What Smart Investors Need to Know About Turnkey Real Estate, Warranties, and Property Management

Dr. Axel Meierhoefer (00:00)
So I had to look at okay, where can I get cash flow? And that was where the out-of-state comes from, because it was in the Midwest and in the South, where the ratio between the price you pay for the property and the rent that you can get in is in a good ratio. And over the years we have basically found first myself and then for our clients that we don’t really want to buy any asset, any property that doesn’t cash flow from day one.

Dylan Silver (01:58)
Hey folks, welcome back to the show. Today we’re joined by returning guest, Dr. Axel Meierhoefer, the founder of Ideal Wealth Grower, where he helps people build diversified passive income real estate portfolios through out-of-state turnkey investing. Originally from Germany and a former Air Force officer, Axel has spent more than a decade investing, mentoring, and building relationships across high-performing real estate markets throughout the US. Dr. Meierhoefer, thank you for joining us today.

Dr. Axel Meierhoefer (02:29)
Hey Dylan, thanks for having me again.

Dylan Silver (02:31)
Now, when we talk about out-of-state turnkey investing, how do you define that model and what makes it different from traditional rental property investing?

Dr. Axel Meierhoefer (02:42)
It has a couple of components. The first thing, why is it out-of-state? Because I happen to—this is more happenstance—happen to live in relatively expensive places like Santa Barbara, San Francisco, San Diego. And when you look at real estate investing, you kind of have to look at three different, in my opinion, three different options. First option would be you want to buy something where you expect it to go up in value—appreciation, basically, as first and foremost goal. Second option would be you’re looking to invest in real estate that is cash flowing as much as possible. And then the third option would be a combination of the two. Now, I always wanted to build a real estate portfolio for myself as a retirement income or passive income source, and that just didn’t work in California because if at all, you can go for appreciation but not for cash flow. So I had to look at okay, where can I get cash flow? And that was where the out-of-state comes from, because it was in the Midwest and in the South, where the ratio between the price you pay for the property and the rent that you can get in is in a good ratio. And over the years we have basically found, first myself and then for our clients, that we don’t really want to buy any asset, any property that doesn’t cash flow from day one. And it starts out with a calculation and then obviously, you know, you prove it out when you select which property to go for.

Dylan Silver (04:15)
Now, when we talk about some of the markets that you mentioned, I know that you’re in San Diego. I’m in Texas. Are you very bullish on Texas? Do you like investing in the markets in Texas? What’s your thoughts?

Dr. Axel Meierhoefer (04:27)
Well, Texas is a little bit, and California is kinda like that too, those states are a little bit different than I would say some of the rest of the United States because Texas, especially in the last ten, fifteen years, has basically really risen to something that you could call a country in and of itself. And I don’t mean this politically or anything, just by the sheer size of the state and the number of people. So when you ask me about Texas, I would say there are places in Texas like right now, if we went where to go and look for an investment opportunity right now, I would probably look in San Antonio. Right? But because of the size and the volume of people and large, you know, DFW or Austin or San Antonio or Houston and so forth, these are in themselves such large communities, and every single one has a little bit of a different dynamic that you have to look at that. If I compare that, for example, for one of the markets that I’m really into right now, is in that tri-state area between Alabama, Georgia, and Tennessee. Right? It’s nowhere—I mean, I guess you could probably get all the people from Tennessee and Georgia into DFW and still not be overcome. You know, like it’s just so much more rural. So yeah, San Antonio would be my answer for right now. Partially also, and this is one thing that we do for our clients and I’m sure you guys do too, you have to look and keep an eye on what is happening in a market. It’s almost irrelevant what you’re investing in. So you—I don’t know, where are you in Texas, you say?

Dylan Silver (07:03)
I’m outside of Austin, a town called San Marcos.

Dr. Axel Meierhoefer (07:04)
Yeah, okay. So you have probably seen in Austin that due to this massive influx both of construction for new business as well as people, I would say the construction industry has just overbuilt to an extent that the prices just went completely crazy. Right. And as I said when you first asked me, the point is we want to make a positive cash flow deal in our out-of-state investing. In Austin, you would have to really look very hard to find it. In San Antonio, you can actually find some because, as with everything, regardless which asset class or which market you look at, it works in cycles. So while I would say Austin is still just beyond the peak in the first half of 2026, San Antonio is way further down on the downslope to the point that you can start finding good deals again. Right. And some markets fluctuate way more. Austin is one of those that went crazy up. Now it’s coming down. Who knows if it’s gonna go crazy up? San Francisco is a similar market like that. Markets in the Midwest and in the South, they don’t go crazy up, they also don’t go crazy down. They’re more like steady as they fluctuate maybe two or three percent. Right. So that makes it also a little bit more predictable.

Dylan Silver (08:34)
You mentioned Alabam—that’s a market that I have some experience in, and I think there’s a lot of people who are now realizing the opportunities that are in Alabama. One of the things that I’ve noticed that’s quite interesting is on the new construction side, I’m a realtor, there’s actually more cost-effective new construction teams in San Antonio than Alabama, but I also think that there’s a lot of opportunity and untapped opportunity in Alabama. What are you seeing in Alabama?

Dr. Axel Meierhoefer (09:05)
Well, it depends a little bit on how you define that. What I would say that I’ve seen right now with the partners that I’m working with in Alabama, that the price is about the same for the new construction. It may be that the San Antonio properties might be slightly bigger, but from an investor’s perspective, most tenants are not gardeners, right? Like so, you know, it doesn’t really matter that you have 5,000 square feet versus 8,000 square feet around the house. I’m not so sure. Price-wise, I can say it is similar. Now, the one thing that San Antonio has an advantage over is that you typically, depending on location—that’s as a realtor, you know this—but if you really had two comparable locations, your rental income potential is a little higher in San Antonio than it is in Alabama. But even there, it depends, right? If you go to Huntsville, which is, for anybody who doesn’t know, it’s like Rocket City or, you know, so to speak, there’s all kinds of government agencies located there. So there are certain things specific to location, just like I said earlier between Austin being kinda like an industrial hub more and more, besides being the capital, whereas San Antonio is more traditional Texas, I would say. You know, so each place has its variations. Birmingham is probably a little bit more like Austin in a sense—not in size, but in the kind of industry that you’re looking at. So yeah, I mean there’s a reason that people always used to say location, location, location. I in my own business always say we first look at performance, performance, performance and then location. But they are connected obviously, and that’s true between Alabama and Texas as well.

Dylan Silver (11:32)
Now, when we’re out-of-state investing and evaluating these properties, it’s gonna be perhaps more challenging in a lot of ways because you’re not able to physically put eyes on-site. So what are the steps in your process to ensure that the deal is like it looks on paper?

Dr. Axel Meierhoefer (11:54)
Well, there’s a couple of different things and you can use technology, but let me say one thing before, because I didn’t really answer that part of the very first question about out-of-state and then turnkey, because turnkey is really a very, very important differentiator in our approach. And number one, what that allows is to build clusters of investments, rather than saying, “Okay, I buy one house in Birmingham, Alabama, one house in Austin, one house in San Antonio, one house in Chicago,” or whatever. No, we want to build clusters of four, five, six in one area. And then when you think about it that way, the next thing is okay, as soon as I allow that as my strategy, then I want to have a partner, and that’s where the turnkey provider comes in. And just for your audience, really quick, I don’t know how familiar they may be, but a turnkey provider, the ones that I recommend and that we work with for our clients and myself, they have three really, really important variables all under the same roof. They have basically a construction and renovation company as one big part of their business. They have a real estate agency, kind of what you’re doing, as part of their business, and they have a professional property management division as part of their business. So if you think about it from a practical sense, there is kind of like a handover.

The real estate agency finds, let’s say for a renovation property, an ugly duckling property in a really nice neighborhood, and they literally buy it for the company. Then they hand it over to the renovation and contractor team, and they go through and make a statement of work, and they do an estimate, and they look at all the things that need to be done and renovated and replaced, and then they start the work. It’s funded out of the company until it’s about ready, and then they give it back and say, “Okay, we are now ready to take pictures, and maybe a video walkthrough,” which kind of is part of the answer of what you asked earlier, and put it on the real estate part of the business. Now instead of going on Zillow or Redfin or Coldwell or REMAX or stuff, they send it to me and people like me and say, “We have another property available.” And here is where that relationship comes in and where one of the differentiators comes in for our clients. Yes, anybody can go through the country and say, “Where do I find good turnkey providers?” Or you can work with us and we already have a network of good, vetted turnkey providers. So they tell me, “Here is a new property, here is all the data.” I take the data and make it available to our community of clients. And then when you or I or any of my clients buys one of those properties, it gets handed over internally to property management. Now, one of the big benefits is I will obviously ask the question like, “Hey Alabama turnkey provider, how good is the quality of the renovations that your contracting and renovation department does?” And guess, Dylan, what they’re gonna say.

Dylan Silver (15:10)
Great.

Dr. Axel Meierhoefer (15:11)
Great, exactly. They’re gonna say awesome, great, something like that. I’m going to say, “Yeah, that’s exactly what I expected. So you don’t mind giving me a warranty for the first year that when you put with your property management a tenant in the property I bought from your real estate division, that anything the tenant finds that isn’t quite right, your renovation people will fix, right?” And they can barely say anything other than, “Yeah, obviously.” Right. So we put that in the contract and for the first year, whatever they touched in the renovation, they’re gonna fix if something is broken. So now we have an opportunity to start building a little bit of a reserve from our rental income. But it’s also—if you really go, and I’m sure you know this as a realtor—somebody buys a property, puts a tenant in, the tenant reports something is broken, reports it to property management. They call me or you if you’re the owner and say, “Hey Dylan, the tenant just reported that there are 12 light bulbs missing and they need to be put in.” You know, and you say, “Yeah, okay, it’s approved.” I know it’s gonna cost me five hundred dollars—fifty for the light bulbs, and four hundred and fifty for somebody to go there and screw them in. Right? So now, same scenario, turnkey provider. They would never call me, and if they did, I would say, “Remember we have this warranty? You should be ashamed. You said your quality is great. How is it that there are twelve light bulbs missing?” Right? Not so great.

Dylan Silver (17:22)
This idea of the turnkey warranty, this is a gold nugget that you’re giving away for us here. We appreciate it because these are the types of things that people can miss, right? So let’s say you don’t have that warranty in place and you have a relationship with a turnkey provider, they said everything is good. Now they’re coming to you with change orders effectively because things are breaking—that’s not going to leave a good impression. That might sour your perspective on this as a whole. I do want to pivot here and get a little bit granular on identifying both good partnerships as well as good property managers. I’m imagining that a lot of these turnkey providers are themselves managing the property. Are you also evaluating them for their ability to communicate with clients and tenants?

Dr. Axel Meierhoefer (18:17)
Yeah, absolutely. And one thing—and I’m sure you have seen this, I have seen this, and it is not specific to investing or to real estate—but there are certain benefits to scale. Right. So a good, successful, long-term in an area operating turnkey provider—like pretty much any business, but in this specifically, turnkey providers, the ones that I work with—they have 300, 400, 600, a thousand properties under management. So what does that mean? They have a team. They have people, internal employees they can send out to fix stuff. But for me as the owner, as well as the tenant, which I’m also looking after because they’re occupying my asset, my property, they have sophisticated software systems, right? Where you can make payments, where I can see about every property, every rent payment, any repair payment, any kind of like tax document at the end of the year. It’s all available to all three parties: management, tenant, and owner. Right? And all those kind of things, those are things where scale is a true benefit versus a smaller, more like individually run property management company that maybe manages 10 houses or so. You know, they just can’t have all the things that a larger scale allows.

Now, things like you mentioned—communication and so forth—are on top of that. And as part of my vetting process to say, “Okay,” you know, I always—and this has always been my philosophy—I only send somebody to something or recommend like a turnkey provider after I have properties with them and have experienced how they actually treat me. If they treat me well, then I make the assumption they probably treat my clients well. But here is another little nugget, since you mention it that way, is this aspect of cluster building, right? So if I’m the first client and I buy house number one and number two from that turnkey provider, now I’m saying, “Okay, Dylan has just become a client, he is interested in that particular address, that will be house number three under the umbrella of Ideal Wealth Grower.” Then Frankie wants to have one, then Dylan buys the second one, I buy my third one. You can see that the organization, that turnkey provider, has a higher and higher motivation to treat us really well because we all want to build clusters. We’re not just buying a single house from a single realtor that we happen to find to have a good posting on some kind of platform. Right? So we’re building this relationship and we’re becoming more and more attractive clients—which, and I’m not saying this in any braggy way, I’m just saying it’s human nature. If you have a restaurant and certain people keep coming every other day, over time you’re just treating them differently because you don’t want to lose that business. Right. And that also gives us leverage if one of my clients has, like to your question, right? My client, let’s say, has three properties and comes to me and says, “Axel, I don’t know what it is, but they don’t really communicate well with me.” I would literally pick up the phone and call the CEO and founder of that business and say, “Hey, do I get this right that you want to get rid of me and everybody else that I brought?”

Dylan Silver (21:14)
No question.

Dr. Axel Meierhoefer (21:38)
And most of the time they fall over backwards and whatever else you can imagine to make it right.

Dylan Silver (21:44)
We are coming up on time here, Axel. Any new projects that you’re working on? And then also anything you’d like to mention directly to our audience.

Dr. Axel Meierhoefer (21:53)
Yeah, well, new projects—I wouldn’t necessarily call it new projects, but from a philosophical perspective, one thing that we are more and more moving into and also recommending for our clients as well as for myself is to look at what’s called build-to-rent, new construction properties that are designated and built to be investment properties for tenants. Right. And it’s just like to give your audience a quick, you know, without going deeper, but there are certain things like any normal house, people enjoy that the bedrooms have carpet. And I enjoy that too. But from an owner perspective, it is much smarter to put hardwood floors or tile. Right. And so if you look at for longevity, for not constantly have to do maintenance, constantly have to replace things—same thing as, you know, this proverbial dripping faucet, right? You might say, “Okay, well I can get one for fifty bucks,” but if I look for a little bit better quality, like a Kohler or a Delta or so, yes, it costs me a little more in the beginning when I build this thing, but it has like a 15-year warranty, right? And so forth. So there are certain things that build-to-rent does deliberately a little different than if it’s for owner occupancy. And you’re leaving out most of the fancy stuff that are nice to have, but not really increasing either the value or the rent. So that’s a direction that we’re going in, and more and more contractors and turnkey providers are going along on that path.

Dylan Silver (23:22)
Axel, thank you so much for joining us today. Thanks for your time.