Listen to the Podcast Here: Podcast Episode by Jason Lee – Premiered August 11, 2022
What You’ll Learn in the Podcast:
- Why Eric chose to invest in Memphis, TN.
- What it takes to succeed as an out-of-state investor.
- How passive income can build a stress-free lifestyle.
- What being financially free truly means
- What turnkey investing is.
Summary and Highlights:
Eric Martel is the owner of Martel Turnkey, a turnkey rental provider which buys damaged properties and renovates them. These properties that are on lease are eventually sold to investors who want to have a passive income portfolio, financial freedom or retire early. He is also running a business for people who would like to try investment property San Diego since he is settled in Los Angeles.
Eric Martel had his first real estate investment when he was 18, which was an 8-unit apartment building. Because of his family’s current financial state back then, he was inspired by regular but successful people to get into real estate investing.
At first, he didn’t have the money to buy the apartment building. But he was asked by his mentor to look for a deal where the seller offers financing. He considered his first apartment building as not an ideal place to live. He spent little amounts on fixing the damages on the building to keep the cash flowing.
Succeeding as an Out-of-State Investor
He first saw real estate success from his mentor, a regular individual who owns apartment buildings, a shopping center, and different businesses. What he believed to be the root of his mentor’s success is discipline, who wakes up early every day to spend time thinking about business and investments.
He eventually had connections with other real estate investors, where he got the idea of turnkey rentals. When he started working, he started looking for real estate investments in different areas. Toronto and San Francisco were not the best areas to get a return of investment in a short period.
After losing a big chunk of money in the stock market, he started investing in different businesses where he generated passive income.
Passive Income on a Stress-Free Lifestyle
He eventually went back to real estate investments after several years. He analyzed several neighborhoods with continuous population growth in terms of business, good median rent, and median house prices.
Eric Martel and his son started earning from real estate investment when they bought a single-family rental in Memphis. From this investment, they were able to buy more properties not just in Memphis, but in different areas as well.
These properties made them earn 12-14% cash return.
They started making deals with people by offering to sell houses to him and resell them. These deals made their passive income portfolio grow more and start their business.
People became interested in this type of investment. As it grew, it expanded in Detroit, Cincinnati, Dayton, and Pittsburg.
He built a team of property management and realtors who handle the properties and connect them to contractors. His company also entered blockchain where people who own crypto can invest and buy real estate from his company. It was the easiest way to sell a part of an investment to open exchanges.
People who want to know more about Eric Martel can visit marteleric.com http://marteleric.com/.
The website includes information on his businesses and links to his books
Eric Martel advises people to take action on their finances and dedicate time to focus on them.
Episode 55: What It Takes To Escape The Rat Race with Eric Martel
Watch the Podcast | Read the Transcript
Welcome to the Multifamily Millionaire Podcast, the show that interviews multimillionaire real estate investors and top producers in the real estate industry. If you’re looking to create passive income and achieve financial freedom so that you can do what you want whenever you want, you’re in the right place. Our goal is to simplify and make real estate investing easy for you. For more information, you can find us at www.jlm.realestate.
Jason Lee: All right, everyone, Welcome back to the podcast. This is your host, Jason Lee, and today I have my friend Eric Martel on the show. Eric, how you doing today?
Eric Martel: Very good. How are you, Jason?
Jason Lee: I’m doing great. Thanks for your time and coming on. The question I’d like to ask you first just to get the show going, is can you just tell the audience a little bit more about who you are and what you do?
Eric Martel: So yeah, I mean, currently I operate Martel turnkey. This is my main business right now and Martel turnkeys at turnkey rental provider. So, we basically buy distress property, renovate them, rent them out, and then sell them to investors who want to build a passive income portfolio, achieve financial freedom, retire early, or just retire.
Jason Lee: Very cool. And how did you get into real estate?
Eric Martel: Well, my first investment is I was 18 years old. I bought eight-unit apartment building when I was 18. And I just, you know, my story is kind of like, it’s kind of boring, but it’s kind. My parents were kind of like, like most people living in paycheck to paycheck and not being able to save. But I knew pretty early on that this was not the life I wanted. I wanted to build a business. I wanted to do something different. But there was a big gap between what my parent understood how the world was working and what I was seeing, what I was experiencing.
And I had a couple of very inspiring people that I saw in my little town that, you know, there was one guy that basically started with like a chip truck, you know, just selling french fries out of a truck, food truck. And then that drew into, like, he bought the lot where the truck was sitting, and then he bought, he built a restaurant, and then he built another restaurant, and then he had like a candy shop and flower shop, and just like, and he started with selling fries. That was like, it was mind blowing to me. And I was telling my parents about that. I just like he must, he’s a cheat, or he is like, he must be like, you know, something wrong with him, like, he’s a crook because he succeeded, so you must be correct. He must be doing something wrong.
Anyway, fast forward to 18 years old, and then I was you know, I was introduced to a real estate investor. He was quite successful. He had built his own, like, he had like a 36-unit apartment building. He was building a shopping center. He was building a nursing home as well, and quite successful. And he had a unique point of view in ways of doing it. And the thing is that this guy was just a community college teacher, and he was not teaching finance, math or real estate or anything like that. I think he was teaching, like geography or history or something like that. Just like a regular, He was, not a super well-paid job. He was not that smart. Well, I guess I can’t say that, but he was not smarter than, you know, He was not like, yeah, super smart, much smarter than anybody. He was not that much more street smart either. Like he was not he was just regular, like as regular can be. And he was successful.
He was, and then he agreed to mentor me, and that’s how I got my, my first my first apartment building. I said, oh, yeah, well, I, I can analyze numbers all day long, but I said, But Greg, I mean, I don’t have money. And he said, well, don’t worry about that. Well figure that out later. Just find the deal. And so, I analyzed a bunch of deals, probably like 400 and 500 deals to find one that was of where I could get like a hundred percent finance, and it was still cash flowing. So out of these 400 maybe more that I analyzed I found like two or three that, where the numbers worked. And then out of those, only one of them would agree to do seller financing for a portion of the deal. So, I got like a mortgage for the first piece of it.
I got a seller financing for the second piece, the down payment, what I would have to put as down payment. So, he covered that. And then I had my first apartment building. And you know, I still remember writing the check for the credit union that gave me the loan and just for the application, I think it was like 75 or 100 bucks. And I had $200 in the bank at the time, so I was like, well, this is better work because that’s cutting my assets in half. And yeah but was pretty good. So, credit union review is, was great because they were, it’s not like a bank. I went to a bunch of banks, and they don’t lend to people like me. They still don’t lend people like me for some reason. So, I have to always find like some kind of alternative source of financing for the deals.
Jason Lee: So, can you tell us more about the property? What was the, where was it located? What condition was the property in? Things like that.
Eric Martel: Yeah, so that time I was living in Montreal, so it was, I would say it was a, the class property. So it was, you know, obviously it was not like the ideal kind of place, but it was cash flowing and it was in pretty bad shape. So, I would put a little bit of money towards like the minimum amount of money possible towards the, you know, kind of fixing the thing that was like a, you know, pipe broke, and then I fixed that. And then the one mistake I made is that I didn’t have property management you know, associate, you know, a company that would handle that. So, I was the property management, I was collecting, I was fixing, I was doing all that.
And that’s because my, my mentor never used property management. He always manages his deals. And then he had some people that would, you know, fix things and he would just, he would just do it that way. So that’s why I didn’t have that. But, so still, yeah, it’s kind of just did the minimum expenses, minimum repairs as possible. These were a lot of these people were on kind of like section eight welfare. There were a couple of people that were that were retired, so they were living on their pension and stuff like that. So, these guys were good. The welfare people were a different story. Well, I guess most of them were good. It was just like one, one tenant that was not that good.
Jason Lee: Interesting. So, going back to your mentor a little bit, you, you say that he’s a very average guy, didn’t have anything special, but what are some things that he taught you that made him successful?
Eric Martel: Yeah, so he was very disciplined. So every day, every single day he would wake up at like five in the morning, and he would sit at the table and he would just, he would just think for an hour solid about business, about investing, about he was, he imagine if you spend an hour every single day just thinking about business you know, and then you go to work after that. It kind of, it changes your mindset no matter what, because your first thought of the day are about your business are about your finances, and then you go to work, but you still have that in your mind as you go to work. And that really sets the priority, I think, in your brain and in your mind that this is my business is more important. And so, I think that, and as part of kind like the shift that a lot of people have to do, when people introduce themselves at meetups, they say, Oh, I’m a software developer. I’m a doctor, I’m a this, no, I mean, your number one is maybe a doctor is different, but your number one is being a real estate investor or something like that. That should be your focus. And the rest is just like a gig to pay the bills unless you’re passionate about something, a little bit different.
But still, I mean, you need to focus. Your number one focus should be you, your financial freedom, your finances. That should be the priority.
So many people out there are just like, I know people that some of my friends, I mean, they’re making a lot of money in their job. They have like their senior executive and stuff like that, and they’re making, but they’re making so much, they don’t know what to do. They have no time investing it creatively. So, they all put their money in without really thinking in a stock market or say, oh, I’m just going to throw, they just throw money at things and hoping that something will stick because they don’t have time to analyze. They don’t have time to strategize and think about the impact that it might have in the future.
Well said. So, I kind want to dive into your journey more. So, you didn’t really talk about you know, so after you buy that first apartment complex what was the next step? Like, how did you scale your business up to becoming a very successful real estate investor?
Eric Martel: Yeah, and that was kind of the problem for me is that I had no job. I was still at university when I bought that apartment building. So, and this is where I, some of the problems that when I, things that I could have done that I didn’t do. And I was introduced to a whole bunch of other investors out there, and you know, they were doing all kinds of different things. A lot of people were doing like value add. They would buy distress properties, renovate them, resell them all kinds of things like that. And I was, I thought, well, I can’t do that because I don’t have money to do that. And now that I’m thinking back, I said, well, you know, the money is not that important. Maybe I can work with them. I could find deals for them. I can manage projects for them. Something like that, you know, I could have been more creative about how I approach things and kind of like, stick with that field and then continue to be immersed in real estate investing.
So that’s kind of like where my mistake at the time. I was not really thinking at, oh, real estate is the thing in real estate is going to be my vehicle for the future. I was kind of like thinking about it, about kind of like a side gig. And I should have taken it, you know, you know, I was 18 years old. I was not thinking, oh, I want to be financially free. I want to have like passive income and retire early. It was like, I didn’t think that way. I just like, So as I became, I became an actuary. I graduated from university, became an actuary or an associate actuary, and then started working in that I worked in Toronto, I worked in and then I tried to find real estate investment in Toronto. But, you know, there was nothing, Numbers didn’t make sense. At the time too Like the interest rate was like, you know, 15, 16% interest rate. So, a lot of things didn’t work at that interest rate.
But I kept, I always had that in the back of my mind as I, well, I want to do this, I want to do this. And then I eventually, I moved to California in the San Francisco Bay area. And again, I tried, the first thing I did is tried to look for apartment to rent, like apartment rental, like apartment buildings because that’s what I knew. And, you know, again, the numbers didn’t make sense. I could get it to cash flow if I throw enough money at it, but in the end, like, you know, I will have, the return on investment was very bad. It was like, like 1% or 2%. So, I decided to leave my money in the stock market. So, we moved in 2000. So, I leave my money in the stock market. I had tons of stock options also. And then we had the Dot com crash in 2001. And then basically I was wiped out. A few months prior to that, my financial advisor said, hey, you’re done. You’re just like, you can retire now. You have all the money that you need to retire. And I said, Okay, yeah, yeah. But then I was looking for somewhere else to invest, few months later Dot com crash.
I was done three months earlier, and now I had to work another 30 years after that. So yeah, so that kind of, that really forced me to think differently. I wanted to be in control of my investment, in control of the business. You know, so that’s why I kind of like, I did more like you know, other types of investment, business investment. So, we did like low carb grocery store, we did the gourmet sauce company. We did a couple of different businesses like that with the hope that we could generate passive income, we would have it manage. But eventually I came back to real estate investing if one of my son came back to me and said, I want to be a real estate investor. And I was like, wow, okay, let’s think about this.
Again, we tried to look first things in, that was in, about seven, eight, maybe eight years ago, eight, nine years ago. And we tried to find something in the San Francisco Bay area. We couldn’t find anything again. So, we tried all kinds of different strategies. Maybe we can do wholesaling, maybe we can do probate, maybe we can do you know, all kinds of, there’s no foreclosure in Bay Area, but this, we can try to do commercial. We tried to do all kinds of different things.
Commercial was the closest that we got to a deal. But the financing was horrible. We actually had a property, a mixed-use property. It was a commercial that we wanted to redo and redevelop as a mixed-use property about like six units on top, and then commercial at the bottom, and retail. And that was like $12 million just to get the building. And then after that it was holding the building, the permitting process and all that kind of stuff, which we allocated like two years for that. And just you know, the cost of holding the building and all of that. So, we tried to get a partner that would help us finance this. And you know, everybody that we talk to, they just say, oh, yeah, no, we will finance you no problem as soon as you get the permit, we will finance you.
But that’s cost, Yeah, cost a lot of money for the first 12 million, and then after that to hold the property for two or three years waiting for the permit and having the architect and all that kind of expenses on top of that. So, we decide to go back to the drawing board and say, all, let’s think about this again, and focus again on passive income and then say, Okay, well we can’t get passive income here, but where can we get passive income? Where can we get cash flowing properties? And so that’s where we, I was thinking more like strategically at the time and say, Okay, well what do I want? Like what kind of criteria? I want to have landlord [16:08 inaudible]. I want to have something that is, has sustainable growth in terms of population, in terms of business, and I want low unemployment, I want low you know, and then I was looking for kind of at a high level, at that 1% rules. I was looking at the median rent, I was looking at the median house price, and then kind of looking at it is that around 1%, 1% rule. And if it was, then I would go in and look at some of the neighborhoods a little bit more closely.
And that’s kind of how we ended up doing this. We started in Memphis. That was the first house we bought, [16:47 inaudible] find a property manager. I had my other son actually call like all the property managers, all the realtors out there. And we made like hundreds of phone calls. Luckily, realtors don’t reply back. So, there was only a couple that called back. And that was your basically, your criteria. They called back. That’s good. And then, but we’re very lucky. That guy was phenomenal, very responsive, like, and like on the ball with everything really directed where we needed to buy and all that.
So, we did the first deal there in Memphis, Tennessee. And yeah, that was fantastic, the single-family rental. And then we bought one, then after that we bought two, and then we bought three and four, and then we started building, doing the same in Cleveland and in St. Louis. And that’s kind of how we got started with our passive income portfolio.
Jason Lee: Very cool. And have you guys raised any money, or has it all been your own cash?
Eric Martel: So, at the beginning it was all cash. I had a pretty good, I was working as an independent consultant here in the department here in the Bay area. And then so I was pretty well paid. I had money to basically finance a lot of that, but eventually, as you know, the portfolio grew yeah, I needed some more money. Friends and family were asking, hey, what are you doing? And blah, blah, blah. And then, hey, would you like to be a private money lender for our deals. And they say, Okay, yeah, sure, what is private? What is private money lending? So, I had, we had to educate them on what private money lending was and how their money was secured and where we would invest. And then that’s where things like you invest and where in Memphis, like, then it’s like, why in Memphis and blah, blah, blah.
And you know, same thing with Cleveland, why would you invest there? And so, we had to answer all of these questions, but when people looked at the numbers, they would say, Okay, wow, this is, this is good. The cash flow after financing cash on cash return with, like, at the time it was like 12% and 14%. So yeah, Yeah, we were like, it was unbelievable, but was kind of like, yeah and then some of them were even, like, we had some of them that were like infinite basically because we, after refinancing, we got all our money out. So, it was you know, we had a few like that, few unicorns like that.
But yeah, so that’s kind of how that worked out. And then these same people then were like, Okay, well maybe I want to invest with you, Like, do you want to sell your finished house? Like when it’s, maybe I can buy it from you? And then we thought, Okay, well maybe this is a business here. Maybe we can do, like, we can resell some of these properties and that would help with our cash and grow our passive income portfolio. And so that’s kind of, that’s how Martel turnkey started. We never intended to start to start this business. We were just doing our own little thing. And yeah, some people got interested. And now we have, like, you know, we have like a number of people we’re doing 180 flips, rental flips a year right now. So, yeah, so things are doing pretty well.
Jason Lee: Wow. Have you expanded to other markets or are you still just in those cities?
Eric Martel: Pretty much in those cities, we expanded to Detroit. We also, in Ohio, we expanded in Cincinnati, Ohio, we expanded in Dayton, Ohio, Pittsburgh. We’re also looking at Pittsburgh. Yeah, so these are pretty much the market. So that that we’re looking at right now. There’s a couple of other markets that we try to kind of build a team. It’s very hard to build a team in some areas, but Detroit right now is a very good market, highly recommended. We’re not actually in Detroit itself. We’re kind of like out outside the outskirt and some, like a more not affluent, but more like workforce housing kind of development where it’s, you know, there’s some pride of ownership and there’s you know, things have been cleaned up a little bit.
Jason Lee: So, you live in Los Angeles and you’re managing a lot of projects and a lot of deals out of state. I’m sure there will be a lot of people listening to the show who are asking, you know, how are you doing so much out of state? You get some insight that.
Eric Martel: Yeah, so I mean, we had to, the first thing that we did is really build a team on the ground. So, we would have, we make sure that we have the property management in place, and we would also make sure that we had the realtor, the realtor in place. These two people would basically have, they would be able to connect us with everybody else, like the contractor, all that kind of stuff. And they would be, they would manage them. We would pay like a project management fee and all of that, and then would handle the project. We’d, you know, we’d figure out the process for getting them paid and all that kind of stuff. But so it was, it was great for them too, because they would get like new houses, new clients, and you know, they would get money also for managing the project.
So that was very good. But that was the number one, this is our number one criterion when we go in the market is do we have the team to get there? And that’s why some of these markets, I mean, they were not successful. We are constantly looking for someone that would be able to drive this market, like Pittsburgh for example, it’s kind of touch and go. We don’t really have a good property management team there. They’re okay, but they’re not like the other property managers. Same thing with like Birmingham, it’s going to again, touch and go in those, that market. So, we’re not doing that many, we’re not doing, we’re just the only one doing deals in there. We’re not selling anything to our client base until we find like someone that’s solid, then we can go, we can go crazy.
Jason Lee: Yeah. So, it’s who not how, right? You’re finding the right people in place to make sure that you can have a good system. So, your investments, you know, do well.
Eric Martel: Yeah. It’s absolutely true. It’s all about who, and then we obviously had the team at Martel Turnkey, like the salespeople and all that. So, my search and my search even like today is finding A-players, and I don’t, we can talk about what you’re going to do later. I just want to find A players because I know that if I have an A-player, doesn’t matter. Like, I’m going to be able to find something for that person to do. They’re going to figure it out, they’re going to drive it, and they’re going to make more money than, so happy to do that. And we’re looking for all kinds of a players. I mean, I mentioned to you earlier that you know, we have that tokenized real estate fund, Martel and Dust. So, this is basically a portfolio of single-family rentals that are on the blockchain. And we’re looking, right now, we’re looking for an A player someone that’s going to be driving this, and eventually that person is going to be you know, is going to be the CEO of that company. So that’s the kind of person that we’re looking for. And if I had an A player right now that was not busy, I have a lot of A players, but they’re all busy. If I had an A player right now that was not busy, I’d say, Okay, well go here and lead this, drive this. And I know they would do well, I mean, they just, these kinds of people are just driven. They’re going to figure it out, they’re going to, you know, and that’s, that’s what I’m looking for people is number one, is absolutely number one. And then you can do anything you want after that.
Jason Lee: So, you’re talking about using the blockchain to invest in real estate, right? So, mm-hmm. <Affirmative>. Yeah. Do you mean that people who own like crypto can invest in your fund and buy real estate with you?
Eric Martel: Yeah, so yeah, if you have crypto, but even if you have, like I mean, if you have cash and you want to invest in it, I mean, you would have to obviously convert it into a stable point first to buy the to buy the tokens, the security tokens that we’re selling. Security token is $50, and it gives you a share, a piece of the company that owns the real estate. So, you’d be an owner, a member of that LLC. And then you know, so everything that the LLC owns, you own, you are part owner of that and any cash flow, you get that as well. Appreciation, you get that as well.
Jason Lee: So, a token is like a share of the LLC.
Eric Martel: Exactly, yeah. So, we’re using something that’s called the security token. So yeah, it’s basically represent a share. And the reason why we’re doing this is that if you invest right now in other, if you’re invest in a private [25:56 inaudible], or if you invest in which has its own sets of problems and constraints, I should say if I invest in a fund, in a syndication and stuff like that, my money is tied into these syndication for like three to five years. And it’s very hard to get out of that. I mean, I have to talk to the GP and say, hey, can you give me my, I need my money. You know, and you know, you’re going to, you’re going to lose profit, you’re going to lose, it’s going to cost you to get your money out.
So, with this, I mean, we are working right now to have it on open exchanges, but in like three or four months, you’ll be able to take this token and you’re going to be able to go on To Zero, for example, which is an open exchange platform for selling these security tokens. And you’ll be able to offer your tokens, hey, I want to sell my token on [26:47 inaudible] invest on this open exchange. And then another investor could say, oh yeah, I want to buy, I want to buy it, and stuff like that. So that’s much more liquid, much more you know, and then if you, also the other thing with real estate’s, that’s the problem, right? It’s not very liquid. If even if I own an apartment building, two or $3 million apartment building, I can refinance, I can do all kinds of things, use it as collateral, cross collateral on something else, but I don’t really like doing that.
But you know, it’s kind of not liquid. If I want to take, I need $300,000 out of that. If I don’t have the equity, all of that, then I’m kind of stuck. I have to either sell the whole thing and that takes like six months to do. Or I have to figure out some other way of, I can’t do it basically. So, the advantage of the token is that I could own like a million dollars or $2 million in tokens, but if I want to sell a hundred thousand dollars, I think I can just go and take a hundred thousand dollars’ worth of token and sell them on open exchange. So that’s the advantage. And I think this is really where things are going to go in the future. There’s a lot of different experiments, I call them experiments or projects out there that are about fractionalizing real estate, breaking a piece of real estate asset into multiple parts. One of them is arrive home, for example which is not even using blockchain, and it’s kind of it’s just an LLC and they sell membership. There’s also another one called Lofty AI that basically have tokens on the blockchain, but it’s one house at a time that they’re selling.
But that’s on the blockchain and you can invest in that. Our is going to be, when you’re buying in, you’re buying into a portfolio of real estate assets. So, there’s going to be single family rentals in that portfolio and cash flowing from day one from the first minute that you own It’s basically cash flowing.
Jason Lee: Are you going to have like different tokens for different LLCs? Cause different LLCs will own different properties, or it’ll be all one LLC.
Eric Martel: So, the one LLC is going to own all the properties, all the single-family rentals.
Jason Lee: Oh, very cool. Very cool idea.
Eric Martel: Yeah. So that’s what you’re buying into a portfolio. I mean, a lot of these other projects, you’re buying one house at a time. And the problem is that if I want to diversify, then, then I have to kind of buy more houses. So, I’m just placing my bets. This one, once this portfolio achieves, like, it’s like has like 400 or 500 single family rentals in the portfolio, your token, even if you put $50, you’re $50 technically, you know, would be spread around, around the 400 houses that’s in the portfolio. You would take advantage of the cash flow of all the properties in the portfolio.
Jason Lee: Very cool. Well, Eric, looks like you got a great story, and you got a lot of cool businesses going on. So con to conclude the show, I got two more questions for you. One question is, if the audience wants to go learn more about you, how can they do so?
Eric Martel: So, my website, www.marteleric.com. So, it has a lot of things that I do has linked to my book stuff, Stop Trading Your Time for money, as well as two of my YouTube channels. They’re out there. And all kinds of other things that, you know, if you want to find me on Twitter or not Twitter, Instagram or TikTok have that in there. Instagram and TikTok is Martel Eric Official. So, you can find me there. And then the other thing, obviously www.martelturnkey.com and www.martelinvest.com.
Jason Lee: Awesome. And last but not least you know, if you want the audience to take away one, you know, key piece of advice from this podcast, what would that be?
Eric Martel: So, my thinking is that you want to make sure that you take action. So, you figure out where you want to go, you need to focus on your finances and you need to take action and think about it, make it your priority every day. That’s what I learned from my mentor is like, every day you need to spend some time, dedicate the time to focus on your own finances.
Jason Lee: Great advice. Eric, Well thank you so much again for your time and hope you can stay in touch. Thank you so much for joining the show.
Eric Martel: Yeah, thank you Jason.
[End of Transcript]