MichaelC

Hello, Roger, and welcome to The Naked Investor. We're glad to have you in our new and rapidly growing community. As for me, I'm in the Fort Lauderdale area. Where are you in the Sunshine State, (which is damn cold as I write this :ph34r:)

Rental rates are not as readily identifiable as purchase price, which in all but six states is public domain. When you find yourself interested in a property where you are not sure of what the rental market is, there are a few steps you can follow to try and determine that info: 1) check the newspapers to see what the comps in the area are listing for; 2) check with the local Realtors office. Most have property management divisions within the office and can quote you a price range; 3) check with a local rental agency; and 4) call old FRBO ads and ask the owners of properties that have already been rented what they received for their property.

Yes, Michael, you always need a cushion of time to market the property to potential tenant/buyers or assignees. But that time before the Agreement begins isn't "down time" for you. Not at all. The homeowner clearly understands your role in the deal. They also understand because of your position that you have a need and right to access the property. Review Page 1, Paragraph 7. It gives you the right to Access, which allows you to show and market the property so you can run your business profitably.

No. There will be one Assignment of Agreement signed by all three parties: you, the Assignor; the Assignee, and last, the seller. If you review this Agreement, Joe, I think it will be clear. If not, let me know and we'll go over it some more.

Just to be clear, Joe, the Assignment of Agreement form must be signed between you, (assignor), and the person you are assigning the deal to, (assignee). The Assignment of Agreement should be signed by the seller. However, because the seller has already given you the authority to assign and/or sublet without his written permission when he signed the Residential Lease with Option to Purchase Agreement, his further signature is not mandatory. It is simply additional, as you say, CYA, which ain't a bad thing.

Joe, you have a copy of the contract, right? If you read Page 2, Paragraph 15, you'll see you clearly have the right to sublet and assign. However, it's advisable to have an additional document, the Assignment of Agreement, to further protect yourself. Is it necessary? Probably not, but it doesn't hurt.

Every situation and Realtor are different, of course. In general with the situation you described I would think that with the seller agreeing to pay the Realtor his/her commission, that would probably make everyone happy. As for "going around" a Realtor, my advice is don't. It is illegal and unethical. Any short term gains you derive from doing so will surely come back at some point in time and nip you on the heels. You may be sued or, worse still in my opinion, your reputation in the community will be tarnished. Your reputation as an honest businessperson is invaluable to your long term success in this business. A typical listing agreement between a homeowner and a Realtor allows them the right to cancel. However, if a homeowner decides he wants to save $20K in Realtor fees, and decides to cancel after the Realtor has shown you the property, the homeowner is still responsible for paying that commission should you buy the property. If the Realtor should find out, you can be positive a lawsuit will follow. This is something you want no part of. If a homeowner wants to do business with you, tell him to contact you when his listing is either cancelled or expired.

Good idea, Michael! I'd love to hear any success stories from the young and the new out there among us. Let me know about the deal, send me a picture, and I'll post all the gory and wonderful details on the Real Deals page. We'll brag about your successes to all the World! And while you're at it, you can also advertise it for free, right here on this board in the FOR SALE, LEASE, LEASE PURCHASE forum.

Any homeowner has the right to stipulate no pets or no smoking. No pets is not at all unusual. No smoking is not as commonplace, but is becoming more so as the anti smoking movement rolls on. When you meet a homeowner who has these rules in place, it isn't a big deal. Keep in mind you have a choice to reject any property if you deem the homeowner to be problematic. Remember: you're looking for the motivated seller. You never want to be the motivated buyer! If any tenant/buyer breaks a rule, let's say the No Pets rule, you would need to explain to them what the lease they signed stipulates. That should take care of it. If not, you have the option of voiding the Agreement and pursuing their eviction through the local court.

When I have the signed Assignment of Agreement form in my hand, (which is when I also collect the Assignment fee), that is when I contact the homeowner to explain to them what I've done and what it all means to them. I also arrange to meet with the homeowner to further get their signature on it, as well. And, yes, it is standard procedure to have in your agreement with the homeowner the right to sublet and/or assign that agreement. No exceptions. Without it, there is no way you do the deal. Lastly, yes, assigning the agreement to another investor is a very real possibility. Why not? Maybe you are looking for quick cash and he/she is looking at the property with a longer time frame. Or, perhaps it isn't conveniently located for you, but for the other investor it is. Sure, the possiblilty of assigning to other investors is one you should keep open.

Natasha, it is always preferable not to do real estate transactions in your personal name. Doing so puts your personal assets and credit on the line. And even though we go into these deals with the best of intentions, in these times of litigation lotto, too many things can go wrong. Protect yourself. Depending upon your personal situation and the state you reside, there is no one best way to protecting yourself. Ask around of other investors to see what they recommend, for starters. Then, run it by an attorney or a CPA to get some professional opinions. Here in Florida, as in many states these days, setting up an LLC is all of five minutes online.

Natasha, if you are looking to expand your business to outside of your area, specifically into other states, then I would say it behooves you to find a trusted assistant in that location. Be it a realtor, a friend or family member, another investor through the local real estate investment club, etc. Perhaps some targeted advertising in the area you want to expand to will generate some quality prospects you can interview. Good luck.

I don't think either way is going to make a huge difference in the response, Ty. Of course, the best way to find out is to keep track of which ad generates more, and better quality, calls. Try both and let us know. Personally, I'd go with Rent to Own on top. It's always been my preferred way and seems to generate much interest.

Joe, assignments handled incorrectly can be a problem for you as an investor. First, of course, you need to have that right to do so in the Agreement between you and the homeowner. Be careful that the Agreement notes specifically that by assigning your Agreement to another party that you are released from any liabilities, (Residential Lease with Option to Purchase Agreement, Page 2, Paragraph 15 ), in the event something unexpected arises. In addition, we use the Assignment of Agreement form to further cover our butt and protect ourselves in the deal. I don't hit the homeowner over the head with the idea I may assign our Agreement. There is no benefit to frightening or worrying a homeowner if you are not even going to do an assignment in the first place. If and when it happens, I notify them and fully explain what I'm doing and why. I further explain that all of the terms of the original Agreement between them and I remain intact. Nothing changes but who their payment is coming from. They may squawk a bit at first, but it usually goes fine once things are explained and once they realize you have the legal right to do just this.

Andrew, my experience has been that, for the most part, your typical real estate agent gets in the way of doing creative deals. Not all, mind you, but most. I have nothing against Realtors, and I think they provide a necessary service in the community. However, their training is not in touch with ours as creative real estate investors. Talk about lease purchasing, seller carry backs, and flips, and you'll this . Their first concern, understandably, is their commission. Talk about any kind of nothing down deal and their isn't any deal. I always try to avoid Realtors just for these reasons. I have never found there to be a shortage of FSBO's or FRBO's available to talk with. And as you market yourself, these FSBO's and FRBO's will be calling you.

Hi, George. Good question, and one I am asked frequently. I know there are those who will dispute this, but I am a big believer in cold calling as a necessity for the novice investor. Not exclusive of marketing, but in addition to it. Let me explain......... When we are new to this business, we lack knowledge and confidence. All of us. My way of thinking is that it makes no sense to spend your money on various marketing techniques in the very beginning of your new career. Why? Because you probably don't know what to say when the calls come in. And you'll sound unsure and green. So, that hot prospect you paid to have call you senses your nervousness and uncertainty and decides to move on. What do you have to show for your marketing dollars? Nothing but an eroding belief system. This is a sure fire way to kill your enthusiasm and your career before it's even off the ground. I think the process of picking up the telephone and calling on every FSBO and FRBO you can find in your local newspapers is an invaluable educational experience. As newbies we all need to come out of our comfort zone. Making cold calls is a great first step. You'll get kicked around, sure. You'll be nervous, of course. But, you will get over your fear of cold calling homeowners in about a dozen phone calls. You'll see the worst that can happen is someone tells you to get lost. Big deal! I tell that to my in laws all the time and they keep coming back . During this time as you are calling on these homeowners you will begin to recognize the same questions and concerns from many of them. After answering these same questions, something happens. You know the answers and you're comfortable answering them. (Are those your feet on your desk right about now?) Now, you sound relaxed and knowledgeable to the person on the other end. They stay on the phone longer and are listening to what you say. Cold calling is a critical part of the educational process and the learning curve I feel very strongly about. It is the best way to get comfortable and professional talking about lease purchasing. Do this and you will be better prepared when the homeowners start calling you. Perhaps after a few months and a few deals you'll find you don't need to cold call anymore because now your marketing campaign is in high gear and the calls are consistenly coming in. Great! But the foundation was laid in the very beginning with those calls you were making.

Hello, Adam, and welcome to The Naked Investor. Delighted to have you as a new member, and I hope you spend some time with us here. You mentioned this site looks like it might be poised for a nice growth spurt. We certainly are aiming for that, too. We are receiving new registrants on the board daily, and it's folks like you who are contributing to that growth. It's worth repeating: this site is all about learning, sharing, having fun in the process, and doing deals. That's the bottom line here. Hope we hear from you often.

Hello, Elegua, and welcome to The Naked Investor. Stick around and become a regular. We're happy to have you join our new community. I am not an attorney. With that out of the way I will offer you my opinion based on my experience as an investor. It is not illegal to advertise a house for sale or for lease purchase if you aren't the owner. I've done it literally hundreds of times, and can do so because I am acting as a principal in the deal. My agreement with the homeowner gives me control of the property and an interest in it. As such I am not acting as a realtor and I am not misleading anyone into thinking I am a realtor. In fact, I make it a point to state that I am not one when I am speaking with a potential purchaser or tenant/buyer.

JoeS, I am not familiar with the specifics of Columbus, OH. But I will try and answer your question with some general advice. Yes, there are legal and illegal ways of profitting in real estate. Despite what some will have you believe, flipping is not illegal. To protect your position in the deal, you should place it under some type of contract that allows you to assign, or flip that contract to another interested party. It could be a Purchase Agreement, or a Lease with Option to Purchase Agreement, or it could be a Pure Option Agreement, as well. This is perfectly acceptable and legal and will allow you to protect your position and get your cash immediately without having to go through the closing process. Collect an assignment fee, get out of the deal, and move on to your next five.......

Dee Dee, I don't expect to put down money. Sometimes, though, it is necessary to make the deal happen. I look at the big picture. If I want the property, if the numbers all work, if I look at it and know this is a quick property to move based on previous experience with similar properties in the neighborhood, I am not opposed to putting some option money down to secure the deal and get control. Little, or nothing down, is always better. But in some instances that isn't possible and then you have a decision to make. Still, it isn't a bad thing to be able to put down, say, $1200 to control a $150K property for 36 months, is it? The same due diligence required for the purchase of any property is required when you lease purchase a property. also. This includes property value, local rental market, condition of the property, liens, etc. Lastly, if the seller has a second, or even third and fourth mortage, that is not a factor in what we pay them. The market, Dee Dee is what we concern ourselves with. If the rental market is, say, between $700 and $1000 per month, as wise investors we will try and get in at the lower end, and turn around and charge our tenant/buyer the higher end. That spread is one of our profit centers. If the homeowner has terrible financing and has an $1100 per month payment, we are not going to pay an above market rent to cover their monthly cost. The homeowner would have a decision to make: whether or not they want to do this deal with you and accept a several hundred dollar per month negative cash flow. (It beats making payments on a vacant property). On the other hand, if the homeowner has a monthly payment well below the going market rent, we certainly will try to get in at as low a monthly payment as possible. What I'm saying is that the owner's monthly cost is not necessarily what our cost will be. As you can see, there are a number of factors at play.

Hello, dretke, and welcome to The Naked Investor. I hope you spend some time on our new boards. In the meantime, let's see if we can help you out........... For starters, I agree that lease purchasing is an excellent way for a novice real estate investor to get started. It's not the only way, mind you, but it is one way where someone with little or no cash and experience can put together a deal or two and get on their way. To answer your specific question, we may or may not pay any option money to the homeowner when we set up a lease purchase deal with them. Typically, I don't. My general rule of thumb is if I must pay some amount of option consideration I limit it to the equivalent of one month's rent. Even then, I don't pay the homeowner until I collect my option consideration from my tenant/buyer. There are exceptions, of course. But for the most part the vast majority of deals we do will be nothing out of pocket. As an investor you should get used to that way of controlling properties through lease purchasing. If a homeowner is insisting on a large amount of cash, move on. There are other, more motivated sellers awaiting your help and problem solving abilities. As for research, are you referring to comping out the value of a house?

Hello, Bill, and welcome to The Naked Investor. If you like our community here, please don't hesitate to register and become a regular. I'm sure you have much to contribute to our new and growing board. A quandry, indeed, but a good one as I see it. You describe the other two gents as "decent and level headed". So, you asking for a fair share for your efforts is not unreasonable. They probably won't think so, either. In fact, the good doc has already offered a 50/50 split if you'll work some deals with him. Seems to me you just need to settle on an amount before sitting down to dinner. Don't go there uncertain of what you want. You need to figure your bottom line, and you want to seem professional and organized. At the meeting, if you can, it would be greatly beneficial to you to try and get the other two to quote you a figure first. We are all aware, (at least we should be), that in negotiations he who talks first loses. For example, you may be thinking $2000, and your partner may be thinking $2500. By keeping quiet you just made an additional $500 per deal. If you are unable to make your partners speak first, then you need to state what you want and, more importantly, why. Have some reasons to back up your position. Based on your description of your partners and how things are working between you, I think you'll be fine. It sounds as if you've put together a mutually beneficial partnership. Let us know how you do, and stick around. Bill.

Could you be more specific with what you mean by business plan, Michael? I believe it lays out for the reader the step by step procedure necessary to complete your first of what I assume will be many lease purchase deals. So, in that sense, yes, my book outlines in detail a plan for running your business.

Andrew, the best gauge of whether or not an ad works is to watch the frequency it runs. If you consistently see an ad in the newspaper that is telling you that it is effectively pulling phone calls. On the other hand, if you see an ad once or twice, and then don't see it again, it apparently didn't work. There are many factors at work with the effectiveness of an ad. The area of the country, the time of the year, the length of time you give it to run, etc. Truth is, the best way to learn what works for you is to try different advertisements and keep careful records as to their effectiveness. In a short while you should be able to make an informed decision as to which ads gives you the best bang for your buck. Keep in mind that any ad is better than no advertising. In other words: market, market, and market some more!!

Joe, thank you for your order. And let me thank you, also, for your participation and contributions to the board in its early stages. Both are very much appreciated. I'll be sending you an email momentarily with delivery confirmation.