How Investors Can Buy Three Rental Properties Instead of One With the BRRRRKey Strategy

Steve Yoak & Dom Zato (00:00)
So BRRRRKey is basically like you buy it, you renovate it, you rent it, you refinance it, right? But you usually have to do that all on your own, right? You got to find the contractors, you gotta find all these people. Well, we’re doing all that for you, handing you the done product. And then what’s really really unique about us is we don’t have you don’t own the property during the whole rehab process. We do. Once we finish it, you get a full inspection from a third party licensed home inspector here in Ohio. All right. And then I’ll sell you the property on owner financing terms at zero percent interest for 60 days while we do the refinance.

Dylan Silver (02:06)
Hey folks, welcome back to the show. Today we’re joined by Steve Yoak and Dom Zato, real estate investors with Akron Turnkey, where they help investors operate and find turnkey and BRRRRKey properties. Dom and Steve, thanks for joining us here today.

Steve Yoak & Dom Zato (02:22)
Thanks for having us. Now we appreciate it.

Dylan Silver (02:24)
We talk about investors who would be an ideal fit for a turnkey and a BRRRRKey. Who is that ideal person?

Steve Yoak & Dom Zato (02:34)
Yeah, I think that kind of boils down to to people that, you know, have trouble finding cash flow in their markets. So we deal with a lot of out of state investors. And we have a few people, you know, local to the area that also buy from us. But a lot of folks are out-of-state investors that are looking for good returns and can’t find them in their backyard. So we help provide those. And Dom, if you want to add a little bit to that, feel free. Yeah. A lot of our investors are high income W-2 earners who want the benefits of real estate. They want appreciation. They want debt pay down. They want the cash flow. And a lot of times they want the tax savings. But maybe they live in California or the East Coast. So to Steve’s point, the numbers don’t really work in their market. So that’s why they come to us, because they want the convenience of buying real estate and we do all the work without all the headaches of actually managing it, going out, finding the contractors, making sure the numbers work. They rely on us to be boots on the ground in Akron for that.

Dylan Silver (03:31)
Now there’s a lot of folks, and you mentioned it, Dom, who may be priced out of the market that they’re living in, especially if they’re in the parentheses, as people call it, like California and then the East Coast. People are looking at areas like Akron and many other markets. When they’re initially reaching out to you, are they aware of what this process will look like? Is this the first time they’ve gone out about this? What is the expectations that an investor may have?

Steve Yoak & Dom Zato (03:58)
Yeah, so I think it’s mixed. I always try to find or ask questions to understand the perspective of real estate investing and how much they know about it. Our product, what we do is for a seasoned investor, also for a new investor. So I try to understand their level of understanding of real estate investing, set the right expectations. So it really just comes down to understanding, okay, what is your time horizon as well? I think that’s a big one. A lot of investors, they have… what I’ve found nowadays is they have short time horizons. I wanna set the expectation that hey, owning real estate, it’s a seven, ten year process.

Dylan Silver (04:39)
Yeah, and and you know, you’re doing something very unique, which is you’re not only sourcing these properties, which is of course challenging in and of itself, you’re also managing them. And then you’re also involved in the BRRRRKey space. We were talking in the green room. I love this term. It’s the first time that I’ve heard this, although it’s been around for a while, you you informed me. What really defines a turnkey property? And explain to our audience who may not be familiar with BRRRRKey what that is.

Steve Yoak & Dom Zato (05:05)
Yeah, I’ll take BRRRRKey on here, Dom. So BRRRRKey is basically like you buy it, you renovate it, you rent it, you refinance it, right? But you usually have to do that all on your own, right? You got to find the contractors, you gotta find all these people. Well, we’re doing all that for you, handing you the done product. And then what’s really really unique about us is we don’t have you don’t own the property during the whole rehab process. We do. Once we finish it, you get a full inspection from a third party licensed home inspector here in Ohio. All right. And then I’ll sell you the property on owner financing terms at zero percent interest for 60 days while we do the refinance. No other BRRRRKey provider in the entire nation owns their asset and also provides it at zero percent interest to you. That’s unheard of. And then the cherry on top, we do zero percent property management the first year.

Dylan Silver (06:43)
Unbelievable. We were talking in the green room. I said, “This is so good,” you know. Do you get a lot of people coming to you really asking, “Well, hey, what what’s the catch,” right?

Steve Yoak & Dom Zato (06:52)
Yeah. So a lot of people ask what the catch is. The big the big thing I always tell people is like, I buy real estate at Akron-Canton as well. You know, I have over a hundred and seventy, hundred and eighty rentals. I don’t I don’t even know anymore, right? I just keep adding them to it. So the more houses I sell, the more I end up keeping. So I’m pretty much on the path of sell two houses, keep one. So the better we perform on sales, the more I get to keep from my own personal portfolio. And then I get to be landlord neighbors with everyone. Yeah, I think that’s a that’s a huge point. What Steve just said there is you have somebody that is a provider, but he’s also investing alongside of you. Like the chances are if you buy a property from us, Steve owns property down the street, on the street, or he managed one on the street or down the street. So it’s it’s it’s parallel with your goals.

Dylan Silver (07:36)
I’d like to get a little bit granular if we can here and talk about the acquisitions side. I love acquisitions. This is where I cut my teeth in as a real estate operator. People have all different expectations for, you know, what level of rehab will be required, what they’re comfortable with. What does an acquisitions price for a single family home in Akron… what what does that look like? I’m sure many different things, but what does that generally look like?

Steve Yoak & Dom Zato (08:03)
Yeah, we’re kind of stuck in that price range of like one thirty, like low one thirties to like one forties is pretty much our price range for a fully updated asset. Like turnkey, I think it’s a terrible name. And and I think a lot of people just paint something and call it turnkey. That’s not what we do. We spend millions of dollars a year at Home Depot. We go by the idea that all the mechanicals or major CapEx items have to have 10 years of life plus. So what does that mean? Right. Sounds great, huh?

So if your furnace is older than 10 when I buy the property, I replace it. If your hot water tank’s older than five when I buy the property, I replace it. If the roof is like a three-tab shingle, missing shingles, I replace the entire roof. And I don’t double layer it like a slumlord. I take it all the way down to the wood. I make sure the wood is good before we put the shingles back on. We do take out a lot of chimneys on these older homes as well. It’s a major leak point in in roofs just because of the deteriorating mortar and stuff like that. New kitchen, flooring, paint, lights, outlets, cover plates are pretty standard in every reno we do. I can’t… we’ve saved like 2% of kitchens. Like out of the 200 purchases last year, there’s like four or five kitchens we saved. So that’s that’s how particular we are about the process.

And then I know West Coast people always get scared on basements, right? That’s always a big like, “What’s what the what the heck’s a basement?” Well, it’s it’s where all the money is lost or gained, right? So we make sure the foundation walls are, you know, within three inches of square. So if they’re outside of three inches, you know, we do wall replacements, we beam them, you know, whatever is needed. We do interior waterproofs, and that’s not just Drylok-ing the walls. That’s, you know, full interior waterproof, a drainage system put underground so that the water is not stuck in the walls. You may think, “Why is that a big deal, Steve? Right? Who cares if there’s some water in the walls?” Well, in Northeast Ohio, it gets really cold in the winter and it’ll freeze, and ice and water expands when it freezes, so it’ll start to break down your walls. So, what we want to do is we want to make sure we get all the water out of the walls to protect your foundation long term. Because that’s going to be your biggest expense if something goes wrong is rebuilding a foundation. And don’t get me wrong, we do foundation walls every week. We’re probably going to rebuild 15, 20 walls this year. I mean, we’re always working on one. It’s a multi-week process. So we’re always working on foundation walls and things like that. That’s why I take… it’s so important that we make sure those are updated.

Then as far as the electrical, we always make sure they’re breaker boxes. We don’t do any like old fuse boxes or anything like that. And then we just try to make it so that it’s tenant-friendly in the sense of on your unit turns, we like to do a lot of textures on walls, so it’s real quick and easy to do unit turns. We just try to make it tenant proof as I always joke, right? Yeah, tenant proof. No more, no more light bulbs. We always use LEDs, because we’re tired of getting the maintenance call, “Hey, my my power’s not working,” so you’re sending out an electrician to freaking put in a light bulb. Like who wants to do that, you know? Overqualified… like overqualified light bulb putter-inner.

Dylan Silver (11:48)
Pivot.

Steve Yoak & Dom Zato (11:48)
And then us too, Steve, on that point, you know, having our own maintenance crews driving around town with, you know, our logo on the trucks, things like that. Everything that we do, you can see from Steve, we got the knowledge, but also everything is risk management. Because buying real estate is a pretty simple model. Four walls and a roof, you buy it at X, you can rent it out for X plus Y, you make cash flow at the end of… there’s a lot of markets that make cash flow. But really what we try to lean on is minimizing those… that risk. Because these properties, and that goes back to setting the right expectation… you know, you buy a property for 135,000, it appraises for 160. You’re making 250 bucks a month in cash flow after all your expenses. You… it’s not much, but that’s why we want to reduce the risk of big capital expenditures because water heater busts, five years of cash flow gone. So that’s why we really want to minimize those risks. Maybe not five years, it’s a lot.

Dylan Silver (12:41)
Yeah.

Steve Yoak & Dom Zato (12:42)
What, five grand or so? No, no, it’s not five grand. It’s fifteen hundred bucks for an installed hot water tank. So you gotta, you know, you lose some time, but we want to make sure we’re avoiding that. But the cool part about the BRRRRKey, I think that we did touch on, is it’s the amount of money you have into the deal, right? Right. So yeah, your cash flow may be less, but for the same down payment on a turnkey, you can buy three BRRRRKey properties. So you’re… you’re… it’s a no-brainer, it’s a scale move, right? It’s a huge scale move. And it’s a cash flow move. Because if… think about it, if you’re only making $250 or $225 on a single family and you get three of them, you’re really making six seventy-five to seven hundred bucks, let’s say. You know what I’m saying? Compared to a down payment on a turnkey, you’re only making, you know, $350, $400.

Dylan Silver (13:27)
You mentioned something, I wanna make sure that this isn’t lost either on me or our… our audience. You could buy potentially more BRRRRKey properties than a turnkey. Break that down first.

Steve Yoak & Dom Zato (13:37)
Yeah. So appreciate a calculator for that one. Might need a calculator. So let’s just say you buy the house for 135, right? We get an appraisal at 165. You get 80% of 165 leaves you at 132. So your loan amount will be for 132. You’ll be out that three grand plus closing cost twice, because the first one and then the refinance. And then you’ll have, you know, prepaids for your… your mortgage and stuff like that. And zero percent interest on the loan for me. Yeah. Unbelievable.

So in that meantime, while you’re doing the refinance, our leasing agents are working to get someone in that property. And a lot of times we can’t refi until we have a tenant in that property. So what I like to do is I’m extremely conservative on rents. As Dom’s saying, like I’m usually 50 bucks below the market. And what that allows us to do is get a lot of applicants quickly for your property. And then we’re able to pick the best applicant. And good applicants usually take care of properties at a higher level than a lower level applicant. And I also joke if your finishes are above market, right? Because you’re dealing with houses that are a hundred years old. So all of our finishes are the best in the area, but we’re fifty dollars below market, where can that tenant go and get a better deal? Nowhere. You’ve now tenant trapped…

Dylan Silver (14:55)
They’re stuck. Yeah, they’re staying. Pivoting here, Dom, you’re in California, I believe, right?

Steve Yoak & Dom Zato (15:43)
Yeah, I’m in San Diego. I’m the only one that works remote. Everyone else is in Akron.

Dylan Silver (15:46)
Now you obviously have an a a perspective being on the West Coast and I see it as a Texas licensed realtor, different part of the country, but I see it nonetheless. There’s a lot of interest, specifically in areas like Akron and in Ohio at large. It almost seems to be real estate investors know that there’s deals to be had in Ohio. Do you see that being out there in San Diego? Are investors talking, “Yeah, I want to do a deal in Ohio”?

Steve Yoak & Dom Zato (16:12)
Yeah, we’re hoping somebody doing a 1031 Exchange. We’ve seen a lot of 1031 Exchanges in California, people who inherited properties, or people that just see the cost of living out there. I mean, out here, average home price is a million dollars in Akron, you can buy eight, nine rentals for that and not have to put twenty percent down. Cause here, if you put twenty percent down, you’re negative cash flow because of the mortgages… mortgages and rent ratio. So we’re seeing a lot of people say, “Hey, my dollar can go a lot further. I can get better returns, even though appreciation wise might not see it, but on a cash flow basis, it’s much better.”

Dylan Silver (16:52)
Now when you’re looking at the property management side, you know this is a a separate niche within you know real estate investing. There’s a lot of people that say very challenging to to operate as a property manager because the overhead may… or excuse me, the the the upside may not be super large and it can be challenging. There’s a lot of the headaches. You’re almost the human shield, if you will, between an investor and the the tenant. Have you always done the acquisitions and the property management together? Yeah.

Steve Yoak & Dom Zato (17:24)
So we’ve been doing it… just for a little backstory. I started buying real estate in 2013, was a middle school teacher. So I was teaching middle school until April 17th, 2021. My son was born in Daxton, and I never went back. So that that tells you how quickly we’ve scaled, but we’ve always managed the properties. And you know, you mentioned that it’s a tough business to be in. And the reason it’s tough to be in is because you have landlords that have dilapidated properties that expect you to be a miracle worker. We don’t take on outside properties.

So if you called us today, Dylan, and said, “Hey, will you manage my property at 123 Main Street?” we’re going to tell you there’s a waiting list and we’re never going to call you back. We only manage for people that buy turnkeys from us because they understand the level that these properties need to be at to be successful. Now, if you bought one from me and then you bought one outside of it, we’d walk in and say, “Hey, you need to do this for us to manage it,” and we’d offer to do those repairs. But to get in the door with us, you have to buy a turnkey. It’s way easier to manage assets that are updated and well kept. We’re not dealing with fifty furnaces being out the first week it’s cold here. You know, it’s just not a thing. Like if the furnace isn’t working, it’s usually something very minor, like a high limit switch or a clog filter. You’re not replacing full units, you know.

Dylan Silver (18:40)
When when you’re talking with out of state investors wherever they are in in the country, are they, you know, set on one specific type of structure for their rental property, be it, you know, turnkey, BRRRRKey, or or even fix and flip, and they’re coming to you asking about different types of deals that that might work for them, or is it many ways consultative, “Hey, here’s what might work for you based on your goals”?

Steve Yoak & Dom Zato (19:08)
I’ll let Dom handle that. Yeah, I can I can speak to that. So real estate investing is very umbrella term. There’s a lot of things that fall under that what people want to do. And going back to expectations, I like to ask a lot of questions to understand, okay, is this person have a short-term mindset or a long-term mindset when it comes to investing? Because really what we do is the BRRRRKey and the Turkey route, which is… I call it the slow drip. So I really like to ask people questions. And then if I can see that they’re not really a fit, I’ll be up front with them because we’re not going to really change what we do because it reduces risk. And we have that, you know, that expertise in that space.

So if they want to flip, if they want to wholesale, if they want to do it themselves, I’ll use my experience and spend the next 10, 15 minutes with them and say, hey, this is what you’ll look for. You’re going to be taking on the risk of finding general contractors, raising the money, using your own money, doing hard money, and then you gotta make sure you comp out to do a perfect BRRRR. So it’s a little bit of both. I love real estate, been doing it for a decade. I own rental properties. So I’ll just chat people’s ear off about real estate and educate them. Our calls are all educational. Like some people are experienced where I love those conversations. Some people are brand new and I also love those conversations as well.

Dylan Silver (20:26)
We are coming up on time here, gents. Any new projects or activities that y’all are working on, and and also anything you’d like to mention directly to our audience? Yeah.

Steve Yoak & Dom Zato (20:34)
Yeah, we’re always inventory. Yeah. Yeah, we’re buying houses every week. So I mean, I got fifteen, sixteen crews running here in Akron. So I mean there’s always something coming up. We do have a little bit of a wait list. You know, if you put a house in a contract today, we’re not finishing it for, you know, two to six weeks usually is kind of our our pushed out time frame. But we go through inspections and all that stuff just like a normal transaction. I don’t think we’ve had a house fallout because of inspection this year. And it’s August fourth, so pretty good. We we we’re pretty… we’re very diligent about just making sure they get completed correctly and then also anything that pops up on the inspection report, I take care of. You don’t have to arm wrestle me. I’ll just do it, you know. And yeah, really quick going back to risk mitigation, because I’m a big advocate of that, from somebody that thought buying their first rental property and then realizing, my god, I have all these expenses, and then finding Steve and working with Steve for a while now, is if you reserve a property with us and we do the seller finance and then you go to refinance and the appraisal comes back low… we underwrote it was supposed to be 160 and the appraisal comes back at 120. You’re like, “Dominic, what the heck?” No harm, no foul. We just transfer the property back to us, ownership. You’ll be out the inspection report, 350, 400 bucks, and we part ways or we go look for another property for you. That way it reduces the risk, so you’re not stuck with the property. So I think that’s a huge aspect. That’s the one thing that I find that a lot of people like, aside from the zero percent interest seller financing.

Dylan Silver (22:10)
Those two things are incredible that you have those offerings for investors. Dom and Steve, thank you so much for joining us today, gents. Thanks for your time.