know that coming in. And I would love to give everyone an opportunity to register for a free video consultation. And they can do that at @MaverickInvestorGroup/R E P. So Real Estate Pros. So it’s M-A-V-E-R-I-C-K-I-N-V-E-S-T-O-R.

G-R-O-U-P.com slash R E P, which stands for Real Estate Pros. If you go there, you’ll see the video consultation registration form. You can just submit that and grab a time on our calendar. And also, even if you’re not ready to have that conversation and do a consult on that same website, I have put four ⁓ educational webinars. They’re just recorded webinars. You can watch them. I told you about that.

Client who built a 64 property portfolio. That’s one of those. It’s a free video fireside chat. How did he do that? Right. we talk about that. ⁓ I have a webinar on tax strategy and so forth. So there’s some really high value educational stuff. All of it is completely for free. And again, the website, Maverick Investor Group dot com slash R E P to grab the video consult or the free educational webinars or both.