MichaelC

I think my previous reply was at around 1:00PM, not AM. As for what time I go to bed, well, I'm married. So, the answer is long after my wife does....... I'm part Al Bundy.

Hey, with all the boys from the Great North hangin' here, how come I haven't received any maple syrup yet?

Roger, when I first started, my primary source of marketing was newspaper advertising. I would run my ad every Sunday in the Albuquerque Journal: AAA Credit/References. Family needs lease with purchase option in good area. Phone number. This little three line ad cost me about $13 per week, and I ran it for years. I would consistenly receive three to four calls weekly, and sometimes more. The bottom line is this generated many deals over the years. Now, here in Florida the cost of newspsper ads is very expensive and I don't see it as practical for someone starting out. Another main source of my marketing campaign was, and is, networking. I always let people know what I do. Especially those who might be in a position to help me: Realtors, mortgage brokers, title company employees, etc. After years in this business you will also find that deals come to you. For example, I can't count the number of deals I have received as a result of a neighbor or friend of someone who I bailed out with a lease purchase deal giving me a call. The moral of the story: there is no one best way to market. What works for you in your area may not be the best for someone else in their part of the world. My advice is to always market within your budget, (you don't want to go broke in six weeks and quit on your dream), diversify your marketing for maximum exposure, and keep careful records of what the results are of your various marketing efforts. Within three to four months, maybe less, maybe more, you'll have an accurate representation of what is working and where to spend your marketing efforts and dollars.

Steven, I know we spoke about this at some length, but I wanted to reply for the good of all the members here. Typically, most of the deals I do will require nothing down, literally. In some cases, I'm willing to pay the equivalent of up to one month's rent as nonrefundable option money. More than that, and you really need to question the motivation of the seller, and who is in control of the deal. There are exceptions, of course, but the scenario above is a general overview of the approach I take, and the way I teach my students to do so.

Hi, Steven. Glad to see you've come on board here. As we spoke about on the telephone, I think the condo market lends itself well to creative real estate and lease purchasing. Lord knows there are no shortage of them down here in Florida. The thing you need to be alert to are the specific rules of the specific condo association. You need to be certain, for example, they allow rentals in the building. As for co-ops, I am not familiar with how they work. Perhaps someone will come along who can offer us some insight on this.

Andrew, forming an LLC does not usually require the services of an attorney. I did my own, (two actually), here in FL. It took all of five minutes online, at a total cost of about $125 each. Most states have a similar setup, and you can start by going to Oregon's. Once there, go to the Corporation Division page, or something similar, and you'll see what is involved in forming your LLC. As for putting a personal residence into your LLC, there is no one correct answer. Everyone's personal situation can vary. This is an instance where an attorney or even a CPA would be worth a few bucks to determine what is best for you.

LLC stands for Limited Liability Company.

That's fine, Michael. Always work within your budget. Remember a few things about your marketing plan. First, be consistent. Do not run one or two ads, and then decide advertising doesn't work because you haven't yet cashed a check for $3,000. You are laying the foundation for your business. Give it and yourself a chance at success. The other thing I want to stress is to diversify your marketing. Newspaper ads are great. But, that is only one form of marketing. Use others, as many as you can think of and afford, and keep careful records as to what works best. After two months or so, you'll have a better idea of which marketing methods are most effective and you can streamline and progress from there.

February 6, 2003: Nationwide teleconference call with the members of KLA Group, LLC. (Charlotte, NC). The teleconference is at 10:00PM ET. Please contact Ken Little at 704-395-1781 for information. March 29, 2003: Richmond Creative Investors Association April 9, 2003: Wealth in Real Estate Group, Jacksonville, FL. June 17, 2003: Oklahoma City REIA, Oklahoma City, OK. July 11, 2003: San Jose Real Estate Investors Club, San Jose, CA. August 14, 2003: Mid-Atlantic Real Estate Investors Association, Baltimore, MD. September 18, 2003: Tulsa REIA, Tulsa, OK. October 8, 2003: Long Island Real Estate Investors Association, Melville, NY. October 21, 2003: Mid Hudson Valley REIA, Poughkeepsie, NY. April 13, 2004: Real Estate Navigators, Pensacola, FL. July 7, 2004: Northern Illinois REA, McHenry, IL. September 18, 2004: Sacramento Valley REIC, Rocklin, CA. October 25, 2004: Maryland Real Estate Exchange Network, Baltimore, MD. February 24-26, 2005: Real Estate Investing Expo, Las Vegas, NV. July 19, 2005: Mid-Peninsual REI, Redwood City, CA. July 22-24, 2005: Creating Wealth Through Financial Independence

If the homeowner is residing in a property you obviously will not be making any payments to him, will you? I don't know that you can "speed up the process", or that you would even need to. For example, if a homeowner is having a new house built, I don't care how much money you wave under his nose, he isn't going anywhere because he can't. My experience has been that most homeowners are as anxious as you are to get out and move on. They want as much as you to have a tenant/buyer in the property, and rent payments coming in. The bottom line is you won't usually need to concern yourself with a slow moving homeowner. If, though, you do, it isn't a big deal. You set up the start date out far enough to give you ample time to find a tenant/buyer and you're set.

Escape, or weasel clauses as we like to call them, definitely need to be in the agreements you use. In addition to to an inspection clause, moneyman, we have in our Agreements the right to cancel in the event we are unsuccessful finding a satisfactory tenant/buyer. I also have an Early Termination clause which limits my liability to a maximum of one month's rent in the event I need to break my Lease with Option to Purchase Agreement with the homeowner.

Hi, Michael. Good to hear you're hitting the ground running. Business cards, newspaper ads, marketing, marketing, marketing! Make those calls, too! I cannot emphasize this enough! Cold calling is a great hands on educational experience. It helps you to understand how many homeowners think and what their concerns are. It also enables you to gain a comfort level for speaking about lease purchasing, and better prepares you for when your marketing efforts start to pull in calls. 4/2/2 means 4 bedrooms, 2 bathrooms, 2 car garage. Personally, I have never liked two bedroom houses. The market for them is small, and they don't have the interest or the appreciation that you receive with three and four bedroom houses. I've dealt with a few and they were usually slow to move. However, if the numbers are right I certainly wouldn't rule one out if a good deal came along.

Seller financing is an actual sale of a property. The homeowner is acting as the bank and providing the loan for the purchaser to buy the property. Instead of you needing to make payments to Washington Mutual each month, you would make your payments to the seller. A lease option, of course, is not a sale but, rather, a lease with an option to purchase. There is no financing required when the Lease with Option to Purchase Agreement is signed because title does not change hands. If, and when the option is exercised is when you would need to concern yourself with obtaining financing, which may or may not be seller financing.

I guess the first question I would have is how would you have the phone number of the homeowner? If the property is listed with a Realtor, it would be the Realtor's sign and phone number on the front lawn, and the Realtor's ad in the newspaper would have the Realtor's phone number. That said, let's just say for argument sake that you did somehow have the homeowner's number and called, knowing that the property was listed with a Realtor. I think you'd be walking a fine line here, Andrew. You are soliciting business from a homeowner while he/she is under a listing agreement. On the other hand, someone else would make the argument that since you had never seen the property, or spoken with any Realtor about it, you have done nothing unethical. My opinion is this is asking for a problem. You may go many years without a problem with this approach. Then, one day, an angry Realtor discovers what you have done, and presses on with a legal action against the homeowner, and possibly even you. Who needs it? There are plenty of FSBO's, Andrew. Don't cause yourself any unneeded aggravation.

Moneyman, no need to apologize about posting or length of posts. That's what this board is here for. I agree wholeheartedly that educating yourself first, at least to some degree, is the prudent way to approach any new venture. Ignorance may be bliss, but it can also be damn expensive! I guess I have a biased perspective, but I think for the new real estate investor, lease purchasing can be one of the best ways to break in. Done correctly, it is low risk and requires little to no startup capital. Nor is it technically difficult, either. Overall, I think lease purchasing provides a nice comfort zone for most new creative real estate investors. A little bit of studying, a little guidance, spend some time here, and you'll be fine. We'll do all we can to shorten your learning curve.

Moneyman, first of all, welcome to The Naked Investor. I hope you become a regular part of our new community. I think your question is too vague for anyone to answer. What type of deals are you looking to transact? What is your background? What studying/experience do you have, if any? Etc..... If you can provide us with more information I'm sure we can offer some advice and opinions and get you on your way.

Good info, Andrew. Thank you.

Who'd a thunk it? Tampa Bay whomps on big, bad Philly. Being a Giants fan, can't say I'm sorry to see the Eagles get their butts kicked! -_-

Michael, your tenant/buyer is responsible for all maintenance and repairs, as per Page 3, Paragraph 18. Let's say an air conditioning compressor breaks, and requires replacement. That could run, say, $2,000. That is the responsibility of the tenant/buyer. Not you, not the homeowner. Again, Page 3, Paragraph 18.

Michael, Page 1, Paragraph 5 refers to who you notify in the event of a serious problem. It has nothing to do with the amount of money someone is responsible for. Reread it and I think you'll see what I mean. It's Paragraph 4 that covers the Maintenance and Repair costs.

A voice mail system is not a bad thing. However, I don't think you need one today. Let your business develop and as it does, you'll know when you need such a thing. In the meantime, save your money. As for having a database of potential tenant/buyers, the primary way to get such a list is to advertise for prospects. Run a "dummy" ad for a nonexistent typical home in your area. As you receive calls, explain that the property is already taken. Proceed to collect information from all your callers as to who they are, what they want, etc. I have included the Tenant/Buyer Profile for just this purpose, Michael.

The Residential Lease with Option to Purchase Agreement is the specific agreement you use between yourself and the homeowner. It gives you quite a bit more leeway and control than you could otherwise expect. The Residential Lease Agreement and the Option to Purchase Agreement are the two agreements you would use between yourself and your tenant/buyer. These Agreements are quite a bit more restrictive on the tenant/buyer and, again, keeps you in control of the deal. I suggest you review the chapter on the Agreements in my book. You will see that before each Agreement is explained the situation it is to be used. Page 3, Paragraph 18: the blank would be filled in with the name of the Esrow company you and the homeowner agree to use, if you are using one. If not, that paragraph can be deleted. Page 3, Paragraph 19b: this is where you state who is responsible for closing costs. Generally, I write in "Tenant/Buyer will pay all allowable closing costs." Not to worry, though, because you pass along all closing costs to your tenant/buyer. Page 1, Paragraph 4 is where the Agreement describes maintenance and repair costs and responsibilities. Simply fill in the agreed to amount in the blank. Lastly, all parties signing the Agreements should initial each page, also.

Correct. When you assign the Agreement you are selling your interest in the property. The terms originally agreed to remain the same. The homeowner is not affected except that he/she will be receiving their monthly payments from the party you assigned the contract to. Same with your tenant/buyer. If you assign the Agreement after you have a tenant/buyer already in place, nothing changes except the address the tenant/buyer mails their monthly rent payment to. If the tenant/buyer does, in fact, exercise their option to purchase, then of course the party you assigned the Agreement to back when is the party who profits at the close. Lastly, an Assignment of Agreement does not need to be recorded. However, the assignee can, and should record a new Memorandum of Option to protect his position, just as you did.

C'mon, Andrew! If it drops below 60 degrees F in south Florida there is absolute chaos and panic in the streets! And we wonder why the Dolphins can't win in December when they visit the Jets !

Michael, you are correct when you say that even if I need to put down some option consideration it still does not come out of my pocket. For example, if I agree to pay the homeowner $1500 option consideration, it is also agreed that I will make that payment when I collect option consideration from my tenant/buyer. Say I collect $4500. I pay the homeowner his $1500, and pocket the remaining $3000, (which is promptly given to my wife ). If and when the tenant/buyer exercises his option to purchase, he would be credited the full $4500 toward the purchase price.