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Retire In Style, Here’s How by Stephanie Mojica
n a down economy, buying a property for investment purposes and renting it out to a tenant might seem a risky proposition. But Chris Dannenfeldt and his team at Property Partners I are helping people across the country create passive income through residential investments and literally “save their retirement.” Dannenfeldt, based out of Dallas, anchors the retirement funds or other cash assets on behalf of his clients into the purchase of residential real estate. The potential annual return on investment is 12 to 16 percent. As of February 2012, occupancy rates for about 8,500 houses managed through Property Partners I are 97.4 percent. The company also manages about 32,000 mortgage notes with a default rate of about .4 percent. A typical Property Partners I client is between the ages of 45 to 65, earning a six-figure income, has at least $100,000 in investable assets and is not an experienced real estate investor. “They are people that have been used to doing the traditional things like stocks, bonds, and mutual funds,” Dannenfeldt said. “And they’re dissatisfied with their returns. They are tired of taking losses. They’re worried about what they’re going to do for retirement.” Unlike many of his competitors, Dannenfeldt’s company also takes an active role in the management and maintenance of clients’ real estate investments. Representatives handle payment of taxes, insurance, repairs and any problems that may require the eviction of a tenant. This literally creates monthly passive income for investors. Property Partners I purchases maintenance contracts and weaves the cost into their clients’ initial investment. Using maintenance contracts can save thousands of dollars in one transaction, Dannenfeldt said. A roof for which a general contractor would charge an independent real estate investor $3,500 costs Property Partners I about $700 through its maintenance contracts. “[Clients] will not ever get any kind of phone call ever on, ‘You owe me money Realty411Guide.com
for maintenance,” Dannenfeldt said. “And we do all that work with our own in-house employees.” The firm also mitigates vacancy risks for its investors through an income rental guarantee. Investors can use a modest portion of their monthly profits to purchase the guarantee. This step will keep the monthly revenues coming even if the property becomes vacant due to a renter moving on or being evicted. Property Partners I representatives work with qualified attorneys who can help investors legally shift their assets. The lawyers also help clients create the corporate structures necessary to limit their financial liability in the event that a tenant or visitor to the owned property is injured or has another type of legal claim. The company protects its investors as well as its reputation by conducting a thorough financial analysis before working with a client. Dannenfeldt wants to ensure that each investor has reserve accounts of liquid assets in case of unexpected job loss or another financial emergency before he invests into purchasing real estate. Likewise, Property Partners I strongly encourages potential clients to use existing assets such as retirement accounts rather than borrowing money to invest. Some exceptions apply, such as for investors who have at millions in assets and wish to take on some debt to purchase multiple properties rather than use up all cash reserves. “As a corporate decision, in today’s economic circumstances I am opposed to
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debt,” Dannenfeldt said. “So I would rather someone purchase one property for cash instead of three properties with debt.” Dannenfeldt encourages clients to think of buying real estate that they do not intend to live in as a business. “For example, people buy a franchise
Chris Dannenfeldt
like a McDonald’s,” Dannenfeldt said. “And they don’t buy McDonald’s because they want to buy the hamburgers. They buy McDonald’s because there is a system in place to produce results, which is income to them.” Property Partners I representatives thoroughly study the demographics of each market before setting up investors with properties in the region. Their goal is to become the number one provider of safe and well-maintained low-income rental housing in each market they target, without getting involved with government-subsidized programs such as Section 8. “Over the last three years, we’ve completely phased out of Section 8,” Dannenfeldt said. “The reason being that we have seen across the country some really dramatic cuts in funding that people qualify for because of the cutback of funding in those programs. So before that had become an issue, we had already started phasing out.” Once someone begins renting a home managed by Property Partners I, they typically stay in that residence or move to anContinued on pg. 25
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