1

Volume

WATERWERKS PUBLISHING

A Realistic Guide To Purchasing Premium Real Estate

Purchase Course book

Written By Arturo D. Hill IV

A REALISTIC GUIDE TO PURCHASING PREMIUM REAL ESTATE

Purchase America Coursebook

? WaterWerks Publications P.O. Box 742 Chicago Heights, Illinois 60426 waterwerkspublish@yahoo.com

IMPORTANT READ THI S FIRST!

Dear Friend, Your decision to purchase this Coursebook may be one of the smartest moves youve ever made! This Coursebook delivers on every promise Ive made with regards to buying property using the lease purchase contract. Every idea youre about to read has been tested and is proven to work. These ideas have already proven to be profitable to thousands of people just like you, and Im confident they can be profitable for you, too. There are so many great ideas in this Coursebook that it is hard to keep track of them all. Youll find a lot of tips and techniques throughout each lesson that will relate to a variety of topics, so dont be thrown off if an idea seems a little off the chapters title at first. It doesnt matter if youre only interested in certain aspects of the lease purchase contract, there will be many, and I mean many, tips in all the sections that apply to everyone. If youre not interested in becoming an investor, you will be tempted to not read the chapter about investors. But you will also find many more tips and techniques that apply to certain approaches since you may be trying to accomplish a similar goal. So please be sure to study this entire course, regardless of your approach to real estate. In this Coursebook, you will discover the most advanced ideas, methods and techniques relating to the lease purchase contract used by the top people in the field. Moreover, you will soon discover how you can personally take advantage of this remarkable contract. Ive tried it all the conventional, the unconventional, the risqu, the complicated, the simple, the common and even the No Money Down crazy. And today, I am more successful than I ever imagined I could be. I make more money in a single month than I did in a year when I sold software-consulting services. Many gurus who market similar products sell them with mammoth 300-page manuals, a never-ending supply of audio tapes and audio CDs, countless video tapes and one even offers his course with ten, thats right, I said ten, personalized coaching session (via the phone) on lease purchase contracts. Oh, bye the way, did mention that their coaching fee is usually five times the price of their course. I am here to tell you that you dont need all of that nonsense. Time is a precious commodity and you are busy enough already. What you need is the same information condensed into a format that is quick to read and easy to understand. You also need fresh ideas a nd marketing tactics. You need The Purchase America Coursebook, and it delivers. It may have occurred to you to ask, Why is he revealing all of this information? Well, you see Im mad. To be blunt, I am as mad as I have ever been about something. I frequently get calls from clients who have been burned by some of these gurus who offer to teach someone how to make ga-zillion dollars in real estate. In fact, real estate can be the fastest way to lose a lot of money quickly, if youre not knowledgeable and have the appropriate advisors and information at disposal. You could put this information together yourself, but with great difficulty and at an outrageous cost. One of the seminars I recently attended only revealed a small portion of what youre about to read, but cost a great-deal more
ii

than $200.00 (the price of this course) to attend. It really bothers me to see the consumer blind-sided like this, and its time for someone to be on your side. When I write, it is in a no-nonsense, clear-cut and highly precise manner. I am precise, but I dont have a Ph.D. in English, so if its literary style youre looking for, you might find my writing unusual or even annoying. But if its information youre after and not stylish prose, then this Coursebook is for you! I have spent countless hours researching the subject matter of the lease purchase contract. I have owned four companies since the age of eighteen, all of which were successful. I have learned from the best of the best about creative real estate and have spent a lot of money gathering information about the lease purchase contract. All of this knowledge is now yours! All you have to do is read on. I encourage you to do so, that your life and the quality of life will be greatly changed. I wish you all the best in accomplishing your goals. God Bless You,

Arturo D. Hill IV WaterWerks Publishing, Inc.

Version 2.3 Copyright 1998, 1999, 2000, 2001 WaterWerks Publishing, Inc. All Rights Reserved. No representation or warranty as to legality, accuracy, correctness, or acceptance of the enclosed forms by any State or jurisdiction is indicated. Should you decide to use any of the enclosed forms in your legal affairs, consult with an attorney. The author assumes no liability for the use (or misuse) of the material contained in this publication, or any of the related materials. The author is not making, nor assuming, implicitly or explicitly, any capacity of representation or a fiduciary relationship. This material is offered for information purposes only and the reader uses this material assuming all risk upon them. This material may not be reproduced or retransmitted in any way.

iii

ACKNOWLEDGEMENTS

I first acknowledge God, who is the head of my life for without His grace and mercy; and the sacrifice of His son Jesus Christ on Calvary, I would not be able to overcome the adversities in life and therefore could never reach my true potential. This Coursebook is dedicated to my precious mama, who has always inspired me with her ability to quickly learn any subject matter and master it. I have emulated you all of my life. Again thanks, to my wonderful mama for her love, joy, encouragement, tolerance and consummate prayers; To my courageous son, To my four younger sisters; To my little cousin (who has been like a sister); Thanks to my long-time friend, Danny Turner, for always believing in my madcap ventures and me. In loving memory of my grandma, who will forever live on in my heart. Special Thanks: To all of you who purchased this Coursebook; may the grace of God and His eternal peace rest and abide with you always.

iv

PREFACE
You miss out on 100% of the opportunities you dont pursue. I will remember this day for the rest of my life. I was sitting in my office sifting through an endless pile of mail when I came across another notice from my company requesting (demanding) my presence at one of their all too frequent motivational business development meetings. It seemed like my full-time job had switched from developing software to becoming a brainwashed yes-man who would sacrifice anything for his company. Well, thats all fine and dandy, but that doesnt pay the bill collectors. One weekend I found myself sitting in a grand hotel ballroom with around fifty other senior software consultants from my company; all with the same unfulfilled look on their faces. For the third straight time I heard these words come out of the speakers mouth, our IT department has decided that a strategic re-organization of IT staff throughout the company would be implemented immediately I instantly tuned the speaker out and fell into a daydream about how I could break free from the chains of working for someone else and become independent and wealthy on my own terms. My thoughts took me back to when I did something that will remain in my memory forever; I set out to buy my first investment property to help me get through college. I had $750.00 in the bank and a hunger to stop throwing money away on quarterly dorm room payments. I had no idea what I was going to do, just that I wanted an investment property and I wanted it for very little money down. I remembered glancing through one of my creative real estate courses, which I attended earlier that year. The course referred to the features and benefits of lease purchase contracts. I seemed to recall that if money was tight, a lease purchase contract could be the key to opening the front door of my new investment property. After two weeks of unsuccessfully searching through the classified ads for properties being sold on lease purchase contracts, I decided to change my tactics. I would become proactive in my search. I would approach sellers and persuade them to sell to me on my terms. A week passed until I found the right seller. He had just purchased another property in a nearby suburb and he could no longer afford to make two mortgage payments. He didnt need much cash and he was motivated to sell his property it was a HUD property, which he purchased and had been trying to rent. Praise the Lord! Perfect! I offered him full price for his property if he would lease purchase it to me for twelve months, allowing me time to save for the rest of the down payment. Furthermore, I asked him to give me a $400.00 credit per month towards the purchase of the property. Much to my surprise, he agreed! I saved as much money as I could and six months later I closed on my first investment property. I sold it two years later for a profit of $15,000 and bought another investment property closer to my place of work. The speaker droned on, thank you for attending, and dont ever forget, being in good hands is the only place to be" On that note I stood, walked to my car, and drove home with a burning desire to set myself free. My plan for freedom would deal with real estate in one form or another, but I did not know exactly how. A month later I found my half-completed freedom plan all but decomposing in my to do file. I didnt have time to finish it. There were too many things to do around the office; mounting projects, endless telephone calls, visits from internal clients complaining about their applications, which I had no control over. I was losing my mind! Then one day my mother, aware of my desire to begin serious investing in real estate, invited me over to her house for dinner. Little did I know that she had a hidden agenda (my mom likes doing stuff like that)? She wanted to introduce me to a friend of hers named James. He was soft-spoken, well
v

dressed and appeared to be in his mid fifties. He asked what I did for a living. I told him that I was a disgruntle Software Architect. He told me that he was a full-time real estate investor. He continued, I have owned hundreds of homes, apartment buildings and commercial buildings and next week I am closing on several local drug store chain buildings I couldnt believe it! He didnt look like a real estate tycoon, he didnt talk like a real estate tycoon, he didnt act like a real estate tycoon, but I was struck by the thought: If this guy can do it, I would do it too! So, I just did it! Because of my previous dealings in real estate, I knew that lease purchase contracts worked and worked well. I knew that they created win-win situations for both the buyer and the seller and I knew this was the best way to do business. So I went to seminars, libraries and bookstores to get as much information as I could that related to lease purchase contracts. I finally finished my freedom plan that focused on one objective: to make $500,000.00 as quickly as I could using the lease purchase contract. Things were looking grim I had $1,000 in the bank and $10,000 in credit card debts. I was making enough money to just cover the bills. I remembered reading somewhere that if I owned my property I had something called equity. So I did a little research to find out what equity was. After some minor investigation, I discovered that I potentially had thousands of dollars sitting in my property. I went to see my fraternity brother, Milton, who owned a local mortgage company. I asked him if I could get an equity loan from my property. He examined my application, reviewed my credit report, punched some buttons on his computer and two weeks later I had $20,000.00 cash in my hands. I immediately paid off my credit cards, spent some money repairing my property and bought a video store (using the same lease purchase methods). But wait! I still had over $5,000 burning a hole in my pocket. With my freedom plan in one hand, $5,000 in the other, and a longing to live my life on my own terms, I went out and negotiated the control of six more properties in a nine-month period. One of the properties I bought and then lease purchased to a tenant/buyer. Five of them I lease purchased from landlord/sellers and then concurrently sublet to tenant/buyers. To my surprise, my net cost was less than $1.00 to control all of these properties (in fact, I actually made a profit up front)! It would appear that the $5,000 was just the boost in confidence that I needed to finally take action. When the dust settled I had over $30,000 in the bank and my net worth increased from virtually nothing to over $100,000.00. Now, eleven years later, I am a full time real estate investor, and I am here to tell you that you can do the same thing if you Trust in God, obtain this knowledge and work hard. Keep in mind: If you do the possible, God will do the Impossible. I can do all things through Christ who strengthens me. - Philippians 4:13.

vi

Important Read This First! ................................................ ii ACKNOWLEDGEMENTS ................................................iv Preface........................................................................................v

Technique 2 Balance Sheet Candy (Let it Ride and I Love it When) ................................................................................... 18

DEVELOPING THE BATTLE PLAN ............1 LEASE PURCHASE DEFINED ...................................3 What is a Contract? ......................................................................3 What are the Key Elements to a Binding Real Estate Contract? .........................................................................................3 What is a Lease Purchase Contract? ........................................4 STEP-BY-STEP FOR TENANTS/BUYERS ................................................. 26 STEP-BY-STEP FOR LANDLORDS/SELLERS .......................................... 23

FEATURES & BENEFITS ........................5 Landlord/Seller Benefits ..............................................................5 Tenant/Buyer Benefits ..................................................................6 Investor Benefits ............................................................................8 Realtor Benefits ..............................................................................8 MARKETING TIPS .......................... 32 General Advice .............................................................................32 Finding Landlord/Sellers...........................................................32 ONE IN A MILLION - AIRE ................. 10 Finding Tenant/Buyers...............................................................33 Landlord/Seller Concerns .........................................................10 Finding Both..................................................................................33 Tenant/Buyer Concerns .............................................................11 Concerns of Both Parties ...........................................................11 Not a Concern, a Need to Know...............................................12 THE ART OF SELLING ...................... 34 Selling a Lease Purchase Contract .......................................... 35 Selling a Lease Purchase Contract to a Landlord/Seller...... 35 Selling a Lease Purchase Contract to a Tenant/Buyer......... 36 STEP-BY-STEP FOR INV ESTORS .. 13 Technique 1 Matchmaker (Quick Cash and Residual Income) ........................................................................................ 13 STEP-BY-STEP FOR REALTORS ...... 29

THE ART OF LANDLORDING ......... 38 Minimize Your Risk....................................................................38 Notes and Ideas.............................................................................39

INFORMATION GATHERING FORM LANDLORD/SELLER......................................................... 71 INFORMATION GATHERING FORM TENENT/BUYER................................................................. 72 REALTOR PROSPECTING FORM .................................. 73 RESIDENTIAL LEASE APPLICATION.......................... 74 RECEIPT FOR INVENTORY CHECKLIST AND LEASE ...................................................................................... 76 INVENTORY CHECKLIST ................................................ 77 Lead - Based Paint Disclosure ................................................ 79 MONTHLY STATEMENT TENANT COPY............... 80 LEASE/PURCHASE ADDENDUM.................................. 81 FOR DRUG-FREE HOUSING........................................... 81

BANKS, DEBT AND CREDIT .......... 40 General Information on Lenders.............................................40 Advice on Debt ..............................................................................42 Establishing or Reestablishing Credit....................................42

MODELING SUCCESS ............. 43

GETTING STARTED.................... 44 Explanation of Terms ............................................................. 45 APPENDIX A RECOMMENDED VIEWING ........... 47 APPENDIX B EQUITY CHARTS.................................. 48 APPENDIX C CASE STUDIES ....................................... 50 APPENDIX D MARKETING MATERIALS ............... 51 APPENDIX D FORMS....................................................... 58 REAL ESTATE OFFER TO LEASE PURCHASE .......... 60 REMOVEL OF SPECIFIED CONTINGENCY[IES]..... 61 UNIFORM LEASE PURCHASE AGREEMENT............ 62 REAL ESTATE LEASE AGREEMENT ........................... 64 ASSIGNMENT OF LEASE PURCHASE AGREEMENT .................................................................................................... 67 PROFIT CALCULATION WHEN BUYING................... 68 Improvements.......................................................................... 68 Cash Back .................................................................................. 68 MISCELLANEOUS ............................................................... 68 PROFIT CALCULATION WHEN RENTING................ 69 UP FRONT NET PROFIT ................................................... 69 BACK END NET PROFIT .................................................. 69 PROPERTY ANALYSIS FORM.......................................... 70

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Chapter

Developing the Battle Plan

Rent a home to a man and he has shelter. Give that man the option to buy that home, and he now has direction for his future.

he Purchase America Coursebook has one goal; to help you buy, sell, or invest in real estate using the best terms available to any free market in the world. You wont find any unnecessary information, only a clear, exact method to accomplish this goal. The Purchase America Coursebook is the culmination of countless seminars, courses, books, tapes, and, most importantly, years of experience, brought together into a clear and easy to understand format. A lot of people dont want you to have the information contained in this Coursebook. The two main offenders are lenders and Realtors (if youre a Realtor dont worry, you can use this knowledge to your advantage). Lenders make a living from charging interest on loans. In thirty years you could pay over $200,000.00 in interest alone on a $100,000.00 mortgage. Realtors make a living off of charging a commission when you buy or sell a home with them as your agent. Since a typical commission rate is 7% of the price of a home, you would pay $7,000.00 in Realtor commissions for a $100,000.00 home. This is nonsense! This Coursebook will show you how to save potentially hundreds of thousands of dollars by re-thinking your approach to buying, selling, or investing in real estate. If you are an investor, since nobody can predict the future, you better have a battle plan for economic survival in the twenty-first century. This Coursebook will teach you how to use the principles of leverage to prosper in a good economy, but more importantly, it will teach you how to thrive in a poor economy. The term lease purchase is commonly known by several other names such as rent-to-own, lease option, and lease with option to buy, all of which have essentially the same meaning. According to the Association of Progressive Rental Organizations, the rental industrys trade association, the rent-to-own business is more than forty years old, generates about $4.4 Billion in revenues for the industry, and serves nearly three million customers. It shows no signs of slowing down, in fact, all indications point to increased revenues for years to come.

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Long ago an entrepreneur devised a crazy plan for moving his otherwise difficult to sell inventory. He sold televisions and the economy was in terrible shape. He was a very intelligent businessman and he knew that people had an I want it, and I want it now temperament. Additionally, he observed that people could afford to make monthly payments, but just could not seem to save enough money to purchase his product outright. So he began advertising his televisions in the newspaper as Rent-To-Own, Just $15 Down and Easy Payments of $15 Per Month for 12 months. Since he was providing financing terms to assist the buyer, he could demand a higher sales price. From that time on, he did not have any problems selling his televisions. Another entrepreneur who sold furniture observed his friends success and began marketing in the same manner. Much to his delight, people came beating a path to his door. Televisions evolved into furniture, furniture into home appliances, home appliances into automobiles and automobiles have evolved into real estate. At one time, any person interested in buying or selling real estate with favorable terms made every effort to seek out a land contract. They were quick, easy and usually simple for both the buyer and seller. Land contracts now resemble the Model-T Ford and the lease purchase contract now resembles the Ford Thunderbird. It is quicker, easier and much less complicated for both the buyer and seller. People generally fear that which they do not understand. Lease purchase contracts are becoming increasingly popular throughout the free world, but have yet to become widely used. As such, there are no specific sets of rules that apply to structuring a lease purchase deal. You will not find someone who will provide you with a clear systematic formula nor with all the essential forms. Until now! I am a firm believer that experience is the greatest teacher and mistakes make up a substantial portion of that experience. Every time we make a mistake, we are less likely to make that mistake again especially if its a costly one. This is the inevitable learning curve that every person needs to overcome. No one can guarantee your results, however, the goal of The Purchase America Coursebook is to help you through that learning curve so that you can buy, sell or invest in your next property using the most powerful means available to the free world today; the lease purchase contract.

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Chapter

Lease Purchase Defined

The main idea of the lease purchase contracts is to control properties, not own them.

f you are unfamiliar with the workings of a lease purchase contract, pay close attention to this chapter. When you are comfortable with its contents, closely examine the two lease purchase agreements that are included and note the differences between them (one benefits the landlord/seller and one benefits the tenant/buyer).

What is a Contract?
A contract is an agreement between two or more persons (individuals, businesses, organizations, or government agencies) legally binding them to do, or to refrain from doing, a particular thing in exchange for something of value.

What are the Key Elements to a Binding Real Estate Contract?

1. Offer and Acceptance: Original signatures with no alterations to the contract. If the original offer is marked up and initialed by the party receiving it, then signed, this is not an offer and acceptance but a counter-offer. Any final agreement should be reduced to a final writing and signed by both parties. 2. Consideration: A bargained for exchange of something of value. Money is the most common form of consideration, but a promise to perform (i.e. a promise to pay) is also satisfactory. 3. In Writing: A real estate contract must be in writing. a. Identify the Parties: The full name of the parties must be on the contract. b. Identify the Property: At least the address, but preferably the legal description must be on the contract. c. Purchase Price: The amount of the sales price or a reasonably ascertainable figure (an appraisal to be completed at a future date) must be on the contract. d. Signatures: A real estate contract must be signed to be enforceable.

P U R C H A S E

A M E R I C A

C O U R S E B OOK

e. Legal Purpose: The contract is void if it calls for illegal action. f. Competent Parties: Minors, mentally impaired, drugged persons, etc. cannot enter into a contract. g. Meeting of the Minds: Each side must be clear as to the essential details, rights, and obligations of the contract.

What is a Lease Purchase Contract?

A lease purchase contract combines a basic lease contract with an optionto-purchase contract. The tenant/buyer pays to the landlord/seller a nonrefundable option deposit that is applied to the purchase price of the property. The tenant/buyer then pays to the landlord/seller a sum that is typical to the rental amount usually on a monthly basis. A portion of that monthly payment is then applied to the purchase price of the property. During, or at the end of the lease period, the tenant/buyer has exclusive right to sell their option interest; or buy the property under the terms to which both parties have previously agreed. Lease Agreement + Option-to-Purchase = Lease Purchase Contract

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Chapter

Features & Benefits

The best advertising is a great product.

he lease purchase contract is the quickest, easiest and least expensive way to buy, sell or invest in real estate. It replaces the typical adversarial relationship that usually exists between buyers and sellers with a win-win concept of transferring real estate ownership. As a result, it is highly sought after by those who are aware of its powerful features and benefits.

Landlord/Seller Benefits
If you are a landlord/seller and dont need much cash up front, the best way to get your full asking price and/or a higher than average rent for your home would be to lease purchase it. Since you are providing flexible financing to assist the tenant/buyer and you are offering value, the tenant/buyer is more willing to pay a higher sales price and higher than average rent. Tenant/Buyers understand this concept of trading price for time and value. When you lease purchase your home, you receive option consideration (an option deposit). This is a non-refundable amount and can be any amount you wish, but is typically equal to two to three months rent. You will receive your profits at closing when, and if, the tenant/buyer exercises their option to buy. If the tenant/buyer, however, defaults or allows the option to expire you also win since you get to keep their original option deposit and can begin the whole process over again by collecting another option deposit. The earnings potential for the landlord/seller is tremendous since a well-negotiated deal will reap profits at every stage. Here are some of its features and benefits: 1. Top Sales Price, Even if Demand is Low: You attract to your home more tenant/ buyers who are willing to pay a premium because of the terms and value you are offering. 2. Higher than Usual Rent: Since you are flexible on your terms and are offering value, you can demand a higher than usual rent.

P U R C H A S E

A M E R I C A

C O U R S E B OOK

3. Positive Cash Flow: Since you can demand a higher than usual rent, this will increase your cash flow. 4. Non-Refundable Option Consideration Up Front/Minimum Risk: When a tenant/ buyer executes (signs) a lease purchase contract, you receive an option deposit that is yours to keep if they default or decide not to buy. 5. No Realtor Commissions: Since you are selling your home yourself, you will avoid paying a 6%-10% Realtor commission. In the case of For-Sale-By-Owners, you save on advertising costs because you will have your home lease purchased more quickly. 6. Closing Costs are Delayed: Your closing costs will be delayed (not avoided) until you and your tenant/buyer actually close on your home. 7. Tax Shelter is Maintained: You remain on the deed until the option is exercised and, consequently, you maintain all of the tax benefits of ownership. 8. Attraction of the Highest Quality Tenants: You are dealing with tenant/buyers who have a vested interest in the home; therefore, they think of themselves as homeowners and tend to take better care of it. 9. No Maintenance, No Landlording: Tenants who have a vested interest and believe they are a homeowner may feel a pride of ownership that encourages them to pay on time, perform maintenance and make improvements to your home. Additionally, you can delegate maintenance to the tenant in your agreement (see the I Am Landlord/Seller agreement). 10. Larger Market of Buyers: You are marketing your home not only to buyers, but also to renters and investors. These three groups make up 85% of those seeking to acquire real estate. 11. No Long Vacancies: Your phone will ring off the hook when you advertise your home is a lease purchase deal. Typical turnover time is days or weeks rather than months. 12. Peace of Mind: It is safer than conventional rentals because of the quality of the tenant/buyers and their vested interest in your home. It also means that someone is living on-site who will watch and guard your home against vandalism, fire, etc.

Tenant/Buyer Benefits
If you are a tenant/buyer, you are probably aware of the advantages of owning a home (tax shelter, appreciation, security, etc.). If you seek to lease purchase a home, you typically cannot purchase a home through conventional means, are not ready to commit yet, are very smart or all of the above. The lease purchase contract provides you with many features and benefits, but perhaps the most powerful one is the rate at which you accumulate equity. Compare any lenders loan amortization schedule to that of a lease purchase contract and youll quickly see that there is no comparison. Moreover, the buying

P U R C H A S E

A M E R I C A

C O U R S E B OOK

power of a lease purchase contract can quickly and easily land you a home that you never thought you could afford. Here are some of its features and benefits: 1. Faster Equity Growth: Equity can accumulate up to 99% faster than through conventional financing (see APPENDIX B EQUITY CHARTS). 2. Rent Money is Working Towards the Purchase of the Home: Each month that you pay rent, a portion of that payment will be credited towards your down payment or off of the sales price (see APPENDIX B EQUITY CHARTS). 3. Option Consideration is Credited Towards the Purchase of the Home: When you execute (sign) a lease purchase contract, you must pay the landlord/seller an option deposit. This money is your vested interest in the home and will be fully credited (100%) to either your down payment or off the sales price. 4. Minimum Cash Out of Pocket: When you purchase a home conventionally, you must pay closing costs, prepaids and a down payment. With a lease purchase contract, you pay only first months rent and an option deposit. This will save you between 25% and 85%. 5. Frequently No Down Payment at Closing: Since you have given the landlord/seller an option deposit plus you have been receiving monthly rent credits, there will frequently be very little or nothing left to come up with for a down payment at closing. 6. Closing Costs are Delayed: Your closing costs will be delayed (not avoided) until you and your landlord/seller actually close on the home. 7. Sales Price is Locked In: The sales price will be stated in the lease purchase agreement. 8. Profits from Appreciation: Since the sales price is locked in before closing, any increase in property value will mean that your equity is increasing in the home. 9. Possible Assignment (Sale) of Contract for Profit: If you are allowed to assign your interest in the home (see the I Am Tenant/Buyer agreement), you may assign it to someone for a price. 10. Buying Power: Your buying power is drastically increased. You can get into a lease purchase home for as little as first months rent and a $1 option deposit (see APPENDIX C CASE STUDIES: Proverbs Lake Dr.). Compare that to a lender who requires 5% - 20% down plus closing costs and prepaid fees. 11. Credit Problems are Okay: Qualification restrictions are not as strict as conventional financing. You will be approved at the sole discretion of the landlord/seller. 12. Control of the Home: You will be put in legal control of the home for a specified period without having to actually own it.

P U R C H A S E

A M E R I C A

C O U R S E B OOK

13. No Taxes, Less Liability: Since you do not own the home yet, you will not have to pay property taxes and your liability exposure will be drastically reduced. 14. Maximum Leverage: You are spending very little money to control a very expensive and potentially very profitable investment. 15. Time: Before you actually buy the home, you will have time to repair your credit, find the best financing available, investigate the home and research the neighborhood. 16. Quick Move In Time: Move in time is typically less than one week compared to conventional move in times of one to three months. 17. No Lengthy Escrows or Mortgage Approvals: The decision to lease purchase to you will be made at the sole discretion of a landlord/seller rather than by a lender who can take up to a month (or longer) to render a decision. 18. Minimal Maintenance: Large maintenance problems or any maintenance problems that exceed a certain amount of money are delegated to the landlord/seller (see the I Am Tenant/Buyer agreement). 19. Privacy: Since you are leasing, there will be no public record of where you live (unless you record your option). 20. Peace of Mind: As long as you live up to your end of the bargain, you will have full control of the home and can maintain it or improve it however you wish.

Investor Benefits
As an investor, you are probably aware of the principles of leverage (the use of borrowed funds to improve ones capacity and to increase the rate of return on an investment). With the lease purchase contract, you can control properties that normally require 10-30% down for a nominal amount of money without using a lender or going through the loan application process. Additionally, the lease purchase contract is so quick and easy to use; you can drastically increase your productivity and, consequently, your cash flow. You will receive the same features and benefits as the landlord/seller or the tenant/buyer, depending on which role you take in your transactions.

Realtor Benefits
As a Realtor, you may add the lease purchase contract to your arsenal of income producing techniques. Imagine opening your doors to a world of buyers and sellers that nobody else in your office has even considered. In fact, every buyer and seller you meet is a potential lease purchase candidate. Wouldnt that provide a niche for you? And doesnt a niche separate the top producers from the mediocre producers? Stop losing deals because your seller is overpriced or because your buyer cant get financing. A lease purchase deal requires half the work of selling a home

P U R C H A S E

A M E R I C A

C O U R S E B OOK

the conventional way so you will be much more productive. Furthermore, some of the most successful professionals in the world, including movie stars, musicians, authors and insurance agents, share a little-known secret about the best kind of income you can earn; residual income. What do they know that you dont? Simply put, they know that residual income provides for a steady cash flow that is paid at a date long after your work has been completed. Imagine lining up quick and easy deals that you will be paid for a year or two down the road. Instead of waiting one or two years for the options to mature, maybe you could consult with people on an hourly basis? Maybe you could pay a referral fee to someone for lining these deals up for you? Maybe you could charge an up front fee for your services instead of waiting for the residual income? The possibilities are endless. More importantly, you have a fiduciary responsibility to your clients to do what is right for them. At minimum, you should determine if a lease purchase deal could help them solve their real estate problems. Shoot, it may be exactly what they need.

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Chapter

One In A Million - aire

For every action, there is an equal and opposite government program.

housands of people throughout the United States are using lease purchase techniques to earn a living. Professional real estate companies and successful investors have entire divisions set up to exclusively handle lease purchase deals. Nevertheless, there are a few concerns with this otherwise wonderful way to control real estate and it would be irresponsible to exclude them. For you to make an educated decision on whether it is right for you or not, these points of concern must be read and clearly understood.

Landlord/Seller Concerns
?? Equitable Title: If it looks like a sale and acts like a sale; its probably a sale. In the unfortunate event that you need to evict a tenant/buyer, they could go kicking and screaming to court claiming equitable title. If a court rules in favor of a tenant/ buyer on these grounds, as the landlord/seller you will have to foreclose on them because, in the courts eyes, you are actually selling your home to them. Here is how to greatly reduce the risk of an equitable title problem: 1. The best way to close a deal with a tenant/buyer is to use a separate lease agreement in conjunction with an option to buy agreement. Do not refer to the option to buy agreement in your lease agreement. Treat any tenant/buyer the same as you would treat any normal tenant. 2. Never use the terms credit, seller, or buyer in your lease contracts. 3. Always get a security deposit. Sellers dont take security deposits, landlords do. And, specifically write a receipt for the Security Deposit. 4. Do not give your tenant/buyer more than a one-year lease term. If they want more than that, give them a one-year lease with x rights to renew. Draft a new lease each time they renew.

10

P U R C H A S E

A M E R I C A

C O U R S E B OOK

5. Pay the taxes and insurance. Tenants dont pay taxes and insurance, landlords do. 6. Do not give large monthly rent credits. The more equity the tenant/buyer has, the more likely a judge will rule in their favor. There is no set percentage on what is too much; however, we generally do not give more than 20% of the monthly rental payment. 7. Do not give monthly rent credits at all. Instead have the tenant/buyer pay a monthly option consideration in addition to the rent (my leases do not include a provision for this). 8. All written evidence and conversations are admissible to court and the court will judge you on your intent to sell or not to sell. 9. You do not want your tenant/buyer to record the option in the public real estate records because, in the eyes of the court, it will look like a sale (see next section Tenant/Buyer Concerns).

Tenant/Buyer Concerns
?? Protecting Your Option: It can cost you thousands of dollars and years in the courtroom if a landlord/seller doesnt live up to his end of the bargain. Contrary to landlord/sellers, if you are a tenant/buyer, then you want your agreement to look like a sale. Here is how to protect your option: 1. Record the option in the public real estate records at the county court house. This makes the transaction look like a sale and, if you are the tenant/buyer, you want to be able to claim equitable title. 2. If your landlord/seller has died or disappeared, youre going to have a difficult time getting him to sign a deed. An escrow should be created up front in which a title company or attorney holds the executed deed. Include irrevocable escrow instructions. 3. Record a mortgage to secure the performance of the option agreement. You as the tenant/buyer will now be a lien holder, in the same position as the secured lender.

Concerns of Both Parties

?? Due-On-Sale Clause: A due-on-sale clause of a mortgage is designed to protect the lender. When you buy a piece of real property (versus personal property), you sign a promissory note that makes you personally liable to repay the loan. You also grant a mortgage on the property itself to the lender. That mortgage gives the property as collateral as added security for the loan. If you default, the lender can demand payment of the loan, and/or can foreclose on the mortgage and ultimately repossess the property and sell it to pay off the loan balance. The reason lenders include a due-on-sale clause is so they will be invited to the table at the closing to collect on the loan. It is sort of "money in the bank, in that although a lender would make more on the full life of the loan repayment with interest, if the lender were paid in full at

11

P U R C H A S E

A M E R I C A

C O U R S E B OOK

closing, its risk is diminished. The lease purchase contract may be enough to trigger a lender to enforce its due-on-sale clause and demand payment in full when it realizes this type of transaction is occurring. Here is what you can do to minimize your risk of activating a due-on-sale clause: 1. Pay your mortgage/rent on time. The bank wants to minimize its risk, but it also wants to remain profitable. Remember, the bank may or may not, at its option, enforce the due-on-sale clause. 2. Ensure that and escrow account is setup, and that all parties are aware that this is a conditional sale; and that the final sale of the property has not yet occurred by the enactment of the lease purchase contract, therefore the due-on-sale clause would not apply.
Not a Concern, a Need to Know

Specific Performance: Real estate is one of the few areas of contract law where a court would be more inclined to order specific performance of the contract in case of breach. Typically, in the law of contract, a court will order money damages be paid to the injured party to make him whole. For example, if you contract with a landscaper to mow your lawn, pay him, and he doesnt perform, a court would order him to reimburse you for your loss rather than order him to specifically perform the contract by mowing your lawn. Land is unique, however, and courts are more likely to order the land transaction completed because you wanted to buy that home rather than the other. Keep this in mind when entering any contract for the sale of a piece of property.

12

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Chapter

Step-By-Step For Investors

Give Me A Lever Long Enough And I Shall Move The Earth.

everage, leverage and leverage. These are the real estate investors bywords. The lease purchase contract will provide you with the quickest, easiest and least expensive way to maximize your leverage, thereby controlling homes with little or none of your own money.

Technique 1 Matchmaker (Quick Cash and Residual Income)

Before you even make an offer on a home it is imperative to know what you are going to do with it before you buy, more importantly you should already have a serious buyer lined up. The Matchmaker technique will show you how to prequalify tenant/buyers and then match them up with the homes of landlord/sellers who are willing to lease purchase their home to you. You can then either assign (sell) your option (the Quick Cash) or wait for the options to mature (Residual Income). It is the quickest, easiest and least expensive way to invest in real estate. Note that words in Italics indicate a form included with this Coursebook.
Step 1 Step 2

Read and complete the steps in Chapter 14 Getting Started. Entice tenant/buyers to call you. Place a classified ad similar to the one below under each section, Homes for Rent and Homes for Sale in your local newspaper.

Target: Buyers and Renters Rent-To-Own. No Qualifying! Only $x,xxx down and $xxx per month. Call Arturo (555) 555-1212

13

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Step 3

When a tenant/buyer calls you, use the Information Gathering Form Tenant/Buyers to learn as much as possible about them, what they want in a home, and any problem that they may have. Ideally, you want to hear something like, Well, I have enough for a down payment and Ive been at my job for two years, but my credit just wont be good enough for another year or two. Use the techniques taught in Chapter 10 The Art of Selling to persuade them to let you assist in solving their problem. If you can solve their problem, proceed to the next step. If they are interested; tell them that you dont currently have a home that will suit them, but will have one that fits their exact needs within the next two weeks. Explain to them that, before you go any further, they must fill out a Rental Application in order to determine if they qualify for the home. Once you have a list of at least two tenant/buyers who have filled out, and been qualified by, the Rental Application, proceed to the next step. Entice landlord/sellers to call you. Place one or both of the classified ads below, or similar ad(s), in the Real Estate Wanted section of your local newspaper. Sell Your Property for Full Price Fast closings, cash, and freedom from maintenance. Call Arturo (555) 555-1212

Step 4

Step 5

Step 6

Target: Sellers

Target: Tired Landlords Landlords! Tired of Late Rent? I will solve your tenant problems. Limited Availability. Call Arturo (555) 555-1212
Step 7

When a landlord/seller calls you, use the Information Gathering Form - Landlord/Sellers to learn as much as possible about them, their home, and any problem that they may have. Ideally, you want to hear something like, I dont need much cash, I just cant afford to keep making two mortgage payments each month or Im retiring soon and moving out of state. Use the techniques taught in Chapter 10 The Art of Selling to persuade them to let you assist in solving their problem. If you can solve their problem, proceed to the next step.

Step 8

14

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Step 9

Visit the home and use the Property Analysis Form to determine if the home meets your business plan criteria. If the home meets your business plan criteria; use the Profit Calculation Form when Renting to determine the numbers necessary to secure a profitable deal for you. Show the home to the qualified tenant/buyer and tell them your terms. If they like the home and agree to your terms, proceed to the next step. If they arent interested, you can still proceed to the next step so that you will have this house lined up for the next tenant/buyer who comes along. Remember: it is a lot easier to find tenant/buyers than it is to find landlord/sellers. Use the Safe Offer System to negotiate a deal with the landlord/seller. Draft the offer based on the information contained in your Profit Calculation Form when Renting. Use the contingencies as escape clauses (weasel clauses) just in case you or your qualified tenant/buyer decide to back out of the deal. If the landlord/seller accepts your offer; set a closing date first between you and the tenant/buyer, then between you and the landlord/seller. Make each closing date the same day, except close with the tenant/buyer just prior to (up to two hours) closing with the landlord/seller. Close with your tenant/buyer. Sign with them the I Am Landlord/Seller lease purchase agreement and the Lead-Based Paint Disclosure. Give them the Inventory Checklist and Receipt with instructions that they should return it to you within seven days. Each party should have a copy of all the forms. Tell the tenant/buyer that you will give them the keys before the end of the day. Close with the landlord/seller at the home you are about to lease purchase. Sign with them the I Am Tenant/Buyer lease purchase agreement and the Lead-Based Paint Disclosure. Fill out the Inventory Checklist and Receipt immediately and turn it over to the landlord/seller. Each party should have a copy of all the forms. Get the keys and give them to the tenant/buyer as you promised. Congratulations! The deal is closed. Read the following example for a simple explanation of how this process works in the real world and to see how easy it is to turn your work into some cold hard cash.

Step 10

Step 9

Step 12

Step 13

Step 14

Step 15

Step 16

15

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Example

You read and complete the steps in Chapter 14 Getting Started. You place a classified ad in the newspaper, which prompts Patricia the tenant/buyer to call you. You find out all of the information that you can about Patricia and what she wants in a home. You find out that she must move because of a new job and she wants a 3 BD, 2BA home in Bronzeville. She tells you that she wants the following terms:
Monthly Rent: Rent Credit: Option Deposit: Sales Price: Term: $ 900 100 2,600 100,000 1 Year

You persuade her to let you assist in solving her problem. You tell her that you dont currently have a home that will suit her, but will have one exactly like that within the next two weeks. She is interested so you have her fill out a rental application. You examine it and determine that she meets your standards as a tenant/buyer. You place another classified ad in the newspaper, which prompts Alonzo the landlord/seller to call you. You find out all of the information you can about Alonzo and his home. You find out that he can no longer afford to make two mortgage payments. He has a 3 BD; 2BA home in Bronzville and says that he will take no less than the following:
Monthly Rent: Rent Credit: Option Deposit: Sales Price: Term: $ 800 200 1,000 85,000 1 Year

You persuade him to let you assist in solving his problem. You visit the home and determine that it meets your business plan criteria. You calculate the numbers necessary to secure a profitable deal and they are perfect. You then show the home to Patricia the qualified tenant/buyer and tell her your terms, which are:
Monthly Rent: Rent Credit: Option Deposit: $900 100 2,600

16

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Sales Price: Term:

100,000 1 Year

She says its perfect and the terms are acceptable. You then present an offer to Alonzo the landlord/seller based on the numbers needed to have a profitable deal. Your offer looks like this:
Monthly Rent: Rent Credit: Option Deposit: Sales Price: Term: $800 200 1,000 85,000 1 Year

He accepts your offer so you set up a closing date with Patricia the tenant/ buyer on June 1 at 2:00pm and then with Alonzo the landlord/seller on June 1 at 3:00pm. On June 1 at 2:00pm you close the deal with Patricia the tenant/buyer and collect your money ($2,600 for the option deposit and $900 for first months rent equals $3,500). You tell her that you will give her the keys by 6:00pm. She agrees. At 3:00pm that same day, you close the deal with Alonzo the landlord/seller and pay him his money ($1,000 for the option deposit and $800 for first months rent equals $1,800). You get the keys and give them to Patricia. Deal closed. You now have an up front profit of $1,700 (the $3,500 Patricia gave you minus the $1,800 you gave to Alonzo) in your pocket and you have two ways to profit further from your transactions. They are: 1. Quick Cash. Assign (sell) your option using the Assignment of Lease Purchase Agreement. According to the Profit Calculation Form when Renting, its worth $14,600 on the back end plus $1,100 in monthly rental payments. You could probably sell your interest in the home quite easily. Put a price tag on it of around $4,000 and maybe Alonzo the landlord/seller would be interested in buying it from you? Maybe you could advertise your option for sale in the newspaper? You would keep the up front net profit of $1,700 regardless. Or;
2.

The Hillian. (I call it this because its my favorite) Let Patricia the tenant/buyer rent from you while you rent from Alonzo the landlord/seller for one year. When the option matures, you buy the home from Alonzo and Patricia buys the home from you. Make sure you are positive that Patricia is intending on buying from you before you buy from Alonzo. According to the

17

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Profit Calculation Form when Renting, your up front net profit is $1,700, your back end net profit is $14,600, and your net profit from rent is $1,100 for a total net profit of $17,400 in twelve months. Note that your expenses in a transaction like this should only be closing costs, which can amount to around $1,200. Taxes, insurance, interest and other prepaid expenses will be offset when Patricia buys from you. To illustrate the power of the Hillian method of profit taking, the following chart illustrates the amount of yearly income you would make based on the following constants: 1. You close one deal each month starting today which is June 1, 2000 and continue to do so indefinitely. 2. When closing with your tenant/buyer, only 25% of them actually follow through and buy from you (one every four months). 3. Your up front net profit is $1,500 per transaction, you have a positive monthly cash flow of $100 per home, and your back end net profit is $14,000 for each successful flip. 4. Note that the chart begins on June 1, 2000.
6/00 7/00 Up Front Inc: 1,500 1,500 Monthly Inc: 1,100 1,100 Back End Inc: 14,000 0 TOTAL INC: 16,600 2,600 8/00 9/00 10/00 11/00 1,500 1,500 1,500 1,500 1,100 1,100 1,100 1,100 0 0 14,000 0 2,600 2,600 16,600 2,600 12/00 1/01 2/01 3/01 1,500 1,500 1,500 1,500 1,100 1,100 1,100 1,100 0 0 14,000 0 2,600 2,600 16,600 2,600 4/01 5/01 TOTAL 1,500 1,500 18,000 1,100 1,100 13,200 0 0 42,000 2,600 2,600 73,200

Technique 2 Balance Sheet Candy (Let it Ride and I Love it When)

Again, before you even make an offer on a home you must know what you are going to do with it. The Balance Sheet Candy technique is properly named in that it allows you to purchase a home with virtually nothing down (nothing down does not mean no money to the seller, it means none of your own money to the seller). You can then lease purchase it to a tenant/buyer for a premium, which consequently increases your net worth. You would profit when the tenant/buyer exercises their option to buy, or if they dont exercise their option to buy, you can profit by lease purchasing your home to another qualified tenant/buyer in which case you would collect another option deposit. You then could increase your sales price because of appreciation and/or increase your monthly rental payments. Note that words in italics indicate a form included with this Coursebook.
Step 1

Read and complete the steps in Chapter 14 Getting Started.

18

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Step 2

Step 2

Get prequalified for a mortgage by a lender. Find a lender who will allow you 10% down or less. Once you are prequalified for a mortgage, proceed to the next step. Entice tenant/buyers to call you. Place a classified ad similar to the one below under each section, Homes for Rent and Homes for Sale in your local newspaper.

Target: Buyers and Renters Rent-To-Own. No Qualifying! Only $x,xxx down and $xxx per month. Call Arturo (555) 555-1212
Step 3

When a tenant/buyer calls you, use the Information Gathering Form Tenant/Buyers to learn as much as possible about them, what they want in a home, and any problem that they may have. Ideally, you want to hear something like, Well, I have enough for a down payment and Ive been at my job for two years, but my credit just wont be good enough for another year or two. Use the techniques taught in Chapter 10 The Art of Selling to persuade them to let you assist in solving their problem. If you can solve their problem, proceed to the next step. If they are interested; tell them that you dont currently have a home that will suit them, but will have one that fits their exact needs within the next thirty days. Explain to them that, before you go any further, they must fill out a Rental Application in order to determine if they qualify for the home. Once you have a list of at least two tenant/buyers who have filled out, and been qualified by, the Rental Application, proceed to the next step. Find a home that fits the needs of the qualified tenant/buyer. Call your Realtor, search the newspaper and look for yard signs. Once you have found a home that appears suitable, use the Property Analysis Form to determine if the home meets your business plan criteria. If the home meets your business plan criteria; use the Profit Calculation Form when Buying to determine the numbers necessary to secure a profitable deal for you. Show the home to the qualified tenant/buyer and tell them your terms. If they like the home and agree to your terms, proceed to the next step. If they arent interested, keep searching. Make an offer on the home. On an addendum you should ask the seller to give you cash back at closing as an improvement

Step 4

Step 5

Step 6

Step 7

Step 8

Step 9

19

P U R C H A S E

A M E R I C A

C O U R S E B OOK

allowance. Typically, a lender will allow up to 2% of the sales price back at closing. Use this money for improvements or use it to help offset the cost of buying the home. If you are in any way uncomfortable with real estate transactions, you should seek the advice of a Realtor or attorney.
Step 10

If the seller accepts your offer; set a closing date first between you and the tenant/buyer, then between you and the seller. Make each closing date the same day, except close with the tenant/buyer just prior to (up to two hours) closing with the seller. Close with the tenant/buyer. Sign with them the I Am Landlord/Seller lease purchase agreement and the Lead-Based Paint Disclosure. Give them the Inventory Checklist and Receipt with instructions that they should return it to you within seven days. Each party should have a copy of all the forms. Tell the tenant/buyer that you will give them the keys before the end of the day. Close with the seller. The seller will have their choice of where to close, and it usually takes place at a title company. Get the keys and give them to the tenant/buyer as you promised. Congratulations! The deal is closed. Read the following example for a simple explanation of how this process works in the real world and to see how easy it is to turn your work into some cold hard cash. You read and complete the steps in Chapter 14 Getting Started. You know that 1st American Mortgage offers 10% down investor mortgages so you make an appointment to see them. At your appointment, you give the loan officer all the information they want and, shortly thereafter, they tell you that you qualify for a 30year mortgage at 10% down for up to $110,000. You then place a classified ad in the newspaper, which prompts Zita the tenant/buyer to call you. You find out all of the information that you can about Zita and you determine what she wants in a home. You find out that she must move because of a new job and she wants a 3 BD, 1 BA home in Smithville. She tells you that she would be happy with the following terms:
Monthly Rent: Rent Credit: $850 100

Step 11

Step 12

Step 13

Example

20

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Option Deposit: Sales Price: Term:

5,000 105,000 1 Year

You persuade her to let you assist in solving her problem. You tell her that you dont currently have a home that will suit her, but will have one exactly like that within the next thirty days. She is interested so you have her fill out a rental application. You examine it and determine that she meets your standards as a tenant/buyer. You find a Realtor to help you search for a 3 BD, 1 BA home in Smithville priced around $85,000 ($20,000 less than what Zita wants to spend) and, shortly thereafter, you find one that fits that exact description. After looking at the home, you determine that it meets your business plan criteria. You calculate the numbers necessary to secure a profitable deal and they are perfect. You then show the home to Zita the qualified tenant/buyer and tell her your terms, which are:
Monthly Rent: Rent Credit: Option Deposit: Sales Price: Term: $800 100 5,000 99,900 1 Year

She says its just what shes looking for and she likes your terms. With the help of your Realtor, you make an offer on the home based on the numbers needed to have a profitable deal. Your offer looks like this:
Sales Price: 2% Back at Close: $ 83,900 1,660

The seller accepts your offer so you set up a closing date with Zita the tenant/buyer on July 1 at 3:00pm and then with Rebekah the seller on July 1 at 4:00pm. On July 1 at 3:00pm you close the deal with Zita the tenant/buyer and collect your money ($5,000 for the option deposit and $800 for first months rent equals $5,800). You tell her that you will give her the keys no later than 6:00pm. She agrees.

21

P U R C H A S E

A M E R I C A

C O U R S E B OOK

At 4:00pm that same day, you close the deal with Rebekah the seller. The numbers look like this (assume a 30-year mortgage, interest rate of 8%, taxes of $70/mo, insurance of $15/mo and Private Mortgage Insurance of $50/mo):
Sales Price: 10% Down: Amount Financed: Total Monthly Payment: $689 $83,900 (-) 8,390 75,510 10% Down: Closing Costs: Prepaids: 2% Back at Close: $ Recd from Zita: Total Down Payment: $8,390 (+) 1,000 (+) 2,000 (-) 1,660 (-) 5,800 3,930

You have spent a total of $3,930 to purchase a home on which you owe $75,510 and have a contracted sales price in one year of $99,900. There are two ways to profit from this transaction. They are: 1. Let it Ride. Zita the tenant/buyer makes all of her payments on time and fulfills her obligation to you by buying the home she is lease purchasing from you in one year. According to the Profit Calculation Form when Buying, your back end net profit is $14,260 and your net profit from rent is $1,221 for a total net profit of $15,481 in twelve months. Note that when you actually sell the home to Zita your only expenses should be closing costs, which can amount to around $1,200. 2. I Love it When Suppose Zita decides not to buy your home or defaults in some way. You get to keep the option deposit she gave you of $5,000 and you have maintained a positive monthly cash flow of $111 for however long she has rented from you. You could either re-lease purchase the home to another qualified tenant/buyer or sell the home outright. If you decide to re-lease purchase it to someone else, you get a brand new option deposit and you can increase the monthly rental amount and/or sales price.

22

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Chapter

Step-By-Step For Landlords/Sellers

There are no rules here were trying to accomplish something.

f, for whatever reason, you have decided that you dont need much cash right now and would like to sell your home for top dollar at a later date, here is some good news. You have in your hands the most powerful tool that any person who has anything to do with real estate has ever seen instructions on how to put the lease purchase contract to work for you. Say goodbye to real estate commissions, haggling over price, tenant problems, maintenance headaches and long vacancies. Say hello to a top sales price, quality tenants, positive cash flow and yes, even a tax shelter. Can it get any better than this? Note that words in Italics indicate a form that is included with this Coursebook .
Step 1

Use the Profit Calculation Form when Buying to determine the numbers necessary to secure a profitable deal for you. Once youre comfortable with the numbers you need, precede to the next step. Call a local Realtor to help you determine the value of your home. Determine if you are going to have an open house or are going to do private showings only. The procedures are exactly the same except for the wording of your classified ad. Entice tenant/buyers to call you. Place a classified ad similar to the one below under each section, Homes for Rent and Homes for Sale in your local newspaper.

Step 2 Step 3

Step 4

Target: Buyers and Renters Rent-To-Own. No Qualifying! Only $x,xxx down and $xxx per month.

23

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Call Arturo (555) 555-1212

Step 5

When a tenant/buyer calls you, use the Information Gathering Form Tenant/Buyers to learn as much as possible about them, what they want in a home, and any problem that they may have. Ideally, you want to hear something like, Well, I have enough for a down payment and Ive been at my job for two years, but my credit just wont be good enough for another year or two. Use the techniques taught in Chapter 10 The Art of Selling to persuade them to let you assist in solving their problem. If you can solve their problem, make an appointment to show your home to them. If they like your home, use the Safe Offer System to negotiate a deal with them. Draft the offer based on the information contained in Profit Calculation Form when Buying. Use the contingencies as escape clauses (weasel clauses) just in case you decide to back out of the deal. Offer a fair monthly rental amount and you are half way there. Negotiate for a small monthly rent credit (5% - 15%), a large option deposit ($1,500 $10,000), and a term as short as possible. If the tenant/buyer accepts your terms; have them fill out a Rental Application. Once you have thoroughly examined the application and qualified them, set a closing date. Close with the tenant/buyer at the home you are lease purchasing to them. Sign with them the I Am Landlord/Seller lease purchase agreement and the Lead-Based Paint Disclosure. Give them the Inventory Checklist and Receipt with instructions that they should return it to you within seven days. Each party should have a copy of all the forms. Give the keys to the tenant/buyer as you promised. Congratulations! The deal is closed. Read the following example for a simple explanation of how this process works in the real world. You calculate the numbers necessary to secure a profitable deal for you. You call a Realtor to get an idea of what your home is worth. You decide to have private showings only. You place a classified ad in the newspaper, which prompts Tina the tenant/buyer to call you.

Step 6

Step 7

Step 8

Step 9

Step 10

Example

24

P U R C H A S E

A M E R I C A

C O U R S E B OOK

You find out all of the information you can about Tina and what he wants in a home. You find out that she is being relocated by work. You persuade her to let you assist in solving her problem. Tina comes to see your home and is so pleased with it; he wants to sign your agreement right now. You tell her that before you go any further she must fill out, and be qualified by, a rental application. She agrees. You examine the application and decide that he qualifies as a tenant/buyer. You call her and set a closing date. You meet with her at your home, sign the documents, and turn over the keys. Deal closed.

25

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Chapter

Step-By-Step For Tenants/Buyers

The quality of an individuals life is in direct proportion to their commitment to excellence, regardless of their chosen field of endeavors.

f you are considering lease purchasing a home instead of buying or renting one, please pat yourself on the back. The ultimate freedom is to never own another house as long as you live. Instead, you learn to control them. No more taxes, no more interest, no more closing costs, no more loan applications that take an hour to fill out, no more 30-day waiting periods only to be turned down because the committee says so. Is this a great country or what? Note that words in Italics indicate a form that is included with this Coursebook.
Step 1

Decide what terms you want. How much time do you need before you can buy? How big will the monthly rent credit be? How much can you comfortably afford for a monthly payment, a down payment and a sales price? Once youre comfortable with the terms you want, proceed to the next step. Call a local Realtor to find out local property values. Call a lender to get an idea of what you have to do to get a mortgage. Entice landlord/sellers to call you. Place one or both of the classified ads below, or similar ad(s), in the Real Estate Wanted section of your local newspaper. Sell Your Home for Full Price Fast closings, cash, and freedom from maintenance. Call Arturo (555) 555-1212

Step 2

Step 3

Target: Sellers

26

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Target: Tired Landlords Landlords! Tired of Late Rent? I will solve your tenant problems. Limited Availability. Call Arturo (555) 555-1212
Step 4

When a landlord/seller calls you, use the Information Gathering Form Landlord/Sellers to learn as much as possible about them, their home and any problem that they may have. Ideally, you want to hear something like, I dont need much cash, I just cant afford to keep making two mortgage payments each month or Im retiring soon and moving out of state. Use the techniques taught in Chapter 10 The Art of Selling to persuade them to let you assist in solving their problem. If you can solve their problem, make an appointment to go see their home. If you like their home, use the Easy Offer System to negotiate a deal with them. Draft the offer based on the terms you decided earlier. Use the contingencies as escape clauses (weasel clauses) just in case you decide to back out of the deal. Offer a fair monthly rental amount and a fair sales price and you are half way there. Negotiate for a large monthly rent credit (20% - 100% of the monthly rent), a small option deposit ($1 - $500) and a term as long as possible. The landlord/seller may insist you complete a Rental Application. If the landlord/seller accepts your offer, set a closing date. Close with landlord/seller at the home you are about to lease purchase. Sign with them the I Am Tenant/Buyer lease purchase agreement and the Lead-Based Paint Disclosure. Fill out the Inventory Checklist and Receipt immediately and hand it to the landlord/seller. Each party should have a copy of all the forms. Get the keys from the landlord/seller. Record your option at with the county courts. Congratulations! The deal is closed. Read the following example for a simple explanation of how this process works in the real world. You determine what terms you want and can afford. You call a Realtor to research property values and a lender to evaluate what you have to do to get a mortgage.

Step 5

Step 6

Step 7 Step 8

Step 9

Example

27

P U R C H A S E

A M E R I C A

C O U R S E B OOK

You place two classified ads in the newspaper, which prompts Kenny the landlord/seller to call you. You find out all the information you can about Kenny and his home. You find out that he can no longer afford to make two mortgage payments. You persuade him to let you assist in solving his problem. You go see the home and you like it so you make an offer. Kenny says that he would like an application so you fill one out and give it to him. He likes your application and accepts your offer so you set a closing date. You meet with him at the home, sign the documents and get a key. Deal closed! Remember, record your option at the county court house.

28

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Chapter

Step-By-Step For Realtors

Do what you love, love what you do, and deliver more than you promised.

he possibilities are endless for Realtors who wish to use the lease purchase contract in their business. Many potential homebuyers desperately need the assistance of a Realtor capable of using the lease purchase contract, but they dont know it exists. Use your marketing skills to tap into this market and watch your pocketbook grow. There are many different ways to approach using the lease purchase contract. You could take on the role of consultant and charge an hourly fee. You could charge an up front fee for closing the lease purchase deal instead of waiting for your commission. You could pay a referral fee to someone for lining up these deals for you. Or you could wait for the option to mature and collect your full commission when the deal closes. Its completely up to you. Note that words in Italics indicate a form that is included with this Coursebook.
Step 1

During your normal course of business, you will meet with buyers and sellers. Use the Realtor Prospecting Form to determine their problems and goals. If you determine that they are a lease purchase candidate (see Chapter 10 The Art of Selling), proceed to the next step. Use the techniques taught in Chapter 10 The Art of Selling to persuade them to let you assist in solving their problem. If you can solve their problem, and they are interested in a lease purchase contract, proceed to then next step.

Step 2

29

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Step 2

Have them sign the appropriate paperwork to establish your working relationship including, but not limited to, your commission rate. Since legal requirements for real estate transactions vary from state to state, you will have to use or develop your own forms. Match sellers up with buyers, show homes, negotiate terms and finalize the deal. Make every effort to keep the term of the contract to one year or less. Once the deal is finalized, proceed to the next step. Two months prior to the option maturing, encourage the buyer to pursue a mortgage on the home (or maybe youve already done this) and ensure that the seller is ready to sell (again, maybe youve already done this). Have them sign all of the paperwork necessary to secure the deal. Close the deal and collect your commission. Congratulations! You still get the same amount of commission; it just took a little longer. Read the following example for a simple explanation of how this process works in the real world. Youre in your office when along comes Mark the landlord/seller. He has a 3 BD, 2 BA ranch in Southville worth around $90,000, has a mortgage payment of $750/mo, owes $60,000, would like to put $30,000 in his pocket within 1 year, and only needs $4,000 right now. He is a perfect lease purchase candidate. You persuade him to let you assist in solving his problem with a lease purchase contract. You have Mark sign all of the appropriate paperwork to establish your working relationship. Then an hour later along comes Kelly the tenant/buyer. She is looking for a 3 BD, 2 BA home in Southville, wants to spend around $750/mo, wants to pay no more than $90,000, has a 1 year time frame, but only has $4,000 for a down payment. She is a perfect lease purchase candidate. You persuade her to let you assist in solving her problem with a lease purchase contract. You have Kelly sign any appropriate paperwork to establish your working relationship. You then show Marks house to Kelly and

Step 3

Step 4

Step 5

Example

30

P U R C H A S E

A M E R I C A

C O U R S E B OOK

tell her the terms that he wants. She says its perfect. You close the deal with the exact terms that both parties wanted. Two months prior to Kellys option maturing you get with both parties to encourage them to prepare for closing (if you havent done so already). You close the deal.

31

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Chapter

Marketing Tips
When asked about the power of advertising in research surveys, most people agreethatitworks, but not on them.

o not rely on classified ads alone to get the word out about what you want to accomplish. Choose several methods and put them to work simultaneously. Here are some tips on how to effectively market to landlord/sellers and tenant/buyers.

General Advice
1. Do not spend too much time with low quality prospects. 2. To get the best results for the least amount of money, run your classified ads on the weekends only. 3. Set up a voice mailbox with an appropriate script. In all of your ads put the phrase, 24 Hour Recorded Message, it will double the number of responses you get. 4. When showing a home to a tenant/buyer or meeting with a landlord/seller, leave your Porsche at home and bring the clunker instead.

Finding Landlord/Sellers
1. To save yourself and the landlord/seller time and to clarify your position, run a verbal offer by him before you draft a formal one. Also, determine if they have a problem that you can solve before going too far with the transaction. 2. Locate For-Sale-By-Owners or Homes for Rent in the newspaper. Call them or use a reverse directory (see APPENDIX A RECOMMENDED VIEWING) to get the addresses from the telephone number and mail them a letter or postcard. 3. Drive local neighborhoods and seek out For-Sale-By-Owner signs, then call them or mail them a letter or postcard.

32

P U R C H A S E

A M E R I C A

C O U R S E B OOK

4. Call or send postcards to expired real estate listings. This may require the assistance of a Realtor (see Chapter 14 Getting Started: How to get in the door with Realtors). 5. Contact landlords who have filed eviction lawsuits against their tenants. Send them a letter or postcard. 6. Locate local property owners that live out-of-state by visiting your citys tax assessors office and scanning the tax rolls. Mail them a letter or postcard. 7. Get a newspaper that is at least a week old, preferably two, and call the ads. The people who still have their home available may be motivated to talk to you about how you can solve their real estate problem.

Finding Tenant/Buyers
1. Prequalify them and determine if you can solve their problem before spending too much time with them. 2. Remember that a home is only worth what someone will pay for it. Try not to over price your home. 3. Use pretty words in your ads like spacious, immaculate, modern, grand, perfect, and private. 4. Circulate flyers at local apartment complexes. 5. Place posters at local grocery stores, Laundromats, etc. 6. Have yard signs made and place them at your home. 7. Pass flyers to neighbors and let them help you in your search. 8. Make sure the home you are offering has curb appeal. Cut the grass, clean clutter from the yard, deck, driveway, garden, garage and even the street. Pay close attention to the front door and the entryway. Make the kitchen, the bathrooms; the bedrooms and the family room sparkle. Brew a pot of coffee, bake an apple pie or burn some nice smelling candles to create a pleasant feeling. 9. To encourage potential tenant/buyers to complete an application, you might want to tell them that you review applications on a first-come, first-serve basis and as soon as you find a qualified tenant/buyer, you stop reviewing applications.

Finding Both
1. Contact real estate agents and brokers in your area. Inform them that you will pay a referral fee for any of their clients that you place in a lease purchase home. This relationship can also enable you to find homes and provides a reliable source for competitive prices from the Multiple Listing System (MLS). 2. Always keep a database or list of every single person who has responded to any of your ads. After a few weeks of running ads, you will have a wonderful resource to refer to for potential landlord/sellers and/or tenant/buyers. Get referrals from people in your area that have a lot of contact with the public. Realtors, bankers and barbers are great for referrals. Maybe you could pay them a referral fee.

33

P U R C H A S E

A M E R I C A

C O U R S E B O O K

10
Chapter

The Art of Selling

Selling isnt a science. Its persuasion. And persuasion is an art.

he number one way investors make money in real estate is through negotiation -- period. Whether you are buying or selling real estate makes no difference. You are really selling either way. Even when you are buying, you still need to sell your ideas to the seller to sell to you. You need to sell them on the reasons they should sell to you on your terms. Always remember that people never buy a product or service because of its features. Rather, people will buy a product or service because of the benefits they get from its features. For example, you wouldnt buy a home because it has a large yard, a washer and dryer and a two-car garage. But you would buy a home if the kids will enjoy playing in the large yard, you dont have to go to the Laundromat to do your laundry, and you can protect your cars from the elements in the garage. The idea is that they care about what the product or service will do for them (benefits, benefits, benefits).

Selling Widgets
Sales managers, trainers and average salespeople sometimes wonder what unknown quality makes the super salespeople of the world good at what they do. They want to discover the elusive quality that the super salespeople have, so they can teach it to others. Psychologists studying this elusive quality discovered that many top producers are especially skilled in social interaction. They create a give-and-take relationship with prospects. They encourage feedback and discussion, and they listen.

34

P U R C H A S E

A M E R I C A

C O U R S E B OOK

A top salespersons conversation with a customer may appear to be casual and unstructured, but it isnt. It is a planned (not canned) sales presentation. Many are designed along this pattern: 1. 2. 3. 4. Gain Favorable Attention: A compliment, a joke, etc. Develop a Dialogue: Is that your dog? What kind of dog is he? Explain Features and Benefits: Widgets are wonderful because Handle Objections: I understand and appreciate that you dont like ________ about widgets. In order to make sure we are comparing apples to apples, can you tell me what you are comparing my widget to? Ask for the Sale: Ask and ye shall receive.

5.

Selling a Lease Purchase Contract

Most lease purchase contracts are not found, they are created. Your job is to solve problems by creating win-win solutions. Creating these win-win solutions is the key to success in marketing the lease purchase contract. Since most people are unfamiliar with the concept of the lease purchase contract, it is essential to educate your prospects on its features and benefits. Memorize them (see Chapter 3 Features & Benefits) so that, when posed with an objection or a question, you can overcome or explain why it is such a wonderful approach to real estate.

Selling a Lease Purchase Contract to a Landlord/Seller

Besides being aware of its features and benefits, the situations that encourage landlord/sellers to seek a lease purchase deal are late rental payments, destruction of property, maintenance headaches, relocation, divorce and financial difficulties. Furthermore, to solve a landlord/sellers problem(s) you should offer them debt relief, instant solutions, cash, freedom from maintenance headaches, time, security that you are an expert in your field and a guaranteed written offer.
Step 1 Step 2

Determine if they are serious or if they are merely curious. Determine what problem(s) they have that you can solve, specifically, determine why they are selling their home. Are they making two mortgage payments? Was their home listed with a Realtor for six months and didnt sell? Are they tired of tenants destroying their home? Do they need cash quickly? Can they wait one year before receiving the proceeds from the sale? Would they mind a full price offer in exchange for a lease purchase contract? Clearly restate their problem(s). You, So you need to sell because you cant afford to make mortgage payments on this home and the one you just purchased. Landlord/Seller, Yes.

Step 3

35

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Step 4

Determine if you can solve their problem(s) with a lease purchase contract. You, So if I relieved you from the burden of making two mortgage payments and offered you full price for your home, you could go ahead today, couldnt you. Landlord/Seller, Yes. Explain the features and benefits of the lease purchase contract to them. Negotiate the terms of your deal. At all costs, you should avoid the following sales pitch: You, Hi, I was calling about the home in the paper. Seller, Yes. You, I was wondering if you would consider selling your home on a lease purchase? Seller, No, thank you. Instead, try the three-yes technique: You, So, youve already bought a new home? Seller, Yes. You, And you want to sell this home because you cant afford both payments? Seller, Yes. You, So if I offered you full price and made you payments for more than your mortgage, that would work for you, wouldnt it? Seller, Yes.

Step 5

Step 6

Selling a Lease Purchase Contract to a Tenant/Buyer

Besides being aware of its features and benefits, the causes that encourage tenant/buyers to seek a lease purchase deal are the lack of a down payment, credit problems, not being able to qualify for a mortgage and they need more time. Furthermore, to solve a tenant/buyers problem(s) you should offer them flexible terms, instant solutions, time and security that you are an expert in your field.
Step 1 Step 2

Determine if they are serious or if they are merely curious. If they are serious shoppers, determine what problem(s) they have that you can solve. What kind of home are they looking for? How much do they want to pay per month? What is their time frame? What is their price range? Do they have enough money for the down payment of a conventional mortgage? Have they been at their job for less than two years? Is their credit in bad shape?

36

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Step 3

Clearly restate their problem(s). You, So your credit isnt great right now but will be in one year. Tenant/Buyer, Yes. You, And you need a three bedroom home in the city now because youve been relocated by work. Tenant/Buyer, Yes. Determine if you can solve their problem(s) with a lease purchase contract. You, So if I showed you a three bedroom home in the city that you could get into right now with no qualifying, that would work, wouldnt it. Tenant/Buyer, Yes. Explain the features and benefits of the lease purchase contract to them. Negotiate the terms of your deal.

Step 4

Step 5

Step 6

37

P U R C H A S E

A M E R I C A

C O U R S E B O O K

11
Chapter

The Art of Landlording

Research serves to make building stones out of stumbling blocks.

andlords are among the leading credit grantors yet they have been very lax in using the credit tools available to them. If you screen your tenant/buyers properly, it is unlikely that you will have any problems with them. As the landlord/seller, the two major concerns that you will face are collecting rent on time and the destruction of your property. These risks can be greatly reduced with a little research.

Minimize Your Risk

1. Have the tenant/buyer fill out a detailed rental application. 2. Tell a local lender that you will refer business to them and obtain some of their mortgage applications. When a prospective tenant/buyer applies for one of your homes, have them also fill out the lenders application and take it to the lender for professional one-on-one input. 3. Check the tenant/buyers credit history. 4. Make an unannounced visit to the tenant/buyer at their current residence to see how well they maintain it. What you see there is what you will see at your home. 5. Call previous landlords to verify payment history, quality of tenants, etc. 6. Verify the tenant/buyers employment. 7. Ask for many references and check them. 8. Get a large option deposit to create value in the home for the tenant/buyer. 9. Make the tenant/buyer responsible for the maintenance. 10. Use your instincts.

38

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Notes and Ideas

1. Encourage tenant/buyers to allow automatic transfer from their account to yours. 2. Coincide rent due dates with tenant/buyers paydays. 3. Send your tenant/buyer a holiday, birthday, or better yet, a Thanksgiving card. How often do you receive Thanksgiving cards? They will definitely remember it. 4. Tenant/Buyers who think like homebuyers act in the following manner: they take better care of your home, they pay rent on time and fulfill other obligations, they handle repairs and other maintenance and they improve or upgrade your home. To create the appearance that they are actually homeowners, you should send them a monthly statement that shows their current amount due, due date, late payment fees and any notes you want to include. 5. When signing a lease, give the tenant/buyer twelve stickem labels with your address printed on them. All they need to do is peel off one each month, place it on the envelope with a stamp and mail it. 6. To encourage timely rental payments, on an addendum to the option to buy, state that the tenant/buyer will receive an option consideration bonus (maybe $1,500) if they make all of their monthly rental payments in a timely fashion. If they dont make their payments on time, declare the option consideration bonus void by sending written confirmation to that effect. 7. In the first month, welcome the tenant/buyer as a future home buyer and use that term in both oral and written communications (note that this would strengthen the tenant/buyers defense of equitable title see Chapter 4 One In a Million). 8. Send an on-time thank you voucher, valued at either $25 or $50 good toward the purchase of the home. If they are ever late, any vouchers received up to that point are considered null and void (note that this would strengthen the tenant/buyers defense of equitable title see Chapter 4 One In a Million). 9. What about late rent, pets, maintenance, or any other Landlording headaches? Read my leases. The answers to these questions can be found there. While lease purchasing a home to a tenant/buyer, it would be to your benefit to give them a periodical check-up to see what progress they are making towards purchasing your home. You want them to be ready to buy when the time comes.

39

P U R C H A S E

A M E R I C A

C O U R S E B OOK

12
Chapter

Banks, Debt and Credit

A bank is a financial institution that will lend you money if you prove you dont need it.

utlined below is some general information that will make your life easier when it comes time to deal with a lender. Remember that many financial institutions depend on the "intimidation factor" to manipulate the behavior of its borrowers.

General Information on Lenders

It is unfortunate, but true that you will probably have to deal with a lender and take on some kind of debt in order to buy a home. Lenders are in business to make a profit and they do so by charging interest and fees. They use underwriters who examine every detail they can get their hands on about you to determine if you are a viable credit risk. When purchasing a home, if you are going to live in it, the smallest down payment allowed is typically 3% of the purchase price. Under rare circumstances, you can qualify for a 0% down mortgage, but you will still have closing costs and prepaids to pay at closing. If you are buying an investment property, the smallest down payment is typically 20% - 30% of the purchase price, however, with a little shopping around you can find down payments as low as 10%. The normal amount of cash out of your pocket at a conventional closing will be the down payment (3% - 20% of the sales price), closing costs ($500 $2,000) and prepaids ($1,000 - $3,500). Of course, these figures depend on many different factors, however they are a good starting point for someone who doesnt buy homes every day. Typically, a lender will allow you up to 2% of the purchase price back at close for improvements. Use this to your advantage. When making an offer to purchase a home, always ask the seller to give you cash back at closing. Include in your offer that this cash back will be used as a carpeting allowance, a kitchen cabinet allowance, or just money for general improvements or repairs. Of course,

40

P U R C H A S E

A M E R I C A

C O U R S E B OOK

the lender will not know exactly what you are doing with the money so you can use it to help offset the cost of purchasing the home if you want to. When you lease your home to a tenant, the monthly rental payment that they pay to you is considered income in the eyes of lenders. This helps to offset the mortgage payment on your credit report, thereby allowing you to purchase another home without running into any qualification problems. If you need to raise capital, you can apply for a home equity loan at a bank or mortgage company. Some lenders offer equity loans up to 125% of the value of your home in exchange for a higher interest rate. As long as you use the money to save or make money, it is okay to borrow more than your home is worth (see Advice on Debt below). Lenders offer two main types of mortgages, adjustable rate (ARM) and fixed rate. An adjustable rate mortgage has an interest rate that can go up or down, usually up, every year. Its maximum yearly increase is between % and 3% and it has a lifetime cap of around 5%. A fixed rate mortgage has an interest rate that is locked in for the life of the loan. If you plan to own a home for less than four years, you should get an ARM. If you plan to own a home for more than four years, you should get a fixed rate mortgage. To see a side-by-side comparison of the two, call a local lender or surf to http://loanpage.com/morarm.htm. Additionally, lenders offer a 15-year and a 30-year mortgage. A 15-year mortgage will be paid sooner; however, the monthly payments are higher. Investors know that the 30-year mortgage is better because they can use the money saved from the lower mortgage payment to invest in something that has a higher rate of return. There are four major categories that lenders look at when making a decision to lend you money for a mortgage or equity loan. The criteria for each category varies from lender to lender and some will even trade you a higher interest rate for not meeting one of their standards. The categories are: 1. Credit Scores: This is the benchmark by which you will be judged. 2. Employment: You usually must be employed or in the same type of work for no less than two years. 3. Capacity: You must make enough money to be able to afford the mortgage. 4. Collateral: This is the item pledged as security for the loan (i.e. the home). A mortgage payment generally consists of the following elements: 1. Principal: The repayment of the original amount borrowed on a monthly basis. 2. Interest: The cost of borrowing the principal amount repaid on a monthly basis. 3. Taxes: Real estate taxes paid to a local government agency. 4. Insurance: Homeowners and mortgage insurance on the home. The total of these items is known as PITI (Principal/Interest/Taxes/Insurance).

41

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Advice on Debt
There are two kinds of debt, constructive debt and destructive debt. Constructive debt is money borrowed with the goal of saving or making additional money. An example of this would be to purchase a home with a mortgage because you are borrowing money with the knowledge that homes appreciate in value and they are a great tax shelter. Destructive debt is the purchase of something on credit that you could not otherwise afford (i.e., a new car, rented furniture, too many credit cards, etc.). An example of this would be to purchase merchandise with a credit card and not pay off the balance when the bill comes.

Establishing or Reestablishing Credit

If you are trying to establish or reestablish your credit, there are a few steps to getting started. Remember that credit isn't a right, its a privilege that you should protect. The key to establishing a good credit rating is to use the credit you have responsibly and make all payments on time. Here are some tips on establishing or reestablishing credit: 1. Open a Checking and/or Savings Account: Creditors look at them as evidence that you are able to handle money. 2. Stable Employment: Youll need a record of stable employment and have lived in your current residence for at least six months. 3. Open a Charge Account: This can be done at a local department store or gas station. These are often stepping-stones to other forms of credit. Be sure to make regular monthly payments on time to establish a good credit rating. 4. Get a Loan: When trying to establish credit, you may want to consider taking out a small loan from your bank or credit union. Deposit the money you borrowed into a savings account immediately. While you pay off the loan, the interest you are earning on the deposit will help cut the cost of the loan. Get a Secured Credit Card: With a secured credit card, you deposit a specified amount of money in a financial institution which then issues you a bank credit card (Visa or MasterCard). The amount you deposit becomes your credit limit. With timely payments, you credit limit may increase and eventually the account may no longer need to be secured by your savings.

42

P U R C H A S E

A M E R I C A

C O U R S E B O O K

13
Chapter

Modeling Success
Success is the sum of small efforts, repeated day in and day out.

t should be clear that this is not a self-help book, but rather a blueprint for successfully using the lease purchase contract. Nevertheless, the organization and motivation of others often aids success and since the facts contained in this chapter have had such a tremendous impact on the success of so many people, they need to be shared. Anthony Robbins teaches in his book, Unlimited Power, that success can be modeled. If you do and think exactly as someone else does and thinks, then you will have the exact same results in performing that same specific task. After studying many interviews with successful people and extracting the common traits and qualities that they claim made them successful, the following list of ideas keeps reappearing. This list includes ideas from politicians, successful business people, great athletes, doctors, lawyers and many others. Something different may work for you, but be aware that success is only obtainable if you think that you can achieve it. In keeping with the theme of this Coursebook, the list has been condensed into its essential ingredients: 1. 2. 3. 4. Work: Work very hard and focus on the task at hand. Responsibility: Accept responsibility for your actions and words. Goals: Have measurable written goals, both short-term and long-term. Budget: Have a written budget.

Think: Think for yourself and develop your own ideas and opinions.

43

P U R C H A S E

A M E R I C A

C O U R S E B O O K

14
Chapter

Getting Started
The reason most people do not recognize opportunity is because it usually goes around wearing overalls, and looks like hard work.

G
______ ______ ______ ______ ______ ______

etting rich quick and easy money are two tempting delusions. This Coursebook has provided you with a method of wealth accumulation, but it will not be gained at the same blinding rate as winning the lottery. There are no shortcuts to success. In this instance, success is achieved by focusing on one niche in the grand world of real estate investing -- and, doing it better and more efficiently than anyone else. The best way to begin is to devote as much spare time as you can to your investing business. Make sure there is time that you can have to yourself without any interruptions. Complete the following list in order: (for an explanation of each, see the pages that follow): Acquire Knowledge Acquire More Knowledge Write a Business Plan Print Some Business Cards Join a Local Landlord Association Assemble Your Team ______ Attorney ______ Realtor ______ Accountant ______ Banker/Mortgagor ______ Home Inspector ______ Appraisal Company ______ Title Company ______ Consultant/Mentor Clean Up Your Credit Report

______

44

P U R C H A S E

A M E R I C A

C O U R S E B OOK

______

Acquire Some Cash from (In Order of Appeal): ______ Savings/Checking/Stocks/Investments ______ Unsecured Lines of Credit ______ Home Equity Loan ______ Parents/Friends/Partners/Investors ______ Credit Cards ______ Second or Third Job Commit Your Goals to Paper (Read over them daily) Complete Chapter 8 Step-By-Step Investors

______ ______

Explanation of Terms
Acquire Knowledge: Check this off because youre doing it now. Acquire More Knowledge: Knowledge is something that people value because it opens new horizons, extends freedom and creates opportunities. This Coursebook provided you with all the tools you will need to get started, however, you should never stop learning (see APPENDIX A RECOMMENDED VIEWING). Write a Business Plan: The business plan will become your business bible. At minimum it should contain your target product (i.e. single family homes priced between $50,000 and $150,000 located in Southville school district) and target market (i.e. tired landlords, motivated sellers and tenant/buyers who pay their bills on time). Additionally, it should contain an Executive Summary (location, vision and mission, legal structure), Management Plan (consultants), Operating Plan (staffing, research, technology, licenses), Marketing Plan (competition, target market, target product, pricing, advertising, strategic alliances, market research) and Financial Plan (cash-flow, income statement, balance sheet, sources and uses of capital). As you can see, this is a very important step. Spend no more than 30 minutes scribbling down your thoughts to the above categories, and then spend 30 minutes rewriting it. Print Some Business Cards: This will become your identity in the business world (see APPENDIX D MARKETING MATERIALS). Join a Local Landlord Association: You will meet 90% of your resources at local landlord meetings. You can usually get free advice from local Realtors, attorneys, bankers and accountants who share one common interest; they are all landlords. You can usually obtain discounted credit reports, free Landlording information and a wealth of other important information (see APPENDIX A RECOMMENDED VIEWING).

45

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Assemble Your Team: Just call or pay a visit to some of these professionals and explain to them what your goals are and how you see them playing a role in your success. They know that if you are successful, they will benefit from your success. You will need to find a good Realtor who is willing to help you accomplish your goals. A good Realtor will become your best ally during your investing career. Keep in mind, however, that many Realtors do not think highly of lease purchase deals because they delay their 6-7% commission (which they share with 2-8 other parties). To get in the door with Realtors, explain to them what your goals are and then tell them how they can benefit from your success (they usually want money). You want to ask them if they would consider a partnership whereby they would spend very little time and effort sending you business and you would in turn compensate them for their work. Likewise, they can benefit from you by sending them referrals, providing a solution to one of their real estate problems, or maybe they just enjoy the fruit baskets that you send every month. You get the picture. Clean Up Your Credit Report: It is not necessary to have good credit, however it will be to your advantage to have it. Pay off any outstanding debts, stop making late payments and pay the balances of those credit cards (see Chapter 12 Banks, Debt and Credit). Acquire Some Cash: Although it is not necessary to have spare cash on hand, it cant hurt to have it. Remember that if you borrow money as your source of spare cash, it will be constructive debt, which saves you money or yields profits (see Chapter 12 Banks, Debt and Credit). Commit Some Goals to Paper: You must overcome limited beliefs! Of all the steps listed in this chapter, this is the most important. Ensure that you commit both short-term and long-term goals to paper and make them measurable. If you want a 10,000 square foot mansion in the Bahamas when you retire, write it down! If you want $1 million in the bank by age thirty, write it down! One of the oldest of the old sayings goes, If you think you can or you think you cant youre probably right. (See Chapter 12 Modeling Success) Complete Chapter 5 Step-By-Step Investors: It doesnt get any easier than this. Take action. Many people ask, How can I get started investing in real estate? or How can I sell my home for top dollar without all the headaches? The answer is simple: Figure out what you want to accomplish, then place an ad in the newspaper and sit back and wait for the phone to ring. But many people find it difficult to get started. My grandmother (who was famous for knowing every old saying ever said) always used to tell me, Boonie (my nick name), there are two kinds of people, those who are doers, and those who talk about doing. It is time to be a doer.

46

P U R C H A S E

A M E R I C A

C O U R S E B O O K

APPENDIX A RECOMMENDED VIEWING

Atlas Shrugged By Ayn Rand Anywho.com http://www.anywho.com Credit After Bankruptcy By Stephen Snyder For Sale By Owner http://www.fsbo.com HUD Online http://www.hud.org Hardcover, fiction. A long-time best seller about thinking for yourself. A reverse directory look-up. Find addresses by entering phone numbers so you can send marketing mailers without making phone calls. A step-by-step action plan to quick and lasting recovery after personal bankruptcy. Housing and Commercial property for sale. Properties are offered by the owners directly. Housing and Urban Development Online. Consumer information on housing, mortgages, and real estate laws. Provides quality individual, group, or small business legal service plans.

Legalwise 1-800-331-3425 http://www.legalwise.com Rental Housing Online http://www.rental-housing.com Well worth the money. Realtor.com http://www.realtor.com Tax Lien/Deed Sales http://www.taxbiz.com THINK & Grow RICH By Napoleon Hill Total Foreclosure Solutions http://www.tfschicago.com Unlimited Power By Anthony Robbins

A web site that has everything from real estate law to real estate calculators. $25 annual membership.

A great web site to obtain information on mortgage rates and listings in your area. A web site that has thousands of tax lien listings from commercial to residential to multi-unit property. A book that contains sound money-making secrets that can change your life. A web site that has thousands of foreclosure listings from residential to multi-unit to commercial property. Paperback. A very powerful and effective self-help book.

47

P U R C H A S E

A M E R I C A

C O U R S E B O O K

APPENDIX B EQUITY CHARTS

Example 1 A comparison of the rate of equity accumulation in a one-year period based on the following example: You find a 3-bedroom, 2-bath home in a nice part of town. The sales price is $100,000. You convince the landlord/seller to lease purchase it to you. You put down $3,500 (3.5%) as an option deposit, which is, credited 100% towards the purchase of the home when you buy it plus first months rent, which is $1,000. Each month you receive a $250 (25%) rent credit towards the purchase of the home. Assume that if the landlord/seller was only interested in renting it, the fair market rent is $1,000 per month and that he would want first and last months rent plus a security deposit of $1,000. Assume also that the mortgage companys interest rates are at 8% and the smallest down payment they offer is 5% of the sales price. Taxes, insurance and private mortgage insurance (PMI) are $303 per month. Closing costs and prepaids typically cost about $3,000 for a $100,000 home. Monthly Payment Down Payment 1st Year Cash Paid 1st Year Equity Earned Rent $ 1,000 3,000 13,000 0 Own $ 1,000 8,000 20,000 791 Lease Purchase $ 1,000 4,500 15,500 3,000

Example 2 Find the rent figure below that most closely resembles your monthly rental payment to determine how much money you are throwing away each year in rent. Rent $600 700 800 900 1,000 1,100 1,200 1,400 1,600 1,800 2,000 1stYear $7,200 8,400 9,600 10,800 12,000 13,200 14,400 16,800 19,200 21,600 24,000 2 ndYear $14,400 16,8002 19,200 21,600 24,000 26,400 28,800 33,600 38,400 43,200 48,000 3 rdYear $21,600 5,200 28,800 32,400 36,000 39,600 43,200 50,400 57,600 64,800 72,000

48

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Example 3 A side-by-side comparison of the rate of equity accumulation between a mortgage and a lease purchase contract. Both have the exact same monthly principal and interest payment of $900. Mortgage* Month # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Total: * Mortgage: Principal $82.29 82.84 83.39 83.95 84.51 85.07 85.64 86.21 86.79 87.36 87.95 88.53 89.12 89.72 90.32 90.92 91.52 92.13 92.75 93.37 93.99 94.62 95.25 95.88 2,134.12 Interest $817.67 817.12 816.57 816.01 815.45 814.89 814.32 813.75 813.17 812.60 812.01 811.43 810.84 810.24 809.64 809.04 808.44 807.83 807.21 806.59 805.97 805.34 804.71 804.08 19,464.92 Lease Purchase** Principal $250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 250.00 6,000.00 Interest $650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 650.00 15,600.00

Loan amount: $122,650. Amortized over 30 years at 8% interest. Does not include taxes, insurance, PMI, association dues, or special assessments. Principal will begin to accumulate at a rate of $250 per month in the 169th month (14th year).

** Lease Purchase: Sales price (hypothetical): $122,650. Option matures in 2 years. Do not have to pay taxes, insurance, PMI, association dues, or special assessments.

49

P U R C H A S E

A M E R I C A

C O U R S E B O O K

APPENDIX C CASE STUDIES

Below are some of the deals that have been done in the past: Purchased S. Turlington Street with 3% down for $67,000. Lease purchased it for $795/mo. Monthly payment is $963. Tenant/buyers total down payment was $3,135. Giving $100 monthly credit. Sell to tenant/buyer for $106,595. We have a negative cash flow on this home, but that is okay because this is the home that we got an equity loan on to begin my investing career. In a short amount of time it will be sold for a small profit. Purchased South Shore Drive with 5% down for $149,900. Lease purchased it for $1,550/mo. Monthly payment is $1,266. Tenant/buyers total down payment was $6,200. Giving $200 monthly credit. Sell to tenant/buyer for $199,000. Purchased King Drive with 10% down for $88,000. Received $1,760 back at close that made the total purchase price $86,240. Lease purchased it for $945/mo. Monthly payment is $875. Tenant/buyers total down payment was $3,780. Giving $100 monthly credit. Sell to tenant/buyer for $119,900. The tenant/buyer wanted to move out because her father became ill. She lost her option deposit and, shortly thereafter, we lease purchased it to another tenant/buyer and received a brand new $5,000 option deposit. I kept the sales price the same, but increased the rent to $995 per month. Purchased Roosevelt Road with 10% down for $102,000. Received $2,040 back at close that made the total purchase price $97,960. Lease purchased it for $995/mo. Monthly payment is $895. Tenant/buyers total down payment was $3,985. Giving $100 monthly credit. Sell to tenant/buyer for $134,900. Purchased S. Lake Park Avenue with 5% down for $83,000. Received $1,660 back at close that made the total purchase price $81,340. Lease purchased it for $795/mo. Monthly payment is $712. Tenant/buyers total down payment was $5,000. Giving $100 monthly credit. Sell to tenant/buyer for $122,900. Lease Purchased Oakenwald Avenue. I lived in this home and then sub-lease purchased it to another tenant/buyer. Monthly payment is $900. The total down payment was $901. The contract sales price was $118,000 with $250 per month being credited as equity. Our new tenant/buyers monthly payment is $950. Their total down payment was $3,000. We will sell it to them for $124,900 with $100 per month being credit as equity. Purchased S. Michigan Avenue with 5% down for $104,860. Received $2,140 back at close that made the total purchase price $94,000. Lease purchased it for $995/mo. Monthly payment is $918. Tenant/buyers total down payment was $4,000. Giving $200 monthly credit. Sell to tenant/buyer for $127,000.

50

P U R C H A S E

A M E R I C A

C O U R S E B O O K

APPENDIX D MARKETING MATERIALS

Classified Ads
Dont Rent! Why Rent? Rent-To-Own! You can afford this home! Only $3,000 down! Lease Purchase 3 BD, 2 BA, in Hyde Park. Low down. Rent-To-Own Beautiful 3 BD, 2 BA, huge kitchen, cozy fireplace, private deck, large yard, award-winning Hyde Park schools. Free Rent! Beautiful 3 BD, 2 BA, huge kitchen, cozy fireplace, private deck, large yard, award-winning Kenwood schools. Lease Purchase Sell Your Home for Full Price Fast closings, cash, freedom from maintenance. Written offer within 48 Hours. AAA Areas Rodgers Park South Shore Bronzeville Lease Purchase. $3,500 down $600/mo $700/mo $800/mo

Top Dollar Paid If you are flexible on terms. Any price. Guaranteed.

51

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Eye Catching Headlines

Rent Now, Buy Later! No Qualifying! FREE! Lease Purchase Report Sell Your Home in 48 Hours! Dont Own Rent! Sell Your Home Quick & Easy Why Rent? Rent-To-Own! Dont Rent! Rent-To-Own! Tenant Problems? Free Rent! Guaranteed Sell Your Home for Full Price Easy Rental Program Top Dollar Paid

Display Ads
Selling Your Home? I will pay you full price for your home if you are flexible on the terms. 24 Hour Recorded Message (555) 555-1212 Rental Problems? I will solve your rental problems. Guaranteed. 24 Hour Recorded Message (555) 555-1212 Top Dollar for Your Home! Within 7 days. Guaranteed. 24 Hour Recorded Message (555) 555-1212 Tenant Problems? We will take care of your home on a long-term basis. Just tell us where to mail the checks. 24 Hour Recorded Message (555) 555-1212

52

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Flyers/Posters
Rent-To-Own Beautiful 3 story, Multi-unit, Gray-stone in AwardWinning Bronzeville Community Youll love this 3 story gray-stone, located in historic Bronzeville, because of its spacious bed rooms, magnificent cathedral ceilings, loft potential, large private wood deck and modern kitchen. Property being sold As Is. Here are the Terms: $ 250 $ 1,250 $ 3,900 Monthly Credit Monthly Rent Moves You In

Why Rent-To-Own? Heres why: Up to 99% faster equity growth. Rent money is working towards the purchase of the home. Option deposit is 100% credited towards the purchase of the home. Minimum cash out of pocket to control this home. Frequently no down payment at closing. Sales price is locked in. Profits from appreciation. No taxes, less liability. Time to kick the tires, repair credit and/or find the best financing. Supreme privacy. Peace of mind.

Call Arturo Now! (555) 555-1212

53

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Rent-To-Own Cozy Contemporary English-Modern Mansion in Private New Lenox Area

Youll love this home because of its spacious elevated family room, inviting vaulted ceilings, cute loft areas, five car heated garage, large private wood deck and generous modern kitchen. Here are the Terms: $ 600 $ 2,300 $ 6,900 Monthly Credit Monthly Rent Moves You In

Why Rent-To-Own? Heres why: Up to 99% faster equity growth. Rent money is working towards the purchase of the home. Option deposit is 100% credited towards the purchase of the home. Minimum cash out of pocket to control this home. Frequently no down payment at closing. Sales price is locked in. Profits from appreciation. No taxes, less liability. Time to kick the tires, repair credit and/or find the best financing. Supreme privacy. Peace of mind. Take One! (555) 555-1212 311 Proverb Lake (555) 555-1212 311 Proverb Lake (555) 555-1212 311 Proverb Lake (555) 555-1212 311 Proverb Lake

54

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Postcards
Rental problems? No more! Put your rental properties on automatic pilot with our Easy Rental Program. We will take care of your properties on a long-term basis and save you the headaches. Just tell us where to mail the monthly rent checks. For a no obligation offer, call Art at (555) 555-1212 and never be faced with late rent, maintenance issues, problem tenants, or evictions again. Real estate problems? No more! I am a real estate problem solver. I will solve almost any real estate problem you may have. Guaranteed written offer, cash, freedom from maintenance, fast closings even within 48 hours. For a no obligation offer, call Arturo at (555) 555-1212 and never be faced with real estate problems again. I was wondering if you would consider renting to me on a long term or a rent-to-own basis. I am an excellent tenant with great references and I can promise to pay you on time each and every month. Additionally, I have the tools and skills to perform minor maintenance on the home. If you would like to rent me your home on a long term or a rent-to-own basis, I would be very happy to hear from you. Call Arturo at (555) 555-1212. Follow Up Materials Dear ________________: Just a reminder that I am still interested in your property located at _____________________________. If you become more flexible with your terms, I would like to hear from you. Please call me, Arturo, at (555) 555-1212. Thank you!

55

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Business Cards Sell Your Home Quick & Easy

Fast Closing Within 48 Hours! Freedom From Maintenance! Cash In Your Pocket!
24 Hour Recorded Message (555) 555-1212

Real Estate Problem Solver

Do you have real estate problems? Moving? Need cash? Bad tenants? Vacancies? Late on payments? Divorce? Making two mortgage payments?

24 Hour Recorded Message (555) 555-1212

I Buy Houses Quick Cash!

Fast Closing Within 48 Hours! Buyer will assume your debt! Cash In Your Pocket!
24 Hour Recorded Message (555) 555-1212

Stop Renting Own A Home!

Fast Closing Within 48 Hours! Seller will assist with financing! Possible Cash Back at Closing!!
24 Hour Recorded Message (555) 555-1212

56

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Voice Mail Scripts Outline for Tenant/Buyers 1. Thank you for calling about (insert address of home). 2. Youll love this property because (insert top five qualities about the property). 3. Because I am a private seller, you will save a lot of money 4. (Create urgency) Because this home is in high demand, you must act fast 5. Your next step is to look at the home 6. After the beep, please leave your name and number so I can call you back quickly Thank you and have a Blessed day. Outline for Landlord/Sellers 1. Thank you for calling about (insert address of home). 2. I am a real estate problem solver. 3. I provide solutions to real estate problems every day including, but not limited to, (insert common Landlording/homeowner problems). 4. (Filter the calls) You need to decide how big your problem is on a scale from one to ten. If youre a 1-5 then you dont really have any real estate problems for me to solve and you were just curious about the ad. If youre a 6, 7, or 8, then please leave your name and number and I will call you back shortly. If youre a 9 or 10, then please use the paging option, so that I may call you back immediately. Thank you and have a Blessed day.

57

P U R C H A S E

A M E R I C A

C O U R S E B O O K

APPENDIX D FORMS
Important No representation or warranty as to legality, accuracy, correctness, or acceptance of the enclosed forms by any State or jurisdiction is indicated. Should you decide to use any of the enclosed forms in your legal affairs, consult with an attorney. Safe Offer System Use the Real Estate Offer to Lease Purchase agreement to present an offer to a landlord/ seller or, if you are the landlord/seller, use it to assist you in arriving at terms that are acceptable to both you and your tenant/buyer. Use the Contingency Removal form to remove any contingencies (weasel clauses) that you may have included in your offer. An offer cannot be binding until all of the contingencies have been removed. Have your attorney review this form before you use it. Lease Purchase Agreement (I Am Tenant/Buyer) Use this form in conjunction with the Inventory Checklist and Receipt and the Lead-Based Paint Disclosure to close your deal when you have an accepted offer from a landlord/seller. Use the addendum to cover any details not already covered in the agreement. Have your attorney review this form before you use it. Additional Note: The Bill of Sale section of this contract calls for items such as a range, washer & dryer, microwave oven, etc. Lease Purchase Agreement (I Am Landlord/Seller) Use this form in conjunction with the Inventory Checklist and Receipt and the Lead-Based Paint Disclosure when you have either purchased or negotiated the control of a home that you would like to lease purchase to a tenant/buyer. Use the addendum to cover any details not already covered in the agreement. Have your attorney review this form before you use it. Assignment of Lease Purchase Agreement Use this form to assign (sell) your interest in a home that you are lease purchasing to another party. Have your attorney review this form before you use it. Profit Calculation Forms When you purchase a home conventionally with the intention of lease purchasing it to a tenant/buyer, use the When Buying form to calculate your potential profit. When you lease purchase a home from a landlord/seller with the intention of sub-lease purchasing it to a tenant/buyer, use the When Renting form to calculate your potential profit. Property Analysis Form Use this form before you make an offer on a home to ensure that it is satisfactory. Only use the Point System when you are buying a home.

58

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Information Gathering Forms A very simple and effective tool for quickly sorting out peoples Real Estate problems. Use the tenant/buyer form to gather information about tenant/buyers. Use the landlord/seller form to gather information about landlord/sellers. Realtor Prospecting Form Use this form to determine if a landlord/seller or a tenant/buyer may be interested in taking advantage of the lease purchase contract. Rental Application Use this form to determine if a tenant/buyer qualifies for a home you control. Have your attorney review this form before you use it. Inventory Checklist and Receipt To determine if there is any damage to a home after tenancy, use this form before you or your tenant/buyer take possession. Have your attorney review this form before you use it. Tenant Monthly Statement Mail this to your tenant/buyers to encourage them to think like homeowners. Have your attorney review this form before you use it. Lead-Based Paint Disclosure Federal law requires that every landlord must sign this form with their tenant prior to leasing their home if it was constructed before 1978. Have your attorney review this form before you use it. Lease Purchase Addendum for Drug Free Housing Federal law permits landlords to give this form to their tenant prior to leasing the property. Have your attorney review this form before you use it.

59

P U R C H A S E

A M E R I C A

C O U R S E B O O K

REAL ESTATE OFFER TO LEASE PURCHASE

REV. 05/01/01 Form 2701b PAC Legal Forms, Chicago, IL 60615 This instrument was prepared for

Name:
Address:

Name: Name:
Address:

City, State, Zip: TENANT/BUYER

City, State, Zip: LANDLORD/SELLER

THIS AGREEMENT, dated this _______ day of _____________, 200___, is between _______ ______________________, hereinafter referred to as Landlord/Seller; and _________________________________, hereinafter referred to as Tenant/Buyer: WITNESSETH, that if Tenant/Buyer shall first make the payments and perform Tenant/Buyers covenants hereunder, Landlord/Seller hereby covenants and agrees to lease to Tenant/Buyer, the premises situated in the County of _________________, State of _______________ and commonly known as : ______________________________________________________________ The said premises, as described above, with all appurtenances, are hereby leased to the Tenant/Buyer for a term of ________ months commencing ________________________, ___________*. Rent for the premises is payable in monthly installments of $___________, to be paid on or before the ________ day of the month for which rent is due. $___________ of each rent payment shall be credited toward the purchase price of the property as additional option consideration. *Payments to commence upon tenant procuring a suitable subtenant or assignee. Tenant/Buyer may renew under same conditions for ________terms for payment of $__________________. This renewal payment shall be considered additional option consideration.
Consideration:

Landlord/Seller acknowledges $___________ paid by Tenant/Buyer as consideration for the terms of this Offer. If the Landlord/Seller accepts this Offer , the consideration will be applied to the Option to Purchase Deposit. If the Landlord/Seller does not accept this Offer, the consideration paid by the Tenant/Buyer will be returned in full within 48 hours of receipt, either written or verbal, of the rejection notification.
Terms:

Purchase Price: Monthly Rental Payment: Option to Purchase Deposit: Monthly Credit for Rent Paid:

$_____________________ $_____________________ $_____________________ $_____________________

Other Conditions: ___________________________________________________________________ ________________________________________ Contingencies:

This Offer is contingent upon satisfactory completion of the following items as designated. All contingencies will be removed in writing. If any contingency in this Offer is not removed in writing by the required date, this Offer becomes null and void. Check appropriate items below. Contractors Inspection _____ A contractors inspection of the property at Tenant/Buyers expense, resulting in a report satisfactory to Tenant/Buyer. This contingency is to be removed on or before _____________. Attorney Approval _____ Approval of contract language by Tenant/Buyers attorney. This contingency is to be removed on or before _____________. Partner Approval _____ Approval of contract language by Tenant/Buyers partner. This contingency is to be removed on or before _____________. Other Approval _____ Approval of contract language by ___________________ . This contingency is to be removed on or before _____________.
_________________________________ Tenant/Buyer Printed Name __________________________________________ Tenant/Buyers Signature Date _________________________________ Landlord/Sellers Name __________________________________________ Landlord/Sellers Signature Date 60

P U R C H A S E

A M E R I C A

C O U R S E B OOK

REMOVEL OF SPECIFIED CONTINGENCY[IES]

REV. 05/01/01 Form 2603c PAC Legal Forms, Chicago, IL 60615

THE UNDERSIGNED Tenant/Buyers and Landlord/Sellers, parties to a certain Real Estate Offer to Lease with Option to Purchase contract dated ___________________________________ and covering property commonly known as: _____________________________________________ and which contains a contingency clause with regard to: (check if applicable) _____ _____ _____ _____ _____ Hereby remove said contingency (ies). All other terms and conditions of the Real Estate Offer to Lease with Option to Purchase contract remain the same. CONTRACTORS INSPECTION ATTORNEY APPROVAL PARTNER APPROVAL __________________________________ __________________________________

_________________________________ Tenant/Buyer Printed Name __________________________________________ Tenant/Buyers Signature Date

_________________________________ Landlord/Sellers Name __________________________________________ Landlord/Sellers Signature Date

Notary
STATE OF ____________________ COUNTY OF __________________ On this ______day of ___________, 200___ before me, personally appeared, known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity (ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Affiant Known Produced ID

Type of ID (Seal)

61

P U R C H A S E

A M E R I C A

C O U R S E B O O K

U N I F O R M L E A S E P U R C H AS E A G R E E M E N T
REV. 05/01/01 Form 2701b PAC Legal Forms, Chicago, IL 60615 This instrument was prepared for

Name:
Address:

Name: Name:
Address:

City, State, Zip: TENANT/BUYER

City, State, Zip: LANDLORD/SELLER

THIS AGREEMENT, dated this _______ day of _____________, 200___, is between _____________________________, hereinafter referred to as Landlord/Seller; and _________________________________, hereinafter referred to as Tenant/Buyer: WITNESSETH, that if Tenant/Buyer shall first make the payments and perform Tenant/Buyers covenants hereunder, Landlord/Seller hereby covenants and agrees to lease to Tenant/Buyer, the premises situated in the County of _________________, State of _______________ and commonly known as: ______________________________________________________________ The said premises, as described above, with all appurtenances, are hereby leased to the Tenant/Buyer for a term of ________ months commencing ________________________, ___________*. Rent for the premises is payable in monthly installments of $___________, to be paid on or before the ________ day of the month for which rent is due. $___________ of each rent payment shall be credited toward the purchase price of the property as additional option consideration. *Payments to commence upon tenant procuring a suitable subtenant or assignee. Tenant/Buyer may renew under same conditions for ________terms for payment of $__________________. This renewal payment shall be considered additional option consideration. THE TENANT/BUYER, IN CONSIDERATION OF THE LEASING OF SAID PREMISES, AGREES AS FOLLOWS: To pay the rent for said premises as hereinabove provided; To keep said premises in good condition and repair and at the expiration of this lease to surrender and deliver up the same in as good order and condition as when entered upon, loss by fire, accident, act of God or ordinary wear and tear excepted; IT IS FURTHER AGREED that in case said premises are left vacant, then the Landlord/Seller may, without being obligated to do so and without terminating this lease, re-take possession of the premises. If any part of the rent herein reserved be unpaid, the Landlord/Seller may rent the same for such rent as the Landlord/Seller may be able to do so, making such changes and repairs as may be required, giving credit for the amount so received, less all expenses. IT IS FURTHER MUTUALLY AGREED that the Landlord/Seller, in consideration of the performance of all the covenants and agreements herein to be performed by the Tenant/Buyer under the lease, hereby grants to Tenant/Buyer an exclusive option to purchase said above described premises at any time during the term of this lease for the sum of $__________________, payable as follows: ___________ ______________________________________________________________________________________ _____________________________________________________________________________________. The Landlord/Seller, upon payment of said purchase money, shall convey said premises by General Warranty Deed free from all encumbrances except _____________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ and shall furnish a policy of title from a reputable title insurance company at his expense so showing. Additional provisions: Utilities. The Landlord/Seller and the Tenant/Buyer are responsible for the costs of the following utilities and services for the premises (Check the responsible party): Garbage Removal Water and Sewer Gas Electricity Lawn and Garden Snow Removal _______________ __ Landlord/Seller __ Landlord/Seller __ Landlord/Seller __ Landlord/Seller __ Landlord/Seller __ Landlord/Seller __ Landlord/Seller __ Tenant/Buyer __ Tenant/Buyer __ Tenant/Buyer __ Tenant/Buyer __ Tenant/Buyer __ Tenant/Buyer __ Tenant/Buyer

62

P U R C H A S E

A M E R I C A

C O U R S E B OOK

Late rental payments. The Tenant/Buyer shall pay the Landlord/Seller $25.00 for each monthly installment not received by the Landlord/Seller within ten days of its due date. Access to the premises. Tenant/Buyer shall have immediate access to the property and a key to show the property to prospective subtenants and/or assigns. Maintenance, repairs, and damage of premises. Throughout the term of the lease, the Tenant/Buyer shall maintain the premises in good condition and shall allow no waste of the premises or any utilities. Inspection. This agreement is subject to final inspection and approval of the property in writing by the Tenant/Buyer prior to taking possession. Insurance. Landlord/Seller shall protect Tenant/Buyers equitable interest by maintaining hazard insurance upon the property, naming the Tenant/Buyer as additional insured. In the event of destruction in whole or in part of the property, Tenant/Buyer shall have the option to proceed with the closing and accept the insurance proceeds for said damage, or to declare this agreement null and void, releasing both parties from any obligations hereunder, except for the return of the monies paid by Tenant/Buyer which shall become immediately due and payable from the insurance proceeds. Assignment. Tenant/Buyer shall be permitted the right of subletting or assignment. If this agreement is assigned with the approval of the Landlord/Seller, Tenant/Buyer shall be released from any further liability hereunder. Bill of Sale. At the closing, the Landlord/Seller agrees to convey the _________________, _________________, _________________, _________________ and _________________ to the Tenant/Buyer by Bill of Sale. Intent. It is the intent of the Landlord/Seller to sell the premises to the Tenant/Buyer and it is the intent of the Tenant/Buyer to purchase the premises from the Landlord/Seller. Taxes and assessments. The Landlord/Seller shall pay all special assessments that are assessed on the premises on or before the effective date of this agreement. The real estate taxes on the premises shall be prorated to the date of closing according to due dates, under the assumptions that taxes are paid in advance. Closing. The closing shall be held on or before ___________________________, ___________ unless extended by both parties in writing. The Landlord/Seller shall be responsible for preparing the documents for the closing. The documents shall be delivered to the Tenant/Buyer for review at least 7 days prior to closing. Notices. All notices required by this agreement shall be sent to the other party in writing. The notices shall be delivered either personally or by first-class mail at the recipients last known address. Unless otherwise required by law, the date of service shall be the date of hand delivery or the mailing date. Time is of the essence. Time is of the essence in the performance of this agreement. Entire agreement. This agreement contains all the representations by each party to the other and expresses the entire understanding between the parties with respect to the contemplated transaction. All prior communications concerning the subject matter are merged in or replaced by this agreement. No modifications of this lease shall be binding unless they are in writing and signed by the Landlord/Seller and the Tenant/Buyer. _________________________________ Tenant/Buyer Printed Name _________________________________ _________ Tenant/Buyers Signature Date Notary STATE OF ____________________ COUNTY OF __________________ On this ______day of ___________, 200___ before me, personally appeared, known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity (ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Affiant Known Produced ID _________________________________ Landlord/Sellers Name _________________________________ _________ Landlord/Sellers Signature Date

Type of ID
(Seal)

63

P U R C H A S E

A M E R I C A

C O U R S E B O O K

REAL ESTATE LEASE AG REEMENT

REV. 05/01/01 Form 2701b PAC Legal Forms, Chicago, IL 60615 Name: Name: Name: Address: City, State, Zip: TENANT/BUYER Address: City, State, Zip: LANDLORD/SELLER This instrument was prepared for

THIS AGREEMENT, dated this _______ day of _____________, 200___, is between _____________________________, hereinafter referred to as Landlord/Seller; and _________________________________, hereinafter referred to as Tenant/Buyer: WITNESSETH, that if Tenant/Buyer shall first make the payments and perform Tenant/Buyers covenants hereunder, Landlord/Seller hereby covenants and agrees to lease to Tenant/Buyer, the premises situated in the County of _________________, State of _______________ and commonly known as: ______________________________________________________________

1.

2.

3.

4.

5.

Lease Term. ________ months for the period commencing on ___________________________, ___________, and thereafter until ___________________________, ___________, at which time this Lease Agreement shall terminate. Tenant may renew under same conditions for ___________ terms for payment of $__________. This renewal payment shall be considered additional rents and are non-refundable to the Tenant. Rent. Tenant shall pay landlord as rent, by check or money order at the address stated above or an address designated by the landlord, the sum of $__________________ per month, due and payable monthly, on the ________ day of the previous month for which rent is due. Rent may be mailed through the United States Postal Service at Tenants risk. Any rents late or lost in the mail will be treated as if unpaid until received by Landlord. Tenant further agrees to pay a late charge of $25.00 plus $5.00 per day for each day the entire rent is not received by the Landlord by the ________ of the month regardless of the cause, including dishonored checks, time being of the essence. This increase shall be considered additional rents and if rent is received after the ________ of the month and late fees and/or additional rents are not included with such payment, rent will be considered unpaid. Any payments received by Landlord will be applied first towards late fees and/or other additional charges, then toward rent. An additional Service Charge of $20.00 will be paid to Landlord for all dishonored checks. If Tenants checks are returned unpaid for any reason, Landlord shall have the right to demand cash or money orders on all future payments. Security Deposit. (Circle A or B) A. The Tenant has deposited with the landlord $________________ as a security deposit to reimburse the Landlord for actual damages to the rental unit or ancillary facilities that directly result from conduct not reasonably expected in the normal course of habitation of a dwelling and to pay the Landlord for all rent arrearage or due for premature termination of this lease by the Tenant and for any of the Tenants utility bills not paid by the Tenant. The Tenant is liable for any balances remaining unpaid after the Landlord applies the security deposit to such amounts. The Landlord shall not be required to keep the security deposit in a separate account and may commingle the deposit with his/her own personal funds. If the Tenant leaves the premises in satisfactory condition, the Landlord agrees to provide Tenant with a written letter of recommendation. B. Because of the Tenants good credit and/or rental history, Landlord is waiving requirements for a security deposit. If the Tenant leaves the premises in satisfactory condition, the Landlord agrees to provide Tenant with a written letter of recommendation. Use. Tenant agrees to use said dwelling as living quarters only for ________ adults and ________ children, namely: ____________________________________________________________________ ______________________________________________________________________________________________________________ _____________________________________________________and to pay $50.00 each month for each other person who shall occupy the premises in any capacity. Pets. All pets on the property not registered under this Lease Agreement shall be presumed to be strays and will be disposed of by the appropriate agency as prescribed by law. Any pets kept on the property without the permission of the Landlord in writing shall be a complete and material breach of the lease. Type of pets allowed and names (if none, state so): ________________________________. No Assignment. Tenant agrees not to assign this Lease, nor to sublet any portion of the property, nor to allow any other person to live therein other than as named in above without first obtaining written permission from Landlord and paying the appropriate surcharge. Further, it is agreed that covenants contained in this Lease, once breached, cannot afterward be performed, and that unlawful detainer proceedings may be commenced at once, without notice to Tenant. Prohibitions. Neither the Tenant nor the Tenants guests shall:
64

6.

7.

P U R C H A S E

A M E R I C A

C O U R S E B OOK

a. b. c. d. e.

8.

9.

10.

11. 12. 13.

14.

15. 16. 17. 18.

19.

install any equipment or appliances that, in the Landlords opinion, cause an unsafe condition on the premises; accumulate refuse on or around the premises that might pose a health hazard to the Tenant or to the Tenants neighbors; allow any activity on or around the premises that would result in an increase in fire insurance premiums for the premises; permit any flammable liquids or explosives to be kept on or around the premises; permit on the premises any act that would injure the Landlords reputation or interfere with the rights or the quiet enjoyment of other persons; f. change or install any locks on the premises or in the building where the premises are located; or g. bring any water beds, floor safes, or other heavy objects on the premises. No Waiver. All rights given to Landlord by this Lease shall be cumulative to any other laws, which might exist or come into being. Any exercise or failure to exercise by Landlord of any right shall not act as a waiver of any other rights. No statement or promise of Landlord or his agent as to tenancy, repairs, alterations, or other terms and conditions shall be binding unless reduced to writing and signed by Landlord. Vacation or Abandonment of the Premises. If the Tenant removes substantially all the Tenants property from the premises, the Landlord may immediately enter and redecorate the premises without abatement of rent, and these acts shall not affect the Tenants obligations under this Lease. If the Tenant abandons the premises before the lease expires, all rent for the remainder of the term of the Lease shall immediately become due. Holding Over. The Tenant may, with the Landlords permission, continue to occupy the premises after the term of this lease expires without renewing this Lease or signing another Lease for the premises. Such tenancy shall be on a month-to-month basis and subject to the provisions of this Lease except that the first months rent shall increase 25 percent from the rent for the last month of the term of the Lease and the Landlord may increase rent on 30 days notice to the Tenant. Utilities. Tenant will be responsible for payment of all utilities, garbage, water and sewer charges, telephone, gas association fees or other bills incurred during the term of this Lease Emergency Access. Landlord has the right of emergency access to the leased premises at any time and access during reasonable hours to inspect the property or, at reasonable times, to show property to a prospective tenant. Repairs. Tenant shall be responsible for all repairs, maintenance, costs, service charges, painting, improvements and additions to the property. Tenant shall take an active role to insure that the property stays in excellent condition. Tenant agrees that he/she has had adequate opportunity to inspect the condition of the property and Landlord makes no warranties or representations about the condition of the property, the improvements, utilities, electrical, plumbing, appliances or the neighborhood. Tenant has the right to paint and decorate the property in his/her discretion within tasteful guidelines. Tenant will not make any major alterations to the property without prior written consent of the Landlord. Tenant is required to obtain all necessary permits required by law before commencing improvements. Any work performed on the premises whether by Tenant or other parties shall be as an independent contractor or agent of the Tenant and not an employee or agent of the Landlord. Landlord will have no right of supervision of the work performed. Tenant further warrants that he/she will be accountable for any mishaps and/or accidents resulting from such work, and will defend, indemnify and hold the Landlord and Landlords agents free from claims of any other person or entity. All improvements to the property shall be the property of the Landlord and remain attached and a part of the property when Tenant vacates. Default. To further clarify the terms of the lease, the Tenant shall make certain that the Landlord receives rent by the ________ of the month. A notice of non-payment will be served on the Tenant if rent is not received by the ________ of the month, regardless of fault of the Tenant or the United States Postal Service. Notwithstanding the foregoing, the lease will be deemed materially and incurably breached and terminated if the rent and/or any additional rent is not paid by the ________ of any month for which rent is due. The acceptance by Landlord of partial payments of rent due shall not, under any circumstances, constitute a waiver of Landlord, nor affect any notice or legal proceeding in unlawful detainer theretofore give or commenced under state law. If Tenant defaults on any other provisions of the Lease, including, but not limited to any misrepresentations on Tenants application, Landlord, at his option, can elect to continue the Lease or terminate the Lease and take possession by any lawful means. Landlord is not required to give any notice to cure a violation of the Lease other than as required by law. In the event the landlord is forced to obtain a judgement against the tenant, said judgement shall bear interest at 18% until paid in full. Ordinances & Statutes. Tenant shall comply with all municipal, state, and federal law, statutes and ordinances now in effect, or which shall be enacted in the future, and any violation thereof shall be a complete and material breach of the lease. Interruption of Services. As long as the premises are habitable, any interruption of services or utilities, inconvenience, or discomfort arising from repairs or improvements to the premises shall not affect this lease, reduce the rent, or be construed as an eviction. Intent. It is the intent of the Landlord to lease the premises to the Tenant and it is the intent of the Tenant to lease the premises from the Landlord. Damage or Destruction of Premises. If a casualty partially destroys the premises but they can be restored to a tenantable condition, the Landlord shall repair the premises with reasonable dispatch; however, the Landlords obligation to repair the premises shall be limited to the amount of insurance proceeds actually received by the Landlord. The Tenants obligation to pay rent shall be suspended while the premises are untenantable. If a casualty damages the premises to the extent that they cannot be restored to habitable condition within a reasonable period of time, either party may terminate this lease by giving the other party written notice within 15 days after the casualty. The Landlord shall not be liable for any reasonable delay or for providing housing for the Tenant during repairs. Legal Action. Tenant agrees, without protest, to reimburse Landlord for all actual and reasonable expenses incurred by way of Tenants violation of any term or provision of this Lease, including, but not limited to $20.00 for each Notice to Pay, Notice to Quit or other notice mailed or delivered by Landlord to Tenant due to Tenants non-payment of rent or other breach of Lease, all court costs and attorneys fees and all costs of collection. Any such costs shall be due immediately as additional rent. Any payments received by Landlord will be
65

P U R C H A S E

A M E R I C A

C O U R S E B OOK

20.

21.

22.

23.

applied first towards late fees and/or other additional charges, then toward rent. Both Landlord and Tenant waive trial by jury and agree to submit to the personal jurisdiction and venue of a court of subject matter jurisdiction located in the County in which the property is located. In such event, no action shall be entertained by said court or any court of competent jurisdiction if filed more than one year subsequent to the date of the cause(s) of action accrued. Waiver of Claims. Tenant hereby waives any and all right to assert affirmative defenses or counterclaims in any eviction action instituted by Landlord with the exception of an affirmative defense based upon payment of all amounts claimed by Landlord not to have been paid by Tenant. Tenant may only advance other matters in a separate suit. Property Loss or Damage. To the extent permitted by law, the Landlord and the Landlords agents shall not be liable for any damage to property or loss of property that is caused by theft or casualty on the premises. In the event that the building is damaged and through no fault of the Tenant, and cannot be restored within a reasonable time in the opinion of the Landlord, this Lease shall terminate with no further liability of either party. The Tenant shall obtain insurance to protect the Tenants personal property against such loss or damage (renters insurance). Notices. All notices required by this agreement shall be sent to the other party in writing. The notices shall be delivered either personally or through first-class United States Postal Service mail at the recipients last known address. Unless otherwise required by law, the date of service shall be the date of hand delivery or the mailing date. Entire agreement. This agreement contains all the representations by each party to the other and expresses the entire understanding between the parties with respect to the contemplated transaction. All prior communications concerning the subject matter are merged in or replaced by this agreement. No modifications of this lease shall be binding unless they are in writing and signed by the Landlord and the Tenant.

_________________________________ Tenant/Buyer Printed Name _________________________________ _________ Tenant/Buyers Signature Date

_________________________________ Landlord/Sellers Name _________________________________ _________ Landlord/Sellers Signature Date

Notary STATE OF ____________________ COUNTY OF __________________

On this ______day of ___________, 200___ before me, personally appeared, known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity (ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Affiant Known Produced ID

Type of ID (Seal)

66

P U R C H A S E

A M E R I C A

C O U R S E B O O K

ASSIGNMENT OF
REV. 05/01/01 Form 2701b PAC Legal Forms, Chicago, IL 60615

LEASE PURCHASE AGREEMENT

This instrument was prepared for Name:

Name: Name: Address: City, State, Zip: TENANT/BUYER Address: City, State, Zip: LANDLORD/SELLER

THIS AGREEMENT, dated this _______ day of _____________, 200___, is between _____________________________, hereinafter referred to as Landlord/Seller; and _________________________________, hereinafter referred to as Tenant/Buyer: WITNESSETH, that if Tenant/Buyer shall first make the payments and perform Tenant/Buyers covenants hereunder, Landlord/Seller hereby covenants and agrees to lease to Tenant/Buyer, the premises situated in the County of _________________, State of _______________ and commonly known as: ______________________________________________________________ THIS ASSIGNMENT, dated ___________________________, ___________, is between __________________________________, the Assignor(s) and _________________________ ________________________________________, the Assignee(s). For value received, Assignor assigns and transfers to Assignee that Residential Lease Purchase Agreement dated ___________________________, ___________ executed by Assignor as (Landlord/Tenant) ____________________________________, of the following described premises: __________________________________________________, together with all his right, title, and interest in and to the Residential Lease Purchase Agreement, subject to all the conditions and terms contained in the Residential Lease Purchase Agreement, to have and to hold from ___________________________, ___________, until the present term of the Residential Lease Purchase Agreement expires. A copy of the Residential Lease Purchase Agreement is attached hereto and made a part hereof by reference. Assignor covenants that he/she is the lawful and sole owner of the interest assigned hereunder; that this interest is free from all encumbrances; and that he has performed all duties and obligations and made all payments required under the terms and conditions of the Residential Lease Purchase Agreement. Assignee agrees to pay all rent due after the effective date of this assignment, and to assume and perform all duties and obligations required by the terms of the Residential Lease Purchase Agreement. Signed: _________________________________ Assignor _________________________________ _________ Assignors Signature Date Notary STATE OF ____________________ COUNTY OF __________________

_________________________________ Assignee _________________________________ _________ Assignees Signature Date

On this ______day of ___________, 200___ before me, personally appeared, known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity (ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Affiant Known Produced ID Type of ID
67

(Seal)

P U R C H A S E

A M E R I C A

C O U R S E B O O K

PROFIT CALCULATION WHEN BUYING 1

Closing Costs
Appraisal: Underwriting Fee: Closing Fee: Title Insurance: Document Fee: Recording Fee: Survey: Credit Report: Other: TOTAL: ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ 1A Interest: Insurance: Taxes: Attorney: Advertising: Other:

Prepaids
_____________________ _____________________ _____________________ _____________________ _____________________ _____________________

TOTAL:

_____________________ 1B

2
IMPROVEMENTS
___________________________ ___________________________ ___________________________ TOTAL: ___________________________ 2A

3
CASH BACK
How much will you get back at close from the 2% back addendum: How much will you get as an option consideration from your tenant: How much will you get for first months rent from your tenant: _______________ _______________ 3A _______________ 3B TOTAL: _______________ 3C

4
Down payment
_____% Down: Closing Costs: 1A: Prepaids: 1B: Improvements: 2A: Cash Back: 3C: TOTAL: 4A + 1A + 1B + 2A - 3C _______________ 4A _______________ _______________ _______________ _______________ _______________ 4B Mortgage 1: Mortgage 2: Taxes: Insurance: PMI: TOTAL:

Monthly Payment
_______________ _______________ _______________ _______________ _______________ _______________ 4C

5
MISCELLANEOUS
Your purchase price: Your amount financed 5A - 4A: How many months will you rent to your tenant: How much will you give for a monthly rent credit: How much will you sell to your tenant for 4B + 5A + $xx,xxx: How much will you owe the tenant back at close 5C x 5D + 3A: Your total monthly rental income is ( 3B - 4C ) x ( 5C - 1 ): _______________ 5A _______________ 5B _______________ 5C _______________ 5D _______________ 5E _______________ 5F _______________ 5G _______________

Net Profit ( 5E + 5G ) - ( 4B + 5B + 5F ):
68

P U R C H A S E

A M E R I C A

C O U R S E B O O K

PROFIT CALCULATION WHEN RENTING 1

UP FRONT NET PROFIT

You
Your monthly payment: Your option deposit: _______________ 1A _______________ 1B

Your Tenant
Tenants monthly payment: Tenants option deposit: _______________ 1D _______________ 1E

TOTAL: _______________ 1C

TOTAL: _______________ 1F

Up Front Net Profit 1F - 1C:

_______________ 1X

2
BACK END NET PROFIT

You
Your purchase price: Your rent credit: No of mos in rental period: _______________ 2A _______________ 2B _______________ 2C

Your Tenant
Tenants purchase price: _______________ 2E Tenants rent credit: _______________ 2F No of months in rental period: _______________ 2G Tenants net purchase price: _______________ 2H ( 2E - 1E ) - ( 2F x 2G )

Your net purchase price: _______________ 2D ( 2A - 1B ) - ( 2B x 2C )

Back End Net Profit 2H - 2D: _______________ 2Y Total Profit from Rent ( 1D x ( 2G - 1) - ( 1A x ( 2C - 1 ))): _______________ 2Z

3
Total Net Profit 1X + 2Y + 2Z: _______________

69

P U R C H A S E

A M E R I C A

C O U R S E B O O K

PROPERTY ANALYSIS FO RM
____________________________ ____________________________

Contact Name
____________________________

Property Address
____________________________

Home Phone
____________________________

City, State, Zip

____________________________

Work Phone

Schools & Township

____________________________

Subdivision Year Built: ____________ Style: _________________ # Bedrooms: ___________ Garage: Y / N Color of Home: _____________ # Fireplaces: _______________ Attached: Y / N

# Baths: _______________ # Cars: ________________

Lot Size: ______________Type of Heat: _____________

Sanitation: _________________

Taxes: ________________When Can I Have Possession: ___________________________ Asking Price: _______________________ How Long on Market: ______________

Negotiable on the Terms: _________________________________________________________

POINT SYSTEM (Use When Buying) Seller Motivation Location Terms Price Seller Financing Condition Poor 1 0 1 1 0 1 Average Excellent 2 3 2 3 2 3 2 3 2 3 2 3

Total Score: ___________ Only Buy in the 12-15 Range!

70

P U R C H A S E

A M E R I C A

C O U R S E B O O K

I N F O R M A T I O N G A T H E R I N G FORM LANDLORD/SEL L E R
Name Phone Problem Address/Location Of Property Mo. Payment Needed Down Payment No. BD/BA

71

P U R C H A S E

A M E R I C A

C O U R S E B O O K

INFORMATION GATHERING FORM TENENT/BUYE R

Name Phone Problem Location Desired Mo. Payment Desired Down Payment No. BD/BA

72

P U R C H A S E

A M E R I C A

C O U R S E B O O K

REALTOR PROSPECTING FORM

PREQUALIFYING TENANT/BUYERS Clearly state their problem: ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ What do they hope to accomplish: ______________________________________________________________________________________ ______________________________________________________________________________________ Describe what type of home they are looking for: ______________________________________________________________________________________ ______________________________________________________________________________________ 1. 2. 3. 4. 5. Money for a down payment: Monthly payment desired: Amount would like to spend: Time frame: How is their credit: _____________________ _____________________ _____________________ _____________________ _____________________

If they qualify for conventional financing, would they be interested in the features and benefits of a lease purchase contract: _______________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ PREQUALIFYING LANDLORD/SELLERS Clearly state their problem: _____________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ What do they hope to accomplish: _______________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ Describe what type of home they have: ___________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ 1. 2. 3. 4. How much cash do they need: Current monthly payment: Amount owed: Time frame: _____________________ _____________________ _____________________ _____________________

Would they consider a full price offer in exchange for a lease purchase contract: _______________ ______________________________________________________________________________________ ______________________________________________________________________________________
73

P U R C H A S E

A M E R I C A

C O U R S E B O O K

RESIDENTIAL LEASE APPLICATION

UNIT NO. This is NOT a lease or a rental agreement.

The Undersigned hereby makes application to rent Property located at ________________________________________ Monthly rent $ _____________________ Lease term _______________________ [monthly or yearly] (Check one or both) ______ Deposit Money Paid $__________, ______ Credit Check Fee $55.00

APPLICANT INFORMATION
Name: Name of Co-Tenant: Present Address: How long at present address: Current Rent Amount: Previous Address: City/State/Zip Code: Relationships: OCCUPANTS: Ages: Year, Make & Model of Car: Color: License: Pets: Landlord: Rent Paid Through: Landlord: Phone: Current Lease Expires: Phone: Date of Birth: Drivers Lic. No: Date of Birth: Drivers Lic. No: Social Security No: Exp. Date: Social Security No: Exp. Date:

EMPLOYER & INCOME

PRESENT OCCUPATION Occupation Employer Self Employed, DBA Business Address Business Phone Type of Business Position Held Name of Supervisor How Long There Monthly Gross Income PRIOR OCCUPATION CO-TENANTS OCCUPATION

74

P U R C H A S E

A M E R I C A

C O U R S E B O O K

(Page 2 of the Residential Lease Application)

REFERENCES
BANK REFERENCE: CREDIT REFERENCES ACCOUNT NO. Address: ADDRESS PURPOSE Phone: OPEN/CLOSED

PERSONAL REFERENCES

ADDRESS

PHONE

TIME KNOWN

OCCUPATION

NEAREST RELATIVE

ADDRESS

PHONE

CITY

RELATIONSHIP

Have you ever filed a petition for bankruptcy? Y / N Have you ever been evicted from any tenancy? Y / N Have you ever willfully and intentionally refused to pay any rent when due? Y / N
PLEASE READ THIS CAREFULLY AND SIGN THIS APPLICATION
The purpose of this application is to determine whether I qualify as a tenant. If my application is approved, the Landlord and I shall sign a written lease or rental agreement. The landlord and I have no rental agreement until the time that the lease or written rental agreement i s signed. I have paid the earnest money deposit and credit report fee indicated on this application. The earnest money deposit will be applied to my first months rent if the Landlord enters into a lease or rental agreement with me. If this application is approved, and I fail to enter into a lease or rental agreement, the earnest money and any subsequent payments may be retained to compensate the Landlords cost and damages. The earnest money and any subsequent payments will be refunded to me if this application is rejected. The credit report fee is nonrefundable. My performance under any lease or rental agreement that I may enter into with the Landlord may be reported to a consumer credit reporting agency.

I agree that the Landlord may terminate any agreement entered into in reliance on any misstatement made above. I DECLARE THAT THE FOREGOING INFORMATION IS TRUE AND CORRECT, AUTHORIZE ITS VERIFICATION AND THE OBTAINING OF A CONSUMER CREDIT REPORT.

Signature of Applicant ____________________________________ Date __________________ Signature of Applicant ____________________________________ Date __________________

FOR OFFICE USE ONLY ______ Income ______ Evictions

Date Received ____________________ ______ Credit Report ______ Rental History ______ References ______ Other

______ Accepted ______ Denied Date Notified ____________

75

P U R C H A S E

A M E R I C A

C O U R S E B O O K

RECEIPT FOR INVENTORY CHECKLIST AND LEAS E

The tenant acknowledges receipt of two inventory checklist forms and a signed copy of the lease for the premises located at ______________________ ______________________________________. If one completed checklist is not returned to the landlord within 5 days after obtaining possession of the rental unit, the landlord and the tenant may assume that no real or personal property on the premises is damaged or flawed in any respect. Signed: __________________________ Tenant Date __________________________ Tenant Date __________________________ Witness Date ___________________________ Landlord Date ___________________________ Landlord Date

76

P U R C H A S E

A M E R I C A

INVENTORY CHECKLIST
BATHROOM
Walls/Ceilings Floors Light Fixture Sink Toilet Tub/Shower Medicine Cabinet Window Window Covering Exhaust Fan Towel Racks

C O U R S E B O O K

PROPERTY ADDRESS: MASTER BEDROOM

Walls/Ceilings Floors Windows Screens Window Covering Light Fixture

BEDROOM
Walls/Ceiling Floors Windows Screens Window Covering Light Fixture

BATHROOM
Walls/Ceilings Floors Light Fixture Sink Toilet Tub/Shower Medicine Cabinet Window Window Covering Exhaust Fan Towel Racks

BEDROOM
Walls/Ceiling Floors Windows Screens Window Covering Light Fixture

BEDROOM
Walls/Ceiling Floors Windows Screens Window Coverings Light Fixture

OTHER:

LIVING ROOM
Walls/Ceiling Floors Light Fixture Windows Window Covering Screens Fire Place

SERVICE EQUIPMENT
Air Conditioner Furnace

UTILITY AREA
Floors Walls/Ceiling Washer Dryer

DINING ROOM/AREA
Walls/Ceiling Floors Light Fixture Windows Screens Window Covering

GARAGE/STORAGE
Walls/Ceiling Floors Light Fixture Windows Screens

EXTERIOR
Walls Trim

LAWN/LANDSCAPE

KITCHEN
Walls/Ceiling Floors Windows Screens Window Covering Light Fixture Sink Cabinets Range & Oven Refrigerator Dishwasher Garbage Disposal

MISCELLANEOUS
Door Opener Keys

77

P U R C H A S E

A M E R I C A

C O U R S E B O O K

Residents Name: _________________________ Move-In Date: ____________________ Property Address: ________________________ Move-Out Date: ___________________ Date and Number of Keys/Openers Delivered to Resident: __________ # of Keys: ________ Tenant has inspected the above premises prior to occupancy and accepts it subject to the conditions and/or exceptions noted above. Tenant agrees to deliver the premises in like condition upon termination of the tenancy, normal wear and tear expected.
The undersigned acknowledges that the above is the condition of the Property on moving in.
_____________________________________________

The undersigned acknowledges that the above is the condition of the Property on moving out.
_____________________________________________

Resident Resident Resident

Landlord Landlord Witness

_____________________________________________ _____________________________________________

_____________________________________________ _____________________________________________

ITEMIZED CHARGE SUMMARY

Keys/Locks: Unit $_________ Entry $_________ Mailboxes $_________ Other $_________ TOTAL $________ Cleaning: _________ Hours x $_________ Wage = $_________ ; Materials $_________ TOTAL $________ _________ Hours x $_________ Wage = $_________ ; Materials $_________ TOTAL $________ Carpet $_________ Drapes $_________ Other $_________ TOTAL $________ Painting: _________ Hours x $_________ Wage = $_________ ; Materials $_________ TOTAL $________ _________ Hours x $_________ Wage = $_________ ; Materials $_________ TOTAL $________ Unpaid Rent: Dates from _______________ to _______________ + Late Fee $_______________ TOTAL $________ Utility Bills: $______________________________ Other: $_______________________________TOTAL $________

Note: Amounts followed by an E indicate estimated charges. All other amounts indicate actual charges. Attach copies of all itemized invoices, estimates and receipts to this report. Tenant Forwarding Address: ________________________________________________

78

P U R C H A S E

A M E R I C A

C O U R S E B O O K

LEAD - BASED PAINT DISCLOSURE

(Rentals and Leases) Disclosure of Information on Lead-Based Paint and Lead-Based Paint Hazards

Lead Warning Statement

Housing built before 1978 may contain lead-based paint. Lead from paint, paint chips, and dust can pose health hazards if not taken care of properly. Lead exposure is especially harmful to young children and pregnant women. Before renting pre-1978 housing, landlords must disclose the presence of known lead-based paint and leadbased paint hazards in the dwelling. Tenants must also receive a federally approved pamphlet on lead poisoning prevention.

Lessors Disclosure (initial)

_____

(a) _____

Presence of lead-based paint and/or lead-based paint hazards (check one): Known lead-based paint and/or lead based paint hazards are present in the housing (explain). ______________________________________________________________ ______________________________________________________________ Lessor has no knowledge of lead-based paint and/or lead-based paint hazards in the housing. Records and reports available to the lessor (check one): Lessor has provided the lessee with all available records and reports pertaining to lead-based paint and/or lead-based paint hazards in the housing (list the documents). ______________________________________________________________ ______________________________________________________________ Lessor has no reports or records pertaining to lead-based paint and/or leadbased paint hazards in the housing.

_____

_____

(b) _____

_____

Lessees Acknowledgment (initial)

_____ _____

(c) (d)

Lessee has received copies of all information listed above. Lessee has received the pamphlet Protect Your Family from Lead in Your Home.

Certification of Accuracy

The following parties have reviewed the information above and certify, to the best of their knowledge, that the information provided by the signatory is true and accurate. _______________________________ Lessor Date _______________________________ Lessor Date _______________________________ Lessee Date _______________________________ Lessee Date
79

P U R C H A S E

A M E R I C A

C O U R S E B O O K

MONTHLY STATEMENT TENANT COPY

Mail Date: 09/15/99

Danny Turner 1234 Anystreet Chicago, Illinois 60609

Due By: Current Amount Due: After 10/06/99 Pay:

10/01/99 $795.00 $820.00 plus $5.00 each day late

Mail Payment To: En-sight Investments, Inc. 1507 E. 53rd St. Chicago, Illinois 60616
(888) 843-4597 Notes:

80

P U R C H A S E

A M E R I C A

C O U R S E B O O K

LEASE/PURCHASE ADDEN D U M FOR DRUG-FREE HOUSIN G

1. The Tenant/Buyer, any member of the Tenant/Buyers household, or a guest or other person under the Tenant/Buyers control shall not engage in or facilitate criminal activity on or near the subject property, including, but not limited to, violent criminal activity or drug-related criminal activity. 2. The Tenant/Buyer or any member of the Tenant/Buyers household shall not permit the property to be used for, or to facilitate, criminal activity, including but not limited to, violent criminal activity or drug-related activity. 3. Violent criminal activity means any felonious criminal activity that has as one of its elements the use, attempted use, or threatened use of physical force against the person or property of another. 4. Drug-related criminal activity means the illegal manufacture, sale, distribution, or use, or possession with intent to manufacture, sell, distribute or use, of a controlled substance (as defined in section 102 of the Control Substance Act (21 U.S.C. 802)). 5. One or more violation of section 1 or section 2 of this Lease/Purchase Addendum constitutes a substantial violation of the Lease/Purchase Agreement and a material noncompliance with the Lease/Purchase Agreement. Any such violation is grounds for immediate termination of tenancy, termination of the Lease/Purchase Agreement, and immediate eviction from the property. 6. Proof of violation shall be by a preponderance of the evidence, unless otherwise provided by law. 7. In case of any conflict between the provisions of this Lease/Purchase Addendum and any other provisions of the Lease/Purchase Agreement, the provisions of the Lease/Purchase Agreement Addendum shall govern and supercede all other provisions, relative to this Agreement. 8. This Lease/Purchase Addendum is incorporated into the Lease/Purchase Agreement between ______________________________ (Landlord/Seller) and _____________________ (Tenant/Buyer), dated the _____ day of _______ 2002. Executed this ____ day of _______ 2002. ___________________________ Landlord/Seller ______________________________ Tenant/Buyer

81