Turnkey Investing: Key Skills, Knowledge, and Strategies with Alexander Cruz

Xander, thank you for joining us today. 

Awesome. 

Thanks for having me. It’s been a great conversation so far, and I think we’re going to learn a lot of skills and knowledge here around turnkey, real estate investing and for our listeners out there who don’t know about you and your background, can you tell us a bit about what you do, where you are and how you help people invest in.

Sure. So my name’s Zander, I’m born and raised here in Baltimore, Maryland which is where our business is based, and ran our business CR, Maryland. We are primarily a turnkey real estate provider. I have been doing this now for about nine years. My partner has been doing it since 2004. We were.

Historically at a fix and flip company. Then we evolved into building a rental portfolio of about 300 properties in Baltimore. And then after that, we evolved again into becoming a turnkey provider. That’s a long story short, but we provide single-family turnkey properties in Baltimore that we rent out.

Sell to new owners and then we property manage for them.

Nice. Awesome. So I know several folks just through, networking, recording this show, and all the other stuff one does as a real estate investor who invests in Baltimore. And we were talking a bit about this before we started recording the.

Maybe the media narrative or the perception that Baltimore has, it’s where the wire was sad. There’s just negative press, there’s negative press about every city, but people probably have maybe misinformed or misconceptions about Baltimore in general. And can you tell us about the city and then also how maybe more broadly how people can get to, to learn a city in particular and where the good parts to invest are.

And then maybe the less desirable parts are from an investing stance. 

Sure. So at a high level, you’re not wrong. Baltimore has gotten a lot of negative press for a variety of reasons. And most of them justifiably. But past that, there’s a ton of really great things happening in Baltimore.

There is a lot of huge business that’s happening, a lot of major investments that are happening. And honestly, it’s somebody recently was talking to me and they called it like the last frontier on the coast. So being a coastal city, all of the other coastal cities have gone extremely well. It is the last.

Little brother, if you will say much between DC and Philadelphia and New York, right along with that corridor. Because of that, I think that is why there is so much investment activity happening here, not just at the residential level, but commercial and industrial in, in really big money corporations, amazon ups, FedEx Johns Hopkins, which seems to be one that everybody knows quality corporation and several others. Beneath the surface, there is a ton of really good people here. There are a lot of jobs here and there’s just a lot going on in multiple different industries. I think the back end of your question was how to learn more about Baltimore in.

Be able to invest here. You’ve got to talk to the locals. Baltimore, if you look at it on a map, doesn’t look that big, but there are a lot of nuances to it. And there are things that you just can’t tell on a map. And you definitely can’t tell by looking at a zip code. It’s one of those cities that is blocked.

So on one side of the street, you could have a great investment. And on the other side of the street, you could fall on your face. So talking to the locals that are in the industry and learning what’s the right fit for a particular investor, cause that’s also subjective and different. And what success is going to look like, that’s how people are going to be successful here.

Okay. Makes sense. And I think, my city Richmond, we can relate to that in some ways that just looking at a map or even a zip code. Isn’t going to give you the real information. And if you speak with someone who lives here or invests here, you could get, much more useful information about where to invest.

And I guess, how do you think about, finding that right person? Because I’ll just, relay it to my case, right? If you just spoke to somebody who has lived in Richmond for, 30 or 40 years, They might not be real and not invest in real estate here. They might not have the most up-to-date information about the market.

So not all information sources are equal. So how do you find that person to talk to? I think that’s a  great point because if let me tread carefully and what I say here if I called my uncle who does not invest in real estate and said, Hey, I want to talk to you about investing in Baltimore. He might say, You’re crazy.

Why would you do that? What’s the point. But on the other hand, if you talk to an investor that’s made, I don’t know, millions of dollars investing in Baltimore, they’re going to have a very different perspective. And obviously, they have the experience to back it up. So you know, one of the reasons, one of the draws of Baltimore related to the location and, it has to do with what we talked about earlier, that.

Kind of perception the positive of that as it’s kept price points much more affordable. So that’s why we have a lot of investors come out of DC and from New York that is shopping in Baltimore because it’s so much more affordable than where they live or where they operate. So of course it creates a more competitive environment, that kind of is what it is.

Yeah. That, that is a concern though, that the price shopping, I understand certainly you’re looking for a good deal. Again, just to relate it to Richmond, we see folks coming down from Northern Virginia shoot. They probably come across the border there, of course, Baltimore as well.

Cause they see single-family up there as pushing a million bucks. But down here it’s much more reasonable, but the rents are correspondingly lower and they might not pick the right area. Sure. 

Yeah, same concept. It happens up here. One of the nice things about Baltimore, is we do have a really good rent-to-sale price ratio.

Rents are relatively speaking higher here than in other markets. Compared to the sale price over the last two years that has stretched a little bit. The ratios are not as good as they used to be. Rents are catching back up this year, last year in 2021, there was a major rent price spike, and we’ve seen it in areas where we used to rent houses.

I don’t know, $1,300, they’re pushing $1,500 now and all the comps are supporting. So it is, not to get down a rabbit hole, but. Everything that everybody reads in the newest and the inflation and just the way things are increasing in price. We’re seeing it in and in the rental market too.

Absolutely. Yeah. A hundred percent. And valuations, property taxes, all of that is, is going, flying upward. Regarding, the skill set. Okay. We want to find the right areas. We want to talk to locals who know what they’re talking about and track down the people who know what they’re talking about, what others, I want to talk about.

We can talk, certainly to continue to talk about Baltimore. I love that. I love that lens and I want to talk about, skills that turnkey investors need to have regardless of the market they’re investing in. But I think Baltimore is a very interesting case study. So what other skills come to mind from the perspective of a turnkey investor that they need to know before starting to get involved?

I think they, regardless of where you’re going to invest, need to be educated enough to know what are the right questions to ask, what do I need to learn about a potential market? So regardless of if it’s Baltimore or Richmond or Indiana, they need to understand. The market conditions, but they also need to understand what the relationship is going to look like with their turnkey provider and property manager.

For us, that is the same, we do both. But then other markets it’s not the same. You might have an investor that provides you the property, and then you’re going to another company for the management. So understanding that relationship, understanding what their standards are what are there, the risks involved, what.

I’ll say drawbacks of the market. My, I don’t believe there is a perfect rental market or a perfect rental. We’re talking about houses and people. And they’re not, none of the above is perfect. But it’s understanding that risk. And then how are we going to mitigate it in the best way possible?

So how are we going to make sure that our interests are aligned as best as possible? So if I’m a turnkey investor, that’s the conversation that I want to know and understand. And of course the details, like what are the rates and fees? What happens if X, Y, and Z happen? Just understanding all the different scenarios and how you’re a company you’re effectively partnering with, how are going to handle it?

That’s what. 

Okay. I like that. The concept of alignment of interest in making sure, we’re on the same page here and right. If everything performs and we both stay out together, if it’s not performing, then you know, we both had an incentive to, to help it improve, are there any examples of ways in which.

Interest could be, misaligned specifically as it relates to a turnkey deal or whether it’s, I don’t know, rent’s not being collected. We had the eviction moratorium shoot. It could be still going on in Baltimore for all. I know. What about things that could be aligned or misaligned?