Guest post by Larry Arth:

After investing in real estate for over 20 years, I have spent my last 12 years enjoying the passive investments I have found by investing in turnkey (done for you ) real estate investments.

Like many investors, I too started investing the old fashion way. After buying duplexes, triplexes and four-plexes that all taught me a lot along the way, I was ready to promote myself to investments that would have less of the domestic challenges that come from multiple families living together under one roof.

After managing my own properties for close to 20 years, I eventually hired property managers as I no longer had the time or desire to deal with tenants or fixing leaky toilets. I was now a true passive investor, but I was struggling to find these good investment properties.

Finding Good Investment Properties

I had the clarity that I did indeed wanted to invest in single-family homes. I wanted investments that would of course produce a cash flow while creating great equity build-up through appreciation that I could execute a perfect exit strategy of selling to the retail home-buyer looking for a place to house their families.

I spent hours which turned into days then weeks and then months searching properties that may be good investments. Then trying to establish fair market rents in the area and establish what my expenses would be. There was little room for error here as your cash flow and total R.O.I. was at stake.

Then I Found Turnkey Investing

My “Ah-Ha” was like many others as we were trying to take a single-family home and convert it into a small little business. This process meant we have to do all the diligence and take all the risk in buying property and insuring we can make cash flowing equity building business from the property. I discovered that the risks of turnkey investing have been absorbed by the turnkey companies, and we could actually acquire these homes as a performing asset already rehabbed and rented with tenants and leases in place. The calculations and guess work had been completed, and now we could simply confirm the properties meet our investing criteria and invest in a little business that is already established.

7 benefits of Investing in Turnkey Real Estate

Properties are already performing assets: The guess work is removed and the properties are already rented and performing as assets in the best locations with property management and exit strategies in place.

Best investing markets: As an investor, you want to invest in only the best most sustainable markets. The nice thing is these companies can only survive in these best markets as well. If you cannot find a turnkey company in a particular city, there is probably a great reason why. Real estate is all about location, and turnkey companies will not start a business in a non-sustainable market. Find a great turnkey company, and you probably found a great market to invest in (of course you will want to still perform your diligence on the turnkey company)

Knowledgeable purchases within the sweet spot of the market: The owners and operators of these turnkey companies usually live in the investment areas and have intimate knowledge of the micro markets there, so they know which streets to buy on that will produce the highest demand for resale. Knowing schools, price points of properties, and areas that are prominently owner-occupied are keys to help to you reap the highest reward when selling.

Buyer/investor reduction of risk: The uncertainties of buying properties and converting them to a small rental business, establishing the true cost of any rehab work, the cost of utilities, taxes, insurances, etc. are removed from the buyer. You simply need to evaluate if the investment meets your turnkey investing criteria.

Benefit from economies of scale: Because turnkey companies have relationships with banks and typically buy 10, 20, and even 30 properties per month that close quickly with cash purchase, they tend to get better pricing than an individual can get for the purchase of the property. Then they have their own rehab construction crew that can renovate cheaper than an individual can by hiring contractors themselves since they can buy material in bulk.

Vested interest in the success of your portfolio: Like any good business, turnkey companies want to earn your business today and again in the future. To do this, they are motivated to work with investors and assist in making sure your investment rewards you well. They want to manage your properties and get you great overall repairs with as few headaches as possible so they can hopefully sell you another property in the future. The only way to accomplish this is to sell you a property at a fair price today, run it efficiently and help your investment make you money.

Real estate professionals teams in place: As an individual, buying property requires you to find great tradespeople like lenders, attorneys for entity structuring, and accountants. Turnkey companies already have a variety of proven professionals that they can share with you to make the process easier for you.

Which way makes the most sense to you?

Active investors sometimes enjoy doing all this research and diligence. Passive investors tend to have less time on their hands or simply do not have the desire to do all these tasks, so turnkey investing is a great solution for them.

It took me 20 years of doing investments the hard way before I discovered turnkey investing. Now that I know turnkey investing exists, I no longer have to waste all my time and money doing it the hard way. I can reduce my risk and transfer it to the turnkey companies so I can do what true investors do – invest instead of micromanage details.

Larry Arth is the founder and CEO of Equity Builders Group. Larry is an international recognized consultant and speaker, and he assists investors, both foreign and domestic, to realize their investment potential. He analyzes locations for economic strength that will yield the most sustainable return on investment. Visit Larry’s website.

Guest article by: Charles P. Castellon, Esq.

The law has always struggled to keep up with technology. Back in the 70’s, the legal system was not ready to address issues stemming “test tube” babies and currently, there are some gray areas involving digital assets in estate planning. In the still-young internet age, it will continue to be difficult for the legal system to keep up. An interesting example in the real estate world relates to tenants’ use of Airbnb to earn money from their properties.

Airbnb is a wildly successful web-based company that matches visitors seeking to rent a room with lodging providers. What Uber is to the taxi industry, Airbnb is to hotels. Recently, a New York judge ruled to evict a tenant in a rent-controlled apartment for using Airbnb to rent three of the sprawling apartment’s four bedrooms to guests. The tenant earned an astounding $61,000 in nine months of rental activity.

The judge ruled this subleasing violated the lease and New York’s and rent-controlled housing laws. Though there are unique facts to this case and New York landlord-tenant laws are very different than Florida’s, all Florida real estate investors should carefully consider how the Airbnb revolution may affect them.

Perhaps the first and most important issue Florida landlords should consider is liability. The constant “revolving door of strangers” that alarmed the New York tenant’s neighbors should be a real concern to Florida property owners. As title owner to the home, the landlord is likely to be held liable in court for any harm an Airbnb guest may commit while using the property. If a guest renting one room were to sexually assault a guest in another room, it is a near certainty the victim would sue everyone–the owner, tenant and perpetrator and try to collect damages against any or all. Which one is most likely to have assets the victim could pursue?

A similar liability concern involves an injury to the Airbnb guest in the property. Though it’s not advisable, some investor owners don’t carry hazard insurance on their free and clear properties and instead suggest or require the tenant to get a renter’s policy. If the owner does have insurance, the next risk is whether the carrier may deny coverage based on the “commercial” use of the home effectively being operated as a hotel, or deny the claim for some other reason.

Fortunately, in our market economy, every problem leads to an opportunity for profit by solving it. The “sharing” economy has spawned insurance pools to cover this new category of risk.

The next question is whether the landlord wants to allow the tenant to make money off the property. Some owners may not mind and would feel more secure about collecting the rent if the tenant has an additional income source. Others may demand a piece of the action if there is extra income to be earned. Most landlords would likely be swayed by the liability concerns and as a result, try to prevent the sub-leasing.

A landlord may draft a lease clearly prohibiting using the property as a hotel with heavy penalties, but enforcement may be difficult. Periodically monitoring Arbnb for listings of the investor’s properties may be one answer, but other sites are likely to arise in the wake of Airbnb’s success, just as Lyft came along to compete with Uber for passengers. With time being the most scarce resource for most investors, trying to root out such rentals (that may never occur) on all potential platforms cannot be considered a wise investment.

The best solution to this potential problem is a well-written lease with a heavy hammer of penalties for violations for landlords who don’t want their properties used as hotels. For landlords who don’t object or want to participate in the money-making opportunity, a different lease can be written.

No matter what, the tenant should sign an air-tight indemnification agreement in favor of the landlord. This means the tenant would fully cover the landlord in the event of a claim. Of course, most tenants will not have the money to protect the landlord, so insurance coverage will be essential.

The first step for landlords is to be aware of developments in our society such as Airbnb and how it affects them. The next is to make a well-considered strategic plan to contain the risk of this web-based platform and either prevent its use or share in the profits.

Guest article by: Ron Richards

In 2008, my colleague Steve Perez and I pondered what our next move would be. The “Housing Crisis” was in full-effect, and the company we worked for at the time had just dissolved. The company we worked for was a real estate investment brokerage. We learned a lot and thought the show was over based on where the economy was headed. Despite the economic downturn, we felt that the investment real estate business model was still solid. We were confident in our knowledge and knew that with a little capital, we could make it better. Our idea of making the industry better is what motivated Steve and I to collaborate and start Altura Investment Realty. Having a good grasp of the industry, we wanted to build something special. We kept asking ourselves, “Wouldn’t it be great if…?” Well, after successfully implementing new guidelines for our company, the rest is history. Since 2008, Altura has bought and sold approximately 1,500 residential properties, on and off market, with a focus on selling homes to clients who wanted to build rental portfolios and UP NOW perform “flips.” In the end, we have created a successful boutique firm selling inventory to investors all over the United States and abroad. It’s been a great run, and Altura continues to do great things.

As we continue to innovate, we find ourselves asking the same question, “Wouldn’t it be great if…?” However, this time our collective knowledge gained from running Altura allowed us to adopt the perspective of the investor. For the last several years, Steve and I have both been heavily active in building our own rental portfolio and perform several flips a year. We took note on how investors made decisions on which properties to buy and adopted best practices to build lucrative portfolios. This new perspective generated a lot of questions about the number of resources readily available to help investors make sound investment decisions. At that moment, Steve and I asked each other, “Wouldn’t it be great if…?”

This September, we will be launching an Orlando-based tech startup catering to the real estate investment space. Soon thereafter, we will be introducing the platform across other Florida markets and then nationwide. And it will be 100% free for any user.

This new company is called Kuzza. Yep, just pronounce the U and you have Kuzza, an online real estate brokerage that is data-driven, analytical, and socially engaging – and here’s why we are so excited to bring this to market:

DATA
Locating inventory can be very challenging, especially in our investor-savvy locale, Orlando. But, in order to get the best deals, one must have up-to-the minute data. If a property sits on the market for a few days, then chances are there are many others who have beat you to the punch. At Kuzza, we don’t want that happening, and that’s why have we have a direct data-feed from the Multiple Listing Service (MLS). Having this direct feed gives you access to a property as soon as it hits the market. Not the next day, but the very minute it’s listed. At the same time, Kuzza has licensed to receive the largest source of “off-market” inventory. Driving around looking for “For Sale By Owner” signs is called “Driving for Dollars.” A great technique for sure, as I have done so much of it myself, but wouldn’t it be great to have that data faster and at your fingertips? Kuzza will provide you the most current list of properties on and off market to help you build a list of prospective investments. Further, with the use of custom, saved searches, Kuzza will notify the user via email as soon as a property hits the market.

ANALYTICAL
Having the tools to analyze a property and its return on investment (ROI) is as equally important to finding the deal itself. So, wouldn’t it be great if you could have access to sales comps, rental comps, and investment calculators? Yes, of course it would! At Kuzza, we are providing the tools to help you assess deals and provide multiple levels of due diligence with respect to valuations. First, we provide a Sales Comps Map with the most similar comps available matching the subject home allowing a user to know if the offer is worth the value. Second, we provide a Rental Comps Map displaying similar homes and their rental amounts in a given neighborhood. And third, Kuzza is introducing to its map feature a boundary overlay, which will allow a user to compare a property to other sales in a geographic location. The boundary overlay was customized specifically for Kuzza users. From a map view, every parcel will have specs of a home (beds, baths, and square footage), the sales price, and the month and year of that sale. Kuzza aims to turn users into their own appraisers. While everyone else wonders how much he or she should offer when it’s time to submit a contract, Kuzza users can utilize one of the online investment calculators. It doesn’t matter your strategy – rental or flip – Kuzza has a calculator for each. By giving the user sales data coupled with investment calculators, each user will be able to determine their ROI and make offers with confidence.

SOCIALLY ENGAGING
The real estate investment community is driven by each day’s success story. Just take a look at the investor clubs here in Orlando. They have a lot of members who meet monthly to discuss potential deals and other ways to help ensure success. Many times, members will partner on deals because they each bring a certain strength to the table. For me personally, I have often found it helpful to call or email a peer within the industry for advice. So, wouldn’t it be great to collaborate with other investors on the same platform all while researching properties? What if users had the ability to socially engage with a market’s leading lenders and vendors (including contractors)? How about joining group discussions regarding investment topics of interest to you? If you answered yes, yes, and yes, then Kuzza is definitely worth checking into.

We anticipate launching Kuzza in September 2015 to be a resource for real estate investors. The site will not be live until our official launch day, but every day prior to launch our tech startup will be working hard to fill investor needs for making better and more lucrative investments. Wouldn’t it be great if you had Kuzza at your fingertips? To learn more about our launch, and to stay updated about our new venture, visit www.kuzza.com to join our mailing list.

Ron Richards, co-founder of Kuzza.

Guest article by Augie Byllott:

I am often asked the best way to acquire investment properties. My answer is usually, “It depends…” Those of you who know me, know I have a sense of humor, but this answer is not intended to be either evasive or funny. My favorite acquisition technique is with owner financing, but that usually requires a free and clear property. How many of those free and clear properties come along with a motivated seller attached? Certainly there aren’t as many as I’d like.  Then there’s buying with cash…I’d rather save that resource for the killer deals that have to be closed quickly in exchange for a massive profit.

For houses with an existing mortgage, my favorite way is to purchase the property using the T.O.P.S. method (Taking Over Payments System) also known as “buying subject to” the existing mortgage.  The general problem with the term “subject to” is that most people just don’t understand it. T.O.P.S.is so simple a child can understand it!

It’s a great way to buy pretty houses without spending a pretty penny. Simply put, I step into the seller’s position and begin making their payments at an agreed upon date. The ownership of the property is transferred to me or my entity and the mortgage remains in the seller’s name until I, or more typically my tenant/buyer, pays it off when they obtain new financing and purchase the home.

Why is this a good deal for the seller, you ask? The first thing you have to remember is that successful investors only deal with motivated sellers! This is a good deal for the seller because I can close within a matter of days, as there’s no lengthy loan qualification and approval process.  Additionally, I can typically pay them a higher price because I don’t have any financing costs.

Why is this a good deal for the bank? In many cases, the seller is either in default or soon will be. Banks make money by taking in deposits at one rate and lending them out at a higher rate; simply, they earn a spread on their depositor’s money.

When a loan, which is an asset, becomes delinquent, the lender’s income stream is interrupted.  When their assets become non-performing, the lender is required by the Fed to increase their reserves.  These reserves reduce the amount of capital available for new loans. So, does the bank prefer payments or would they rather foreclose and take the house back? The easy answer: with foreclosure costs running at about $40,000 per house; banks want payments, not houses!

Finally, why is it good for the investor? First, we have no funding cost.  Second, since the loan is not in our name it doesn’t appear on our credit report. Third, our creditworthiness doesn’t come into play because we are not qualifying for a new loan.  But the best reason is that “subject to” transactions offer you the broadest array of exit strategies!

Additionally, even if you have a super credit score, most lenders will limit you to a maximum of 4 loans (if you can get them) and you’ll be required to make a substantial down payment (25 – 30%).  If the loans aren’t in your name and you don’t have to qualify for them, just how many of these will you be limited to? That’s right, no limit!  I met an investor from Ohio who has over 200 properties; not a single mortgage was in his own name. That’s quite a retirement portfolio he’s built.

My preference is to be a “transaction engineer” rather than restrict my business to any one strategy, technique or area of investing.  I love finding profitable opportunities in all types of transactions from pre-foreclosures to renovation projects or owner financing, to split funding.  But a core element of my acquisitions strategy is using “T.O.P.S.” transactions and it should be a critical part of yours.

By the way, did you know that you can do T.O.P.S. transactions for buying real estate with your self-directed IRA?

Augie Byllott helps people buy and sell homes and investment properties in all price ranges without using lots of cash or credit. He is a full time real estate investor, speaker and coach with Personal Action Coaching & Training. He is also a founding member of Common Wealth Trust Services, LLC a land trust service provider.