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Buying on Lease Options Workbook

© 2014 by Wendy Patton/

Control without Ownership Series By Wendy Patton

Buying on Lease Options

Table of Contents

Section 1: Forms & Instructions Profitability Worksheet Instructions ......................................................................................... 3 Letter to Buy a Home on an Option ......................................................................................... 5 Letter to Buy a Home Outright ................................................................................................ 6 Letter to Purchase Vacant Land .............................................................................................. 7 Advertisements for Finding Sellers .......................................................................................... 8 Script: Working with FSBOs – The For Rent Ads .................................................................... 9 Script: For Buyers Calling Listing Agents ...............................................................................11 Proposal ................................................................................................................................13 Buying on an Option: Check List ............................................................................................15 Rental Agreement ..................................................................................................................16 Offer to Purchase/Sales Contract...........................................................................................19 Option to Purchase ................................................................................................................22 Letter to Give Mortgage Information .......................................................................................24 Memorandum of Option .........................................................................................................25 Disclosure of Information on Lead-Based Paint .....................................................................26 and/or Lead-Based Paint Hazards .........................................................................................26 Real Estate Disclosure Also called Seller’s Disclosure or Transfer Disclosure .......................27 Notice of Claim of Interest ......................................................................................................30 Affidavit of Owner RE: Lien Rights .........................................................................................32 Section 2: Articles

Investing in Real Estate: Why Soft Markets are GREAT Markets ...........................................34 Lease Options: The Little or No Money Down Technique ......................................................37 Legal Benefits for Real Estate Investors ................................................................................41 Section 3: Examples & Samples

Example of a Letter to Homeowners ......................................................................................44 Quit Claim Deed – Statutory Form .........................................................................................45 Memorandum of Lease Purchase ..........................................................................................46 Performance Mortgage ..........................................................................................................48

Note: The contracts I use in this course are applicable in all states and have been reviewed by an attorney, but I suggest, before using ANY real estate contract, you should have it reviewed by a real

estate attorney in your state. I recommend using PrePaid Legal as an affordable source. Go to www.gotlegalplans.com



Profitability Worksheet Instructions Legend

All green cells are to be entered and updated by the investor based on their deal.

All light blue cells are calculated cells based on formulas.

Total Profit of Deal

1) Click on the Example Tab to use this and fill out - You might want to save it first

2) Update all the green cells with the data from your deal.

3) The light blue cells will automatically update as you change the green cells.

4) Play around with different numbers and you will see how to get to your bottom

line desired.

* When writing your proposals, remember to put the one you want them to take in

the middle.

This is in general. You might however only propose 2 versus 3.



Profitability Worksheet

Option 1

Current Value $

80,000

Purchase Price $

75,000

Lease Option Premium $

8,000

10% Usually 5 - 10 %

Current Appreciation $

6,000

5% per year

Months in Buyer's Lease 18 months

Subtotal $

14,000

Sale Price $

94,000

= Current Value + Subtotal

Sale - Purchase $

19,000

$ 795 Rent you charge buyer

$ 600 Rent you pay seller

$ 195 Monthly Cash Flow

Cash Flow $ 3,510 Total Cash Flow

Option Credits- Seller $ 500 Monthly Credit You GET

$ 9,000 Your Credits

Option Credits Buyer $ 100 Monthly Credit You GIVE

$ 1,800 Buyers Credits

Total Profit of Deal $

31,410

Option Fee from Buyer $ 1,000

Option Fee to Realtor $ 750 1% % of Purchase Price

Difference $ 250 Your Upfront Money Total

Months in Seller's Lease 36 months

Money Paid to Seller $

21,600

for all months in contract



Letter to Buy a Home on an Option

Name

Address

Phone

Date

Dear Homeowner’s Name,

I am writing to let you know that if you have not sold your home yet, I might be interested in

renting it with an option to buy. If you have said to yourself, “If my home does not sell soon, I

might have to rent it,” then call me. I might be able to help you with your home. I buy homes in

this area on “lease to buy” or “rent to buy” terms.

I am a licensed Realtor, but I am looking to buy this for myself. There would be no commission.

Please call me anytime, and if your home is already listed with a Realtor, then please have your

Realtor call me.

If you aren’t interested in this type of solution now, just keep this letter for future reference. I

would like to talk to you anytime you decide to lease option your home.

Thanks,

Your name

Use this for For Sale By Owners (FSBO) only – if listed with a Realtor than change the part about commission. If you are a Realtor you can’t send this directly to homes that are listed with another Realtor. If it is not listed then go for it. Change what is appropriate for you.



Letter to Buy a Home Outright

Name

Address

Phone

Date

Dear Homeowner’s Name,

I am writing to let you know that if you sell your home located on Street Name, I would be

interested in buying it. I am looking for a home located in this area. I am a licensed Realtor, but

I am looking to buy this for myself. There would be no commission.

Please call me anytime, and if your home is already listed with a Realtor, then please have your

Realtor call me.

If you aren’t interested in selling now, then just keep this letter for future reference. I would like

to talk to you anytime you decide to sell your home.

Thanks,

Your Name



Letter to Purchase Vacant Land

Your Name

Address

Phone

Date

Dear Owner’s Name,

I am writing to let you know that if you sell your property at [Insert Property Address], I would

be interested in buying it. I am a licensed Realtor, but I am looking to buy this for myself. There

would be no commission.

Please call me anytime, but if your property is already listed with a Realtor, then please have

your Realtor call me.

If you aren’t interested in selling now, then just keep this letter for future reference. I would like

to talk to you anytime you decide to sell your property.

Thanks,

Your name

This is to use for vacant land purchases. It really has nothing to do with options, however, it is a good letter to use for vacant land.



Advertisements for Finding Sellers

You can put ads for finding buyers or sellers in either the For Rent or For Sale section of your

local newspaper or on the internet (I love free sites like www.craigslist.org). Try them both and

see what works best in your area.

Here are a couple of ads that work well for finding sellers:

Tired of monthly payments? We can help. We will

make your payments. Call us for a unique solution.

(123) 456-7890

Company wants 3-4 homes in this area on long term

lease or purchase. (123) 456-7890

Is your home not selling? Considering the option of

leasing it? We can help! We will buy your home on a

lease option. (123) 456-7890



Script: Working with FSBOs – The For Rent Ads

For Sale By Owners (FSBOs) are individuals that are selling their home without the assistance of

a realtor. Many investors work with FSBOs in buying deals. In lease options I find that most

sellers need or want their cash out. The best way to find a seller for a lease option is not the

FSBO section of the newspaper, but the “For Rent” section of the newspaper. I will say,

however, that with the markets becoming softer recently, finding them in the FSBO section

might be okay. What you will want to do is to turn the landlord into a seller.

Here is how to buy homes on options from owners:

Call the ads in the paper that are in the “For Rent” section, not the “For Sale” section. The reason

I do this is that 90%+ of sellers must get their cash out and a large portion of the other 10%

won’t consider something creative. It is not because they don’t want to consider something

creative, it is just that they would prefer to cash out and be done with the property and also

something unique will scare most sellers. Call the ads that are for rent, because the #1 and #2

objections for selling on an option has been resolved. The owner does not need to sell or to cash

out of the home AND they are willing to lease the home.

This is a script you can use to contact an owner of a rental home. The words in bold are what is

said to the owner:

Hi, my name is ________I was calling about your home for rent.

Giving your name sounds warmer and will help put the owner at ease with you.

Can you tell me if it is still available? If yes, continue.

When is it available?

Can you tell me a little about the home?

Let them answer some information about the home or expand some questions off the ad.

You are building rapport with the owner. Talk and let them talk. People warm up when they are

the ones talking. Listen and sound interested.

When was the home built?

This question gives you insight to any decorating problems you might be running into. It

will tell you if it might need to be updated If older ask next question, if not skip.

Has the kitchen and bath(s) been updated since it was built?

If it was built in the 70s, I might ask if the baths or kitchens are yellow/green/brown or if

they have been updated since it was built. I am primarily building rapport and leading up the

main question.



Does it have a garage or basement?

Don’t ask questions that are answered in the ad or from their description above.

Ask questions applicable to your area of the country.(ie, Is it in a flood area?, Does it have

central air?, Has it ever had termites? Whatever might be of interest to you and to find out more

about the home.)

Is the yard fenced?

I really don’t care…I am just building rapport. This may prompt them to ask the question

on whether or not you have pets. At this point they still think you are the one that will be living

there. I don’t change that direction of thought until enough rapport and trust have been

developed. They may ask questions as to how many will be living in the home. These are

questions I don’t want to lie about, but don’t want to be totally direct on either. If I said, “I don’t

know, I am going to rent it to someone else”, you can be sure they will not show you the home.

That would kill the trust and rapport immediately. It is hard to say how to handle those questions

exactly. Each time these questions come up, you will be answering them differently based on the

owner.

Here are some ways you could consider handling them.

1) Answer them as if you really were going to live there. Always answer truthfully – just

not always completely or early on in the negotiation process.

2) Try to change the subject or slightly avoid the question.

3) Try to answer to your best guess of who might be renting from you later.

Deception is not what I am suggesting, however, it may sound like that. I am very honest and

straightforward with my sellers, but after they meet me or when I feel that they are open to

discussion about the entire situation via phone. Everything is in writing, too. They will know

that you are not living there before they sign the documents. It is also in the rental agreement

with the seller that you will not be occupying the home.

If the home sounds like something you would like to own then pop the question:

Wow, this home sounds really nice, would you considering selling it?

If they say no then say, “Thanks, but I am really looking for something I can buy. Leave

them your name and number to contact you later if they change their mind about selling. If they

say “maybe” or “yes” then continue on with the next question.

Do you know how much you would want for the home?

Start to feel out the owner for the type of terms they would consider.

When could I come and look at the home to see if I would be interested in it?

Then set it up! Start your rapport building and move into techniques in the book,

Investing in Real Estate with Lease Options and Subject Tos, included in this course.



Script: For Buyers Calling Listing Agents

This script is for rent-to-own buyers to call the listing agents of properties they are interested in

to determine if the seller might consider rent-to-own or to see if the real estate agent has any

other listings where the seller would consider rent-to-own.

“Hi Sally, my name is ___________ and I was calling about the home you have listed at

_________ (the address). Is it still available?”

After they say “Yes, it is.” I would say,

“Can you tell me more about the home? How much is it and how large it is?”

Listen to see if it is something you would be interested in. If so follow up with

“I noticed it has been listed awhile...”

Wait and see what they say without saying anything else. They might say, “Yes…” then I

would go on to the next question. Or they might start to talk more – which is what I am hoping

they will do. I want them to start to talk and tell me more. Maybe they will tell me why it has

been listed a long time or what the status is. You would be amazed at what others will tell you

when you zip it and listen. The next question is,

“Well, I wondered if they would be open to something creative?”

Again, I leave it at that and say nothing more. Sometimes they will runaway with a long

explanation of what the seller will or will not do, sometimes they say, “Like what?”

“Well, something like a rent-to-own or a lease option with your commission paid in full. I am

a rent-to-own buyer looking for a home in that area. Would your seller be open to something

like that?”

Don’t say anything until they respond. You’ll get one of five responses.

1. “Yes, they have mentioned that to me.”

If you get a positive response the next question to ask is:

“Great, do you know what kind of terms they are looking for or are they looking for an offer?”

If they are looking for terms that work for you or they are looking for an offer make an

appointment with Sally to look at the home. Note: Sally will try to become your Realtor®. This

might not be bad if Sally is creative and willing to read this book along with you, but otherwise

don’t sign anything to commit you to Sally except for this home. If Sally is really good, you

might want her to be your agent. If the terms are not within your scope then ask the following:



“Do you have any other listings where your seller might have said to you, ‘Sally, if you don’t

sell my home soon I might have to rent it’? Sally (remember use their real name ), can you

think of any of your listings like this that might work for me?”

Sally may also respond to the rent-to-own question like this:

2. “No, they need to sell now and wouldn’t be interested in that.”

If this is the case jump right to the question where you ask if she has any other listings

that might work. You will need to know your price range and what you can afford as she will

probably ask you about this (we covered this in chapter 3).

3. “I’m not sure I would have to check with them.”

If this is the response encourage the agent to talk with her clients. Reminder her that you

are looking for a rent-to-own home in that area and her commission would be paid in full.

4. “What are you talking about?”

Not every agent knows what rent-to-own is, you may have to give them a brief

explanation.

5. “Why do you need a rent-to-own?”

Most likely it’s because you can’t get a mortgage right now or because you don’t want to

get a mortgage right now. Your best answer is to simply tell her that a mortgage won’t work for

you now but you do want to get into a home now and ask her if that home or another listing of

hers might be a candidate for rent-to-own. Keep your answer brief and then ask her the question

to keep her talking.



. . . . . . . . . .

. . . . . .. . . .

Your Company’s Name

Proposal

Property Address

Innovative approaches to Leasing/Selling



. . . . . . .. . .

Your Company’s Name has 2 programs to offer you…

Please review the following options that we can offer you as a Seller and

consider which would serve you best!

Lease with an Option to Buy to Your Company Name #1

Your company name can pay you a monthly fee of $ 850.00, for a lease term of 3 years. We would then

have the right to purchase your home within the 3 year term at a price of $126,000.00. $XX will be

applied each month towards purchase price.

Lease with an Option to Buy to Your Company Name #2

Your company name can pay you a monthly fee of $ 900.00, for a lease term of 5 years. We would then

have the right to purchase your home within the 5 year term at a price of $130,000.00. $XX will be

applied each month towards purchase price.

In both of these options we would pay the rental amount whether or not the home is vacant or rented. You

would still need to carry your homeowner’s insurance and pay your property taxes until the home is

closed. We would be responsible for everything from the date this agreement starts, including all

maintenance (minor and major, except the first 60 days) of course change this if you want something

different – for example they pay anything above $500. We would like to have all the appliances left with

the home. At closing, you will need to pay the seller’s title insurance, transfer fees/taxes (if any) and any

other fees paid by a seller at closing. We also cover all utilities from our contract start date. We will start

our rental payments to you when we find someone to place into your home, however, during this time

frame you may also market your home for sale. If you sell it before we place someone, then this

agreement can be voided by you.

Thank you for considering Your Company Name!


Your Company’s Address Your Phone number/fax/email etc.



Buying on an Option: Check List

Property Address: ___________________________________________________

Contact: ________________________________________________________

Phone: ________________________________________________________

Projected Take over Date: _________________________________________

Create Owner Folder for this home

Order pre-title work

Check if taxes are paid

Check if mortgage is up to date

Draft all documents: Rental Agreement, Offer to Purchase/Sales Contract,

Option Agreement, Memorandum of Option, Affidavit of Liens

Get a key or access

Set up utilities

Water reading (if city water)

Water softener (if it is on a well is it a rented system?)

Get insurance (Liability)

Review title work

Sign all documents

Get seller to fill out a Lead Based Paint and Seller’s Disclosure

Advertise the home

Record Memorandum of Option

Set up auto-payments if paying mortgage payment

Maintenance/Work to be completed: _________________________________________________________________________________________________________________________________________________________________________________________________________



Rental Agreement RECEIVED FROM:

(hereinafter referred to as “Tenant” ,the amount of $ , as evidenced by

check, as a deposit which, upon acceptance of this Rental Agreement, shall belong to the Owner of the premises

and/or its agent, (hereinafter referred to as “Owner”), and shall be applied to the due amount only, as follows:

Rent for the period from to $

TOTAL $

Tenant hereby offers to rent from the Owner the premises situated in the village/township/city of

, County of , State of , commonly known as

“Housing built before 1978 may contain lead-based paint.

Lead from paint, paint chips and dust can cause health

hazards if not managed properly. Lead exposure is

especially harmful to young children and pregnant women.

Before renting pre-1978 housing, owners must disclose the

presence of lead based paint hazards in the dwelling.

Renters must also receive a federally approved pamphlet on

lead poisoning prevention.” TERM

The term hereof shall commence on , for a period of 3-5 years , terminating on

for a total consideration of which shall be due and payable on the day of month,

and continuing thereafter in accordance with the terms and conditions of this lease.

Tenant will have access to home on to show the property to prospective tenants/buyers or

Contractors.

RENT

Tenant agrees that the rent shall be per month payable in advance, due on the 1st day of each

month to Owner or his authorized agent, at the following address

or at such other place as may be designated by Owner from time to time. (put lender info here if

paying to lender – highly recommended)

INSURANCE

Owner agrees to continue to carry homeowner’s insurance on this home and to have the policy changed to a

non-owner occupied insurance policy. Owner agrees to name the tenant as an additional insured on the updated

policy.

UTILITY BILLS

Tenant agrees and shall be responsible for the payment of all utilities. Tenant shall make arrangements at

his/her expense to initiate service of utilities, including electric, gas, no later than the first day of tenancy, and shall

pay the utility expense in a timely fashion.



ASSIGNMENT AND SUBLETTING

Tenant will be assigning this agreement to another party, but is still responsible to the owner per this rental

agreement. Resident refers to the person(s) occupying the property.

ENTRY AND INSPECTION

Tenant shall permit Owner or Owner’s agent to enter the premises at reasonable times and upon reasonable

notice for the purpose of inspecting the premises.

All entry to the property must be made through the tenant. The tenant can then notify

the resident and arrange an appointment convenient for all parties. Landlord agrees not to call, stop by, or visit

residents without the tenants consent. Consent cannot unreasonably be withheld. This is for the liability protection

of both the tenant and the landlord.

MAINTENANCE, REPAIRS OR ALTERNATIONS

The Landlord gives the tenant the right to make repairs/improvements to the property at the tenant’s

expense.

All repairs will be done by the tenant’s contractors unless otherwise specified.

All repairs, major and minor, will be the responsibility of the tenant – except the first 60 days of this

agreement, which shall be the full responsibility of the Landlord. (put in what you want them to cover if you change

this – i.e. Owner will pay all repairs, or the owner will pay for the first $500 of any repair or the owner will pay

anything over $500 in repairs)

Landlord agrees to use their homeowner’s insurance to cover any items/repairs/damage that would be

covered under their policy (i.e. Storm damage, etc) – since tenant can’t utilize their insurance for these type of

repairs. Should the property become uninhabitable at any point during the lease period, the tenant will be released

from all rent liabilities until the property is habitable and is re-let. The amount of time that the home is

uninhabitable will be the time period that will be added to the attached option agreement, rental agreement and

purchase agreement. (i.e. if the home is damaged for 4 months then the option period will be extended for 4 months

also)

SECURITY DEPOSITS

You must notify your Landlord in writing within 4 (four) days after you

move of a forwarding address where you can be reached and where you will

receive mail; otherwise your Landlord shall be relieved of sending you an

itemized list of damages and the penalties adherent to that failure.

NOTICES

Any notice which either party may or is required to give, may be given by first class mail.

The Owner or Agent’s name and address for receipt of communications pursuant to the above is:



HOLDING OVER

Any holding over after expiration hereof, unless otherwise agreed, shall be construed as a month-to-month

tenancy in accordance with the terms hereof as applicable.

ADDITIONAL TERMS AND CONDITIONS

1. This is part of an offer and option to purchase agreement dated this same day.

2. This lease will only become effective if tenant secures a resident for this property on or before

DD/MM/YYYY AND if owner does not secure an offer to purchase home prior to DD/MM/YYYY.

3. Rent will be prorated if tenant secures a resident prior to DD/MM/YYYY.

4. This lease can be terminated at anytime by the tenant with a 60 day written notice to the owner.

5. If seller doesn’t pay their mortgage payment or tax payments, then the purchaser has the right to

pay the rental amount directly to either of these parties, versus the seller. If any amount paid to

either of these parties exceeds the amount due that month, then the additional amount paid by

purchaser will be credited at closing to the purchaser with an additional 50% added as credit. (ie. if

the rental amount is $900 and the payment made for mortgage or taxes is $1000 then the purchaser

would be credited at closing $100 + 50 = $150 off the purchase price .

The undersigned tenant hereby acknowledges receipt of a copy hereof. Dated: ______________

________________________________________ __________________________________________

Owner/Landlord Tenant

_________________________________________ __________________________________________

Owner/Landlord Tenant



Offer to Purchase/Sales Contract

THE UNDERSIGNED hereby offers and agrees to purchase the following land situated in the

of , County, State of ____________, described as follows:

(insert lot & sub or metes & bounds - legal description)

being known as , together with all fixtures and appurtenances in or on the

premises (unless specifically exempted herein), including, by way of example, but not limited to lighting fixtures,

shades, Venetian blinds, drapery hardware, curtain rods, ventilating fixtures, screens, storm sash, garage door

openers (including transmitters), water softener, built-in kitchen equipment, attached mirrors, attached humidifiers

and incinerators, awnings, all TV antennas, rotors and controls, landscaping, attached carpeting, attached barbecue

unit, if any, now on the premises as well as the following personal property for which a bill of sale shall be given,

namely:

and to pay therefore, the sum of

($ ) Dollars, Subject to the existing building and use restrictions, easements, and zoning ordinances,

if any, upon the following conditions:

THE SALE TO BE CONSUMMATED BY- See the attached Option to Purchase Document signed this same day.

Earnest Deposit for this property will be $ See Attached Option Agreement in the form of a See Attached Option

Agreement .

GENERAL CONDITIONS of sale are printed on the next 2 pages and are incorporated and made part hereof.

By:

Witness Witness

Purchaser Seller

Signature Date Signature Date


By the execution of this instrument, the Seller acknowledges the receipt of a copy of this agreement.

Purchaser acknowledges receipt of Seller's signed acceptance of this Agreement.

Signature:___________________________________________Dated:_________________________



General Conditions: a. Evidence of Title: As evidence of title, Seller shall pay for a commitment for a policy of title insurance

bearing a date subsequent to the date of acceptance hereof in an amount not less than the purchase price herein and

offering to guarantee the title to the premises. The Commitment shall be delivered. to Purchaser immediately upon

issuance thereof. Purchaser will order title work from the title company of their own choosing.

b. Closing Date and Place. If this Offer is accepted by Seller and if title can be conveyed in the condition

required thereunder, this sale shall close within ten (10) days after delivery of the commitment for title insurance

policy at the Title insurance office, however, if the sale is to be consummated in accordance with a new mortgage ,

then the date and place of closing will be determined by the lender. (also see attached option agreement for timing

of closing)

c. Title Objections. If Purchaser objects to title he must notify Seller of the same within ten days of receipt

of evidence of title. Seller must rectify all title problems within 30 days of such notice, or must pay the purchaser

the amount equal to all option monies applied to purchase, plus the difference between sales price of this contract

and the sales contract that purchaser has in place with their optionee/purchaser, plus any improvements that

purchaser has made to the property, plus any attorney fees associated with title problems, all within 30 days of

notice from purchaser of this contract

d. Existing Mortgage. Seller understands that consummation of the sale or transfer of the premises shall not

relieve Seller of any liability that Seller may have under any mortgage(s) to which the premises subject, unless

otherwise agreed on by the lender or required by law or regulation.

e. Encumbrance Removal. Any existing encumbrance on the premises which Seller is required to remove

thereunder may be paid and discharged with the purchase money at the time of closing or, at the election of

Purchaser and with the consent of Seller, assumed by Purchaser and the amount thereof deducted from the proceeds

due to Seller.

f. Prorations: (1) Tax Proration. Taxes to be pro-rated at closing and the seller will pay their portion of taxes used, but not yet

paid.

(2) Special Assessments: All special assessments which are placed upon the land prior to closing are the

responsibility of the seller, whether they are due and payable immediately or in the future.

g. Valid Offer: This offer is valid until See attached option agreement .

h. Property Inspection: The Purchasers may have the physical condition, structural, plumbing, heating, and

electrical systems of the property inspected by a contractor of his own choice within days from the

date of acceptance of this offer and at his own expense-. If seller does not receive written notice from the

purchaser(s) of their dissatisfaction regarding said inspection within 2 days from date of inspection, then this

contingency will be considered satisfied and the purchase agreement is binding without regard to said report. If the

seller does receive written notice, within the time provided, that purchaser(s) are dissatisfied, purchaser(s) at their

election may terminate this agreement and all deposited monies shall be returned to purchaser(s).

Initials: -_____ Yes, Purchaser(s) will have inspection.

Initials: - _____ No, Purchaser(s) hereby waive said inspection contingency and will rely on their own examination

of the property.

The parties hereto have read this page of the agreement and have signed below.

Purchasers Sellers



i. Sellers Disclosure Statement (1) Purchaser(s) have received and reviewed a Sellers Disclosure Statement for the property prior to executing

this contract to purchase the property. Purchaser(s) agree to purchase the property subject to the representations of

its condition disclosed in the Disclosure Statement and to accept the property with those representations.

Initials: Purchaser(s) ____________

j. Default In the event of default by Purchaser, Seller may, at his option, declare a forfeiture thereunder and retain

the option deposit (if any) as full and complete liquidated damages. In the event of default by Seller, the seller must

pay damages to the purchaser in the amount equal to all option monies applied, any improvements made to the home

or property, and all attorney fees to the purchase price plus the difference between sales price of this contract and



the sales contract that purchaser has in place with their optionee/purchaser (or appraised value if just rented –

appraiser to be selected by purchaser) within 30 days of notice from purchaser or Purchaser may, at his option, elect

to enforce the terms hereof . Seller also agrees to pay for any attorney fees associated with a default.

k. The agreements herein shall bind and inure to the benefit of the executors, administrators, successors and assigns

of the respective parties.

l. Entire Agreement: Seller and Purchaser acknowledge that they have read the entire contents hereof and are

familiar with the provisions contained herein. This Agreement constitutes the entire agreement of the parties with

respect to the subject matter hereof. All prior agreements between the parties with respect to the subject matter

hereof, whether written or oral, are merged herein and shall be of no force and effect. This Agreement may only be

changed, modified or discharged by an agreement in writing signed by the party against whom enforcement thereof

is sought.

m. Time is of the essence.

n. Additional Conditions:

1) This Purchase Agreement is part of an option agreement dated .

2) If there are any undisclosed problems with boundary lines, easements, etc. that arise prior to

closing on the property, the purchaser may elect to pay whatever cost may be involved in

correcting these problems to the purchaser’s satisfaction, and deduct the cost from the purchase

price at closing.

3) Seller agrees to remain responsible for any repairs on the home for the first 60 days of occupancy.

(change if $500 copay or any other arrangement with the seller).

4) Seller agrees to change their homeowner’s insurance policy to a rental policy and to name the

purchaser below as an additional insured. This is to be completed within 3 days of purchaser

taking possession of the property.

5) If seller doesn’t pay their mortgage payment, property insurance or tax payments, then the

purchaser has the right to pay the rental amount directly to either of these parties,

versus the seller. If any amount paid to either of these parties exceeds the amount due that month,

then the additional amount paid by purchaser will be credited at closing to the purchaser – with an

additional 50% added as credit. (ie. if the rental amount is $900 and the payment made for

mortgage or taxes is $1000 – then the purchaser would be credited at closing $100 + 50 = $150 off

the purchase price.

6) Purchaser is a licensed Realtor. (remove line if you are not)

7) Purchaser to put $ down on this property. Check will be written directly to the realty

company that has it listed upon execution of attached rental agreement, this amount will be

credited to purchaser at closing. The remaining commission will be paid to the appropriate

offices at closing, out of the seller’s proceeds. (if Realtor involved—remove, if not)

8) Seller agrees to cooperate with purchaser in any way necessary at the end of the option period to

make the transaction close, as long as it does not financially affect the seller. This would include,

but not be limited to, voiding this sales contract and executing a new sales contract for a higher

price with the purchaser of this contract receiving the price difference. For example: This contract

is for $_____ and purchaser sells it to someone else for $ + $10,000. Seller to still

receive $ and purchaser will receive $10,000. This new contract would most

likely involve a new purchaser.

The parties hereto have read this page of the agreement and have signed below.

Purchasers Sellers





Option to Purchase

THIS AGREEMENT made this day of , 20 between,

Optionor, and , Optionee.

IN CONSIDERATION (which will be applied toward purchase price/down payment) of the sum $ (see

attached rental agreement) paid by Optionee (the receipt of which is hereby acknowledged by Optionor)

the Optionor gives to Optionee the exclusive option, right and privilege of purchasing certain Real

property located in the township/village/city of County of and

State of , described as: Property Address_______________________________________

This option is subject to the following terms and conditions:

1) Optionor grants Optionee the exclusive right to exercise this option for a period commencing

on _______ and terminating at midnight, __________. If not exercised, this option shall

expire midnight _________ and Optionor shall be released from all obligations hereunder,

legal or equitable. The obligation shall cease and the consideration here above receipted for

the Optionor, shall be retained by Optionor.

2) There shall be additional option consideration of $__________ per month given by Optionor

to Optionee as credit towards purchasing the home. This monthly option consideration shall

be credit toward the down payment/purchase price of the above property.

3) If Optionee elects to exercise this option the sale shall take place according to the terms of the

attached purchase agreement, which has been signed by Optionee and Optionor this day.

4) Notice of election to Purchase shall be given by Optionee in writing, and by first class mail,

addressed to Optionor, at: ______________________or by a phone call if Optionor has a

phone.

5) The option consideration is for the sole purpose of granting the OPTIONEE the exclusive

right to purchase the subject property at the stated price and terms.

6) This option to purchase shall apply to and bind the heirs, executors, and administrator of the

respective parties.

7) Optionor agrees they will not put any additional liens against property before or during option

period. Additional liens would also imply unpaid property taxes, IRS liens, second

mortgages, etc.

8) Optionee has the right to multiple-list, advertise, or resale this property before or during this

option period. Optionor agrees to continue to carry their homeowners insurance during this

option period, but will have it changed to a non-owner occupied policy within 3 days of

option beginning. If seller does not provide change in insurance within the given period of

time, then optionee can get insurance to cover this change, at optionor’s expense, and to be

taken off following months lease payment – or purchase price, whichever optionee chooses.

9) If optionor doesn’t pay their mortgage payment, property insurance or tax payments, then the

optionee has the right to pay the rental amount directly to either of these parties, versus the

seller. If any amount paid to either of these parties exceeds the amount due that month, then



the additional amount paid by optionee will be credited at closing to the optionee – with an

additional 50% added as credit. (ie. if the rental amount is $900 and the payment made for

mortgage or taxes is $1000 – then the purchaser would be credited at closing $100 + 50 =

$150 off the purchase price.

10) Should the property become uninhabitable at any point during the lease period the tenant will

be released from all rent liabilities until the property is habitable and is re-let. The amount of

time that the home is uninhabitable will be the time period that will be added to the attached

rental agreement and purchase agreement.

11) Time is of the essence in this agreement.

The parties have executed this agreement on the date first above written.

Optionor(s): Optionee(s):

____________________ ____________________

____________________ ____________________

Witness: Witness:

____________________ ____________________



Letter to Give Mortgage Information

Date

To Whom it May Concern:

I, Seller’s name – 1 or 2 names, give, Your Name, the right to have access to all information

regarding my mortgage with you. My mortgage loan number is their loan number.

This would include, but not limited to, checking on balances, changing the address for payment

coupons and correspondence, payoff requests, etc.

Please send all future correspondence on this loan to:

Your name and address

Sincerely,

Owner’s Signature(s)

Notary is Recommended



Memorandum of Option

Optionor, whose address is , and “Optionee”, Your company name or personal

name, whose address is , entered into an option “the Option” dated as of ,

pursuant to which Optionor has agreed to option to Optionee the right to purchase certain real property

“the Property” located in the of , County of , State of _________,

more particularly described as ( insert legal description here).

The Option requires that Optionee shall exercise the Option on, or before, , or the Option

shall expire. While the Option is in effect, Optionor may not assign, convey, lease, sell, transfer,

mortgage, or otherwise encumber the Property or any part thereof, nor shall Optionor do, suffer or permit

any act, deed, or omission which might diminish or encumber the rights of Optionee or the ability of

Optionor to perform obligations in accordance with the terms of Option.

IN WITNESS WHEREOF, the Parties have executed this Memorandum of Option on ______.

OPTIONOR:

OPTIONEE:

( Your Company Name Here – change Michigan

If you are in a different state)

A Michigan Limited Liability Company

Member

Member

Check your county/state recording requirements prior to completion of this form.



Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards

Lead Warning Statement

Every purchaser of any interest in residential real property on which a residential dwelling was built prior

to 1978 is notified that such property may present exposure to lead from lead-based paint that may place

young children at risk of developing lead poisoning. Lead poisoning in young children may produce

permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral

problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women. The

seller of any interest in residential real property is required to provide the buyer with any information on

lead-based paint hazards from risk assessments or inspections in the seller’s possession and notify the

buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based

paint hazards is recommended prior to purchase.

Seller’s Disclosure

(a) Presence of lead-based paint and/or lead-based paint hazards (check (i) or (ii) below):

(i) ______Known lead-based paint and/or lead-based paint hazards are present in the housing

(explain).________________________________________________________

(ii) _____Seller has no knowledge of lead-based paint and/or lead-based paint hazards in the

housing.

(b) Records and reports available to the seller (check (i) or (ii) below):

(i) ______Seller has provided the purchaser with all available records and reports pertaining to

leadbased paint and/or lead-based paint hazards in the housing (list documents below).

(ii) _____Seller has no reports or records pertaining to lead-based paint and/or lead-based paint

hazards in the housing.

Purchaser’s Acknowledgment (initial)

(c) ________ Purchaser has received copies of all information listed above.

(d) ________ Purchaser has received the pamphlet Protect Your Family from Lead in Your Home.

(e) Purchaser has (check (i) or (ii) below):

(i) _____ received a 10-day opportunity (or mutually agreed upon period) to conduct a risk

assessment or inspection for the presence of lead-based paint and/or lead-based paint hazards; or

(ii) _____waived the opportunity to conduct a risk assessment or inspection for the presence of

lead-based paint and/or lead-based paint hazards.

Agent’s Acknowledgment (initial)

(f) ________ Agent has informed the seller of the seller’s obligations under 42 U.S.C. 4852(d) and is

aware of his/her responsibility to ensure compliance.

Certification of Accuracy

The following parties have reviewed the information above and certify, to the best of their knowledge,

that the information they have provided is true and accurate.

______________________________ ________________________

Seller -- Date Seller -- Date

______________________________ ________________________

Purchaser -- Date Purchaser -- Date

______________________________ ________________________

Agent – Date Agent -- Date



Real Estate Disclosure Also called Seller’s Disclosure or Transfer Disclosure

The prospective buyer and the owner may wish to obtain professional advice or inspections of

the property and provide for appropriate provisions in a contract between them concerning any

advice, inspections, defects or warranties obtained on the property. The representations in this

form are representations of the owner and are not representations of the agent, if fany. This

information is for disclosure only and is not intended to be a part of the contract between the

buyer and owner.

Seller states that the information contained in this Disclosure is correct as of the date below, to

the best of the Seller’s current actual knowledge.

Date __________ Property Address _____________________________________________

The condition of the following Property is: N/A, Defective, Not Defective or Unknown

1. Electrical System

a) Air filtration system:

b) Burglar alarm:

c) Cable TV wiring and connections:

d) Ceiling fans:

e) Garage door opener:

f) Inside telephone wiring and jacks:

g) Intercom:

h) Kitchen range hood:

i) Light fixtures:

j) Sauna:

k) Smoke/fire alarm:

l) Switches and outlets:

m) Amp services:

n) Plumbing:

o) Other:

2. Heating and Cooling

a) Attic fan:

b) Central air conditioning:

c) Hot water heater:

d) Furnace heater gas, electric, oil, solar:

e) Fireplace:

Use your state specific form, if applicable.



f) Humidifier:

g) Ventilation:

h) Propane tank:

The Condition of the Following Property Is: Yes, No or Unknown

3. Foundation & Structure

a) Are there any problems with the foundation?

b) Are there any structural problems with the building?

c) Have any substantial additions or alterations been

made without a requiredd building permit?

d) Are there any violations of zoning, building codes

or restrictive covenants?

e) Are ther moisture or water problems?

f) Is there termite, rodent or insect damage?

g) Is there damage due to wind or flood?

h) Is the property in a flood plain?

i) Is the property located within 1 (one)

nautical mile of an airport?

j) Is there any threat of or pending litigation

regarding the property?

k) Are the furnace, wood stove, chimney/flue

in working order?

4. Roof

a) Age in years

b) Are there any current leaks?

c) Is roof currently damaged?

d) Is there more than one roof on the structure?

If yes, how many?

Additional comments if necessary (attach additional pages if necessary):

5. Hazardous Conditions

Are there any existing hazards on the property such as methane gas, radioactive material,

radon or lead paint in the house or well, or expansive soil, toxic materials, asbestos

insulation, landfill, mineshaft or PCBs? If yes, explain:

6. Major Damage

Do you have any actual knowledge if there has ever been any material damage to the

property or structures such as movement, shifting, crack in the floors, foundation, walls or

ceilings? If yes, give details.

7. Termites/ Insects

Are you aware of any existence of any wood boring insects/termites currently in or on the



property or any existing, unrepaired damage caused by same?

8. Water Service

Is there a well on the property? If yes, is it in working order? If no, has it been sealed? If so,

when:

9. Sewer Service

Is the property serviced by a municipal sewer? If not, what is the date of installation of the

private septic system? Date last pumped? List dates and describe any repairs to the system:

10. Lot

Is there an oil/fuel tank on the property? If yes, where is it located? Is the oil/fuel tank in use?

Is the oil/fuel tank underground?

11. Structural

Are you aware of any code violations on the property? If yes, attach explanation. Is the

exterior siding synthetic stucco, Exterior Insulating Finish System (EIFS) or hardboard

siding? If yes, which type?

12. UFFT/Asbestos

Is there any urea-formaldehyde (UFFT) or asbestos material present?

13. Mold/Mildew

In the course of preparing your property for sale, did you clean up any mold or mildew? If

yes, name where and the method of remediation:

14. Radon Gas

Has the property been tested for radon gas? If the property was tested for radon gas, the

results of all tests known to seller(s) are attached. Tests disclose level of radon at any time

prior to or after the test(s).

15. Roof

Have there ever been any material repairs or replacement made to the roof aas the result of

any water problems in the past 5 years? What is the roofing material?

16. Additional comments or explanations:

Seller and Buyer hereby acknowledge receipt of this Disclosure Form by signing below.

Seller’s Signature Date Buyer’s Signature Date

Seller’s Name Date Buyer’s Name Date



Notice of Claim of Interest (under Public Act 200 of 1945)

STATE OF )

)ss

COUNTY OF )

Name , of company, whose address

being duly sworn, deposes and states:

1. That this affidavit is based upon personal knowledge.

2. That on , a certain purchase agreement and Option to Purchase was entered into for the sale of

land wherein , were the Seller, and was the

Purchaser.

3. That pursuant to the provisions of P.A. 200 of 1945 (being M.C.L.A. 565.103), this affidavit is made for the

purpose of giving notice to the world of the existence of the aforementioned purchase agreement.

4. That the property affected by said purchase agreement is:

5. Further deponent sayeth not.

Signature

On this day of , _____ before me, a Notary Public in and for said County,

personally appeared ______________________ to me known to be the same person described in and who executed the within

instrument and who acknowledged the same to be her free act and deed.

______________________________________,

Notary Public

County,

My Commission Expires: __________________

Drafted by and when recorded return to:

Name

Address

Check your state/county recording requirements prior to completion of this form – Use this one if you don’t have seller’s signature on the Memorandum of Option



STATE OF XXXX )

)SS.

COUNTY OF )

The foregoing Instrument was acknowledged before me this day of , 20__ , by

and .

Notary Public, Your county & State

My Commission Expires:

STATE OF XXXX )

)SS.

COUNTY OF )

The foregoing Instrument was acknowledged before me this day of , 20__ , by

and , Members of , a (your state) Limited

Liability Company, on behalf of the Limited Liability Company.

Notary Public, Your county & State


Drafted by:


When recorded return to:




Affidavit of Owner RE: Lien Rights

STATE OF

ss.

COUNTY OF

The undersigned, being first duly sworn, deposes and says that they are the owner of the following

described property in ______________________ County, ________________State, described as follows:

More commonly known as:

Tax I.D. No./Property ID:

(COMPLETE THIS AFFIDAVIT BY CHECKING THE APPROPRIATE BOX BELOW)

Deponent further says that:

__________ A. There have been no repairs, alterations, remodeling or new construction on the

above described premises in the last ninety (90) days.

__________ B. Deponent has contracted for repairs, alterations, remodeling or new construction

on the above described premises which have been completed within the last ninety

(90) days, Deponent paid for all of said improvements directly to the contractors

and there are no unpaid bills or claims for labor or services or material in con-

nection therewith except as follows: ______________________________________

_____________________________________________________________________

_____________________________________________________________________

__________ C. Deponent has contracted with a general contractor for repairs, alterations, remod-

eling or new construction on the above described premises which have been com-

pleted within the last ninety (90) days. The sworn statement of said contractor for

improvements, and appropriate supporting waivers of lien, are submitted herewith.

Deponent has not been served with any notice that a lien will be claimed on the

above described premises for labor performed or material furnished except as

follows: ______________________________________________________________

_____________________________________________________________________

_____________________________________________________________________

__________ D. Deponent has not other liens on said property other than those described here:

______________________________________________________________________

______________________________________________________________________

DATED:________________________________ SIGNED BY:

____________________________

____________________________

Subscribed and sworn to before me this __________ day of ____________, 20___________.

Commission Expires: ______________ __________________________________

Notary Public



Articles



Investing in Real Estate Why Soft Markets are GREAT Markets

nvesting in real estate has changed in many markets in our country. If you are like me, you

live in a real estate market that has gone soft. There are still some areas in the country where

homes are appreciating nicely, but nothing like it was just a year or two ago. There were a

lot of self-proclaimed real estate gurus that popped up during the boom times telling you how to

make HUGE PROFITS in real estate. Back then, during the up cycle, investing in real estate was

so easy. You could throw money at almost any piece of real estate and be practically guaranteed

to make a profit. It seemed like anyone who had flipped a couple of houses and made a profit

was an “expert” investor.

Times are different now. Investing in real estate takes a little more effort. Investors that haven’t

weathered down cycles before are struggling because all they know are massively appreciating

markets. All too many of those self-proclaimed gurus lost their shirts when the markets changed.

Those ads that go “I made $256 Million in real estate in 4 weeks with no money down” are a

whole lot less believable. Okay, $256 Million is an exaggeration, but you know what I mean.

So the question is, “How do we still go about investing in real estate and make profits?” Can it

be done in these soft markets?

The answer to that question is quite simple. I can say without question, without hesitation, the

answer is: YES! ABSOLUTELY!

I have been investing in real estate for more than 20 years. I have seen up cycles and I have seen

down cycles. I have made money and been successful in both. I can tell you several things

about down markets that may surprise you. First, experienced real estate investors will tell you

that more money is made in down markets than in up markets. It’s true, MORE MONEY is

made in DOWN markets than in up markets! Second, experienced investors PREFER to do the

bulk of their investing in DOWN markets. There are a number of reasons for this but the big

ones are that there are more motivated sellers in down markets and the competition (other

investors) pursuing these motivated sellers is LOWER. It’s a double bonus.

Down markets produce more deals and less competition to get those deals.

One of the investing techniques I specialize in is Lease Options. Lease Options are one of the

absolute best techniques for investing in real estate in down markets. I’ll say it again, because if

you are looking for ways to get involved with real estate investing you need to know this, Lease

Options are one of the absolute best techniques for investing in real estate in down markets.

Let’s take a look at why.

I’ve already said that down markets produce high numbers of motivated sellers. Right now in

Michigan, it’s very common to see a house listed on the market in two ways, both for sale and

for rent. They are listed this way because the sellers KNOW how bad it is and they want

someone, anyone, to cover their mortgage payment. These double listings SCREAM “Motivated

I



Seller!” Now, not every single one of these is going to be an excellent Lease Option deal. But

you know what? That’s okay, there are plenty to choose from!

The critical part in selecting your Lease Option candidates, in an up market or a down market, is

creating WIN-WIN-WIN situations. The seller must be satisfied with the deal, you must be

satisfied and the end buyer must be satisfied. When investing in real estate, this is what makes

us successful. How does this work?

To create a WIN for someone we must meet their core need. A motivated seller’s goal is to sell

their house. Eventually they need their mortgage paid off and the deed transferred out of their

name. If they are willing to rent the house as well as sell it, they are telling you that having their

mortgage paid each month is more important right now than actually getting the house sold. If

we can find a tenant buyer for them we are satisfying their core need of paying the mortgage

each month and eventually selling the home. This is a WIN for the seller.

Our end buyer is looking for a home to own. Their current situation prevents them from getting a

mortgage immediately but they plan on being able to get a mortgage soon. They want a home

now. They don’t want to wait to get their house. By allowing them to lease and then purchase

the house we are meeting their core need. This gives our buyer a WIN.

Before we talk about what makes a WIN for us as an investor let’s talk a little more about

mortgages for our end buyer. There has been a lot of news lately about sub-prime lending woes

and how lenders with riskier loans are facing high rates of foreclosure and may be going

bankrupt. As a result it is getting much harder for people with poor credit to obtain a mortgage.

It is also getting harder for ANYONE to obtain a mortgage with 100% financing (i.e. no money

out of the buyer’s pocket). This may sound crazy, but this is actually a good thing for us when

investing in real estate.

When investing in real estate by doing Lease Options it is harder for us to find quality tenant

buyers when almost anyone who can fog a mirror can get a mortgage. Not only that but because

it was so easy to get 100% financing most buyers save nothing and are unable or unwilling to

pay much for an option fee. With the lending companies tightening their belts I expect we will

see a growing population of QUALITY tenant buyers who are able to pay HIGHER option fees.

The flip side of this is that because lenders are tightening their belts your tenant buyers will need

to work harder to restore their credit. It may take as much as 2 to 3 years for some tenant buyers

to be able to qualify for mortgages instead of just 1 year as we had seen before.

The bottom line is when investing in real estate by using Lease Options the difficulties of the

mortgage lenders are just another reason why this down market is a GREAT time for us

investors.

Now let’s look at the last part of our WIN-WIN-WIN equation -- the WIN for us, the investor.

For us to WIN we need to make a profit. The profit comes both from the equity spread between

your option price to the seller and the buyer’s option price to you as well as any monthly cash

flow in the rental payments. With Lease Options it pays to be creative. You’ll find a lot more



deals and be a lot more successful investing in real estate if you practice creativity in your

structuring.

The most common motivated seller we encounter is the one who has little to no equity in his

home. Too many real estate investors get calls from sellers that only care about “What’s it

worth?” and “What do you owe?” If the numbers are too close together, they say, “Sorry I can’t

help you.” Click.

What if you pursue it a little further with a creative mind? A good question to always ask is

“What are your monthly payments?” If the payments are lower than rental rates you may be able

to make some monthly cash flow.

Another good question to ask is, “How soon do you need to sell the house?” You may want to

ask this question a couple of times while you are talking to them. You could be surprised to find

that the number grows longer each time you ask. There aren’t too many markets I can think of

that stay down forever. Eventually the house should start appreciating again. If your option

period to the seller is long enough you can capture appreciation to make your profit.

What about this – “Are you willing to bring money to closing to sell your house?” And if their

monthly payment is higher than what you can rent the house for, “Are you willing to pay the

difference between the rental amount and your monthly payment?” These two questions may

seem brazen, but ask yourself, what have you got to lose? If the seller is fully leveraged on the

house or their payment is higher than the rental rate you have nothing to lose, because if they

aren’t willing to make concessions then you can’t help them! Certainly some of us feel awkward

in asking these questions, but trust me, if you ask this question 30 times, no matter how

embarrassed you might feel at the beginning, you will start to feel much more comfortable by the

end.

These are just a few creative questions you might come up with to try to find terms that will

allow you, as the investor, to make a profit, a WIN for you. When you add all of three of these

together, meeting the seller’s need, meeting the buyer’s need and you making a profit, you have

created a WIN-WIN-WIN. This is what you MUST do to be successful when investing in real

estate with Lease Options.

Do you see how much BETTER it can be to find deals in down markets? Motivated Sellers are

EVERYWHERE and there are FEWER investors competing with you. Combining these two

factors allows you to choose your deals with greater care. Always “Cherry Pick” your deals in a

soft market. This is why experienced investors, who have been in both up markets and down

markets, prefer the down markets. Soft markets can provide some of the best deals when

investing in real estate.



Lease Options:

The Little or No Money Down Technique

An Overview for the Way to Future Financial Freedom (FX3) for the Real Estate Investor

Part 1 of 2

ease Options are becoming quite the buzz word lately. Years ago it was harder for me to

get Realtors to even consider a Lease Option for their clients. Today, markets all across

the country have changed. Lease Options are currently a viable industry trend and needed

for many sellers to sell their homes.

What is a Lease Option? A Lease Option is a way to purchase real estate, usually with very little or no money down,

sometimes even with money back in the investor’s pocket. Sound too good to be true? Well, it

isn’t. Can an investor end up with money in their pocket and not have to put 10-20% down to

purchase real estate? Yes. This technique is used commonly today by the most successful real

estate investors.

The lease option strategy gives an investor the right to lease a home and also the right to

purchase the home during or before the end of the lease period. An option is a contract that gives

an optionee the right to exercise a privilege – and in the case of real estate investing, it gives the

optionee (investor) the right to purchase property during a contracted period of time. It is a

technique that involves gaining ‘control’ of a property, without the total burdens of ownership.

ALL money made in real estate is made by controlling property. Owning property is the most

obvious way to control it, but control is possible without ownership – and control is what makes

the money. It was a dying John D. Rockefeller who told all of us his secret to achieving great

wealth, “Control everything, own nothing.” All of the most successful real estate developers

today utilize options, in one form or another.

It is important to be aware that there are some risks involved with this strategy (as with all real

estate investments), but there are also ways to minimize your exposure and the rewards that can

come with this technique truly out weighs the risks. Real Estate investing is truly the quickest

and best way to build lasting wealth. Many of the world’s wealthiest people acquire much of

their wealth through investing in real estate.

While lease options can build you tremendous wealth, they usually shouldn’t be considered a

short-term investing strategy. I define a short-term strategy as the time that passes from the start

of the transaction to completion (cashing out) being less than one year. A classic example of this

would be a “rehabbing project” (fixing up a home and reselling it). The other side of the

spectrum would be a longer-term strategy, such as buying a rental property and renting it over

many years. I consider lease options and subject to’s to be in the center of that spectrum, usually

requiring one to three years for the best payoff. However, you can always immediately sell the

deal to another individual or investor for a profit; this is what is called in the business

“wholesaling.” This can be done if you buy the property at a low enough price that you can turn

a profit by selling the deal to another investor at a discounted price.

L



Visualize this scenario

In every seminar I teach I ask the students, “Who of you would be willing to purchase a home

valued at $200,000 for $100,000.” Of course all hands shoot up. Then I continue by asking if

they would still be willing to purchase the same home if the price was $150,000. Most of the

hands stay up. I proceed upwards with the price increasing the increments by $10,000 each time.

All of the hands slowly but surely drop. At the price of $180,000 almost all hands are down. At

$190,000, usually, all hands in the room are down. The point I am trying to make to each of

them is most investors are not willing to pay this close to retail price for a home (nor should they

in most cases). I then re-pose the question to each of them, “How many of you would be willing

to pay $200,000 for that same home 10 years from now in a market that is appreciating at 10%

per year with nothing down and only $1000 per month?” Now all their hands go back up. I ask,

“Why, now are you willing to pay more for that house that you refused to pay $180,000 -

$190,000 for a few minutes ago?” They respond in unison saying, “Because you added some

attractive terms!” My response is always the same, “You didn’t ask the terms before!” Most

investors never ask the seller for any terms. They only consider one term - Price! They walk

away from deals before they know if terms are even possible.

“Terms” are parts of an entire deal, such as price, length of time to pay, monthly payment,

amount applied to the purchase price and other negotiated items with the seller. Most of the time

even experienced real estate investors don’t ask, “When does the seller need their price?” They

say no to an entire deal before they ask the seller when the seller needs their price. The previous

example illustrates how most investors think, they don’t ask all of the right questions about the

property before they make a decision. They look at the surface but they don’t dig deeper for

other possibilities. Lease options provide a creative solution that can allow you to negotiate

terms that can increase your profits and provide a great investment opportunity. Whenever you

can negotiate the terms on real estate the value of the property goes up. Deals that were out of

your reach before now might be possible – i.e. large apartment complexes. Now you are able to

pay a higher price on a home if you can get reasonable terms, and having this tool at your

disposal will allow you to open up many new possibilities and make money on deals that were

before completely ruled out. I am not suggesting that you pay $200,000 for a home worth

$200,000, especially in many markets today, but you can if certain market conditions and terms

previously described exist. If your market is flat (not appreciating) and you have only 2 years to

exercise your option to buy the home, then maybe the price you offer should be much less. It’s

all about terms!

When doing any lease option deal, it is one of my mottos that everyone must win or don’t do the

deal. There are 3 people involved in a Sandwich Lease Option: the seller, you (the investor) and

the tenant/buyer. It must be a win/win/win, otherwise walk away.

Wendy’s Rule about Buying on Lease Option

If it isn’t a Win/Win/Win for the Seller, the Investor and Tenant/Buyer then walk away from the

deal. There are plenty of the deals out there where everyone can win.

To find out more about Lease Options and Subject Tos, you can order Wendy’s autographed

book on her website: “Investing in Real Estate with Lease Options and Subject Tos”



Part 2 of this article will cover more details about structuring a Lease Option.

Lease Options: The Little or No Money Down Technique

An Overview for the Way to Future Financial Freedom (FX3) for the Real Estate Investor

Part 2 of 2 Lease options were defined in Part 1. In Part 2, we will talk about structuring a lease option.

Common Lease Option Deals

My typical strategy is to lease option from a seller and then to lease option that home to a

buyer. How Lease Options Work

(may buy) (may buy)

The above illustration depicts a “sandwich lease option.” In a sandwich the meat is in the middle.

The best part of a sandwich is the meat, and you (the investor) are in the middle of the

transaction. Your reward is the meat -- the difference between what you paid for the home and

then what you sold it for. For example: Seller Bob lease options his home to Investor Wendy

for $150,000 at $850 a month for 3 years. Investor Wendy then would lease option the home to

tenant buyer Sally for $180,000 and $1000 a month and only give Sally 1 year to purchase the

home. In this example, Investor Wendy would have $150 a month cash flow and $30,000 in

profit on the difference in the price of the home (what you paid and what you sold it for). This is

a simple example in lease options, because there are so many more things that can be negotiated

in a deal.

It is very important you only work with buyers that have an opportunity to purchase your home. I

only accept applications from tenant/buyers I think could qualify later for a mortgage. I can’t

determine for sure if they will, but a good mortgage lender can give me that advice. I

recommend you work with a good mortgage company to make that determination.

Wendy’s Ethics Rule

Don’t commit to a lease option with potential buyers who have no way of ever being able to

qualify for a mortgage. That is being greedy and taking advantage of someone. It is not fair to

the buyer. If the buyer messes up – shame on them! If you mess them up – shame on you!



At this time my average profit is right around $40,000 per lease option transaction. Lease options

typically turn over every 12-24 months. Depending on what part of the country you reside in the

profit range should vary from $25,000 – $150,000 (Midwest to Northern California). You

decide how much you need to make, and then you will know how many homes you need to lease

option to achieve your goal. Not only can lease options set you up to live today but they can set

you up for Future Financial Freedom (FX3) and retirement. Just sit back and imagine…how

would it feel to be completely debt free? Real estate is the vehicle that can allow you to achieve

just that.



Legal Benefits for Real Estate Investors

re-Paid Legal is one of the most overlooked, yet beneficial tool for the Real Estate

investor. There is no question that investors need quality attorneys that are available to

answer unlimited questions on any subject matter, i.e., real estate questions, taxation,

interpretations of laws and usury rates, just to name a few.

As a full time real estate investor Pre-Paid Legal is not only an outstanding tool, but also a

necessity. If you have never needed legal representation for your investing business or for

yourself, believe me it is just a matter of time. Buying property in this day and age can most

certainly be a liability in every sense of the word. The word “Attorney” puts a certain feeling of

uncertainty and fear into our very being. Not many of us like to call an attorney for advise or

help of any sort, as we know upfront, the charges we incur can be astronomical. This puts many

of us in a quandary of whether we should spend the money for attorney fees or to take the risk of

not having council, by doing without the cost or expense and unfortunately without the

professional assistance that we might need or require. Many of you have heard of Pre-Paid Legal

but really know very little about how it can help you in your business.

In many states throughout the country Pre-Paid Legal offers a plan that is called "The Home

Based Business Rider". This Rider attaches to the "Expanded Family Plan" and in combination

enables the investor and his family to have the benefits that I have listed below.

1. Unlimited questions answered for business or personal matters.

2. Three letters drafted per month on behalf of your business. Unlimited calls or letters

made for you and your family. * One per subject matter.

3. Up to three initial debt collection letters written per month on your behalf for your

business.

4. You can have three contracts or documents up to fifteen pages in length, per month,

reviewed by your provider law firm.

5. Also included with your Business Rider is unlimited small business consulting service

through GoSmallBiz.com

6. Included in your coverage with the “Expanded Family Plan” is pre-paid trial protection

that is included as part of your membership. This benefit grows each year you stay a

member with Pre-Paid Legal totaling up to 335 hours by your fifth year.

7. Automobile representation for you and your family no matter where you had the accident

or the ticket occurred.

8. Have your Last Will and testament and your Living Will created as part of your family

plan benefits. If you already have these important documents in place then they can be

updated free of charge with your membership.

9. As part of the business rider you will have consultation service for your small business.

This service is provided free as part of your membership through www.gosmallbiz.com

There are many more benefits for members of Pre-Paid Legal Services. What I have listed above

encompasses some of the more significant benefits for the real estate investor. For only $39.50

per month is there any question why an investor would not want or need this type of coverage

and representation?

P



If you are interested in hearing more about how Pre-Paid Legal can save you and your family

money and grief, then feel free to call Michael Gott at 248-227-3943. If you like what you are

reading and you want to get signed up now then go to, www.prepaidlegal.com/hub/mgott

I wish each of you all the best. I am confident that you will find a tremendous asset and tool for

your business in Pre-Paid Legal Services.

Wendy Patton

http://www.prepaidlegal.com/hub/mgott



Examples & Samples



Example of a Letter to Homeowners


Address Phone, Fax and E-Mail

Dear Homeowner:

I am writing to tell you about my company. I buy homes. I buy homes when the seller can

consider something unique. Not every home will sell on the market, or in the time frame you

would like. I can offer you a solution. I buy homes using a lease purchase. A lease purchase is

a closing that takes place after a period of time – no later than the length of the lease period.

Here are some situations when you would consider a lease purchase with Goldfinch Properties.

Is your home not selling?

Doe you need debt relief? Are you carrying a mortgage you can’t afford or do you

have two mortgage payments?

Do you have little or no equity?

Is the home vacant?

If you don’t need all of your cash out or you can refinance to get your equity out.

Does the home need major renovations?

Job transfer.

Inherited property.

Here are some of the benefits to you.

Debt relief.

Quick seller solution.

Purchase offer price near or at current market value. I don’t “low ball” on my offers.

No missed mortgage payments.

Owner retains all property tax benefits.

No property management headaches.

Opportunity for monthly cash flow.

I am a buyer of homes in this area that I keep for investment properties. If you fall into one of

the above situations, please call me to discuss how I can help you benefit from a lease purchase.

I look forward to helping you in the future.

Sincerely,

Your Name



Quit Claim Deed – Statutory Form

KNOW ALL MEN BY THESE PRESENTS: That

whose address is:

Quit Claim(s) to

whose address is

the following described premises situated in the

County of and State of , to wit:

Commonly Known as:

Tax I.D. No.:

for the full consideration of EXEMPT MSA 7.456 (26) (a)

EXEMPT MSA 7.456 (5) (a)

Not sure on your state info here…please check

Dated this ___________ day of __________, 20____.

Witnesses: Signatures:

____________________________ ____________________________________

(L.S.)

____________________________________

(L.S.)

____________________________________

(L.S.)

____________________________________

(L.S.)

STATE OF

COUNTY OF >ss.

The foregoing instrument was acknowledged before me this ____day of ____, 20__.

Drafted By: Wendy Patton Notary Public –

County, _______________

My commission expires:______________________

Recording Fee: $

Return to: State Transfer Tax: $-0-

Send subsequent tax bills to

When recorded return to:

Your address and Name



Memorandum of Lease Purchase

____________________________ and ___________________________, whose address is

__________________________ and Your company name, a _________ limited liability

company, whose address is , entered into a Lease Purchase dated

________________________, pursuant to which __________________________ and

_________________________ has agreed to sell to __________________ LLC the right to

purchase certain real property “__________________________” located in the

_____________________, County of __________________ , State of

____________________, more particularly described as

Parcel ID/Sidwell # _________________

More commonly known as: ________________________________

The Purchase Agreement requires that _______________, LLC shall complete the

transaction in the purchase agreement dated this same day. This Agreement stipulates that

__________________, LLC will either execute the purchase agreement, or assign the right to

execute the purchase agreement, of this property on or before ___________________________.

While this Agreement is in effect, ______________________ and _____________________

may not assign, convey, lease, sell, transfer, mortgage, or otherwise encumber the Property or

any part thereof.

IN WITNESS WHEREOF, the Parties have executed this Memorandum of

Lease/Purchase on ____________________________.

Sellers:

Purchaser:

Your Company Name

A _________Limited Liability Company,

Member



STATE OF )

)SS.

COUNTY OF )

The foregoing Instrument was acknowledged before me this day of

, , by

and .

Notary Public,

County,


STATE OF )

)SS.

COUNTY OF )

The foregoing Instrument was acknowledged before me this day of

, 20 , by Wendy Patton , Member of , a Michigan Limited Liability

Company, on behalf of the Limited Liability Company.

Notary Public, County,




Performance Mortgage

Need 2.5” on top in almost all states of blank space to record!! Fill in all < spaces >

-----------------------------[Space Above This Line For Recording Data]------------------------------

MORTGAGE

THIS MORTGAGE (''Security Instrument"') is made between the grantor < Your info>

, ("Obligor"), and the grantee, < Sellers Info > ("Obligee") whose address is

< Sellers Address >

Obligor has executed a certain agreement dated < Date > ("Agreement") under

which Obligor is under an obligation to perform certain acts, promises and/or covenants, which

is valued at $ <value of your option or equity >.

This Security Instrument secures to Obligee the performance of Obligor's promises,

covenants and agreements under this Security Instrument and the Agreement.

WITNESSETH, that in consideration of the premises and in order to secure the performance and observance of

all of the provisions hereof and of said Agreement, Mortgagor hereby grants, sells, warrants, conveys, assigns,

transfers, mortgages, and sets over unto Mortgagee, all of Mortgagor's estate, right, title and interest in, to and under

all that certain real property situate in the County of < county of property > , State of < state of property

> , more particularly described as

< put in full legal description – will be needed for recording – also, if you have parcel id or sidwell, put that in as

well >

which has the address of < address of property >

TOGETHER WITH all the improvements now or hereafter erected on the property, and all easements,

appurtenances, and fixtures now or hereafter a part of the property. All replacements and additions shall also be

covered by this Security Instrument. All of the foregoing is referred to in this Security Instrument as the ''Property."

OBLIGOR COVENANTS that Obligor is lawfully seized of the estate hereby conveyed and has the right to

grant and convey the Property and that the Property is unencumbered, except for encumbrances of record. Obligor

warrants and will defend generally the title to the Property against all claims and demands, subject to any

encumbrances of record.

OBLIGOR AND OBLIGEE COVENANT AND AGREE AS FOLLOWS:

1. Hazard or Property Insurance. Obligor shall keep the improvements now existing or hereafter erected on the

Property insured against loss by fire, hazards included within the term "extended coverage" and any other hazards,

If you want to do a performance mortgage like outlined in the book – information not on the CD



including floods or flooding, for which Obligee requires insurance. This insurance shall be maintained in the

amounts and for the periods that Obligee requires. The insurance carrier providing the insurance shall be chosen by

Obligor subject to Obligee's approval which shall not be unreasonably withheld. If Obligor fails to maintain

coverage described above, Obligee may, at Obligee's option, obtain coverage to protect Obligee's rights in the

Property in accordance with this document. All insurance policies and renewals shall be acceptable to Obligee and

shall include a standard mortgage clause. Obligee shall have the right to hold the policies and renewals. If Obligee

requires, Obligor shall promptly give to Obligee all receipts of paid premiums and renewal notices. In the event of

loss, Obligor shall give prompt notice to the insurance carrier and Obligee. Obligee may make proof of loss if not

made promptly by Obligor.

Unless Obligee and Obligor otherwise agree in writing, insurance proceeds shall be applied to restoration or repair

of the Property damaged, if the restoration or repair is economically feasible and Obligee's security is not lessened.

If the restoration or repair is not economically feasible or Obligee's security would be lessened, the insurance

proceeds shall be applied to the sums secured by this Security Instrument, whether or not then due, with any excess

paid to Obligor. If Obligor abandons the Property, or does not answer within 30 days a notice from Obligee that the

insurance carrier has offered to settle a claim, then Obligee may collect the insurance proceeds. Obligee may use the

proceeds to repair or restore the Property or to pay sums secured by this Security Instrument, whether or not then

due. The 30-day period will begin when the notice is given.

2. Preservation, Maintenance and Protection of the Property. Obligor shall not destroy, damage or impair the

Property, allow the Property to deteriorate, or commit waste on the Property. Obligor shall be in default if any

forfeiture action or proceeding, whether civil or criminal, is begun that in Obligee's good faith judgment could result

in forfeiture of the Property or otherwise materially impair the lien created by this Security Instrument or Obligee's

security interest.

3. Protection of Obligee's Rights in the Property. If Obligor fails to perform the covenants and agreements

contained in this Security Instrument (under any underlying security agreement which are superior or subordinate to

this security instrument), or there is a legal proceeding that may significantly affect Obligee's rights in the Property

(such as a proceeding in bankruptcy, probate, for condemnation or forfeiture or to enforce laws or regulations), then

Obligee may do and pay for whatever is necessary to protect the value of the Property and Obligee's rights in the

Property. Obligee's actions may include paying any sums secured by a lien which has priority over this Security

Instrument, appearing in court, paying reasonable attorneys' fees and entering on the Property to make repairs.

Although Obligee may take action under this paragraph, Obligee does not have to do so.

Any amounts disbursed by Obligee under this paragraph shall become additional debt of Obligor secured by this

Security Instrument. Unless Obligor and Obligee agree to other terms of payment, these amounts shall bear interest

from the date of disbursement at the Agreement rate and shall be payable, with interest, upon notice from Obligee to

Obligor requesting payment.

4. Inspection. Obligee or its agent may make reasonable entries upon and inspections of the Property. Obligee

shall give Obligor notice at the time of or prior to an inspection specifying reasonable cause for the inspection.

5. Condemnation. The proceeds of any award or claim for damages, direct or consequential, in connection with

any condemnation or other taking of any part of the Property, or for conveyance in lieu of condemnation, are hereby

assigned and shall be paid to Obligee.

6. Successors and Assigns Bound, Joint and Several Liability; Co-signers. The covenants and agreements of this

Security Instrument shall bind and benefit the successors and assigns of Obligee and Obligor, subject to the

provisions of this document. Obligor's covenants and agreements shall be joint and several. Any Obligor who

co-signs this Security Instrument but does not execute the Agreement: (a) is co-signing this Security Instrument only

to mortgage, grant and convey that Obligor's interest in the Property under the terms of this Security Instrument; (b)

is not personally obligated to pay the sums secured by this Security Instrument; and (c) agrees that Obligee and any

other Obligor may agree to extend, modify, forbear or make any accommodations with regard to the terms of this

Security Instrument or the Agreement without that Obligor's consent.



7. Notices. Any notice to Obligor provided for in this Security Instrument shall be given by delivering it or by

mailing it by first class mail unless applicable law requires use of another method. The notice shall be directed to the

Property Address or any other address Obligor designates by notice to Obligee. Any notice to Obligee shall be given

by first class mail to Obligee's address stated herein or any other address Obligee designates by notice to Obligor.

Any notice provided for in this Security Instrument shall be deemed to have been given to Obligor or Obligee when

given as provided in this paragraph.

8. Governing Law; Severability. This Security Instrument shall be governed by the law of the jurisdiction in

which the Property is located. In the event that any provision or clause of this Security Instrument or the Agreement

conflicts with applicable law, such conflict shall not affect other provisions of this Security Instrument or the

Agreement which can be given effect without the conflicting provision. To this end the provisions of this Security

Instrument and the Agreement are declared to be severable.

9. Transfer of the Property or a Beneficial Interest in Obligor. If all or any part of the Property or any interest in

it is sold or transferred (or if a beneficial interest in Obligor is sold or transferred and Obligor is not a natural person)

without Obligee's prior written consent, Obligee may, at its option, require immediate performance of the agreement

secured by this Security Instrument. However, this option shall not be exercised by Obligee if exercise is prohibited

by federal law as of the date of this Security Instrument. A "transfer" shall also include, but is not limited to a

contract-for-deed, installment land contract, lease of greater than three years, purchase or option agreement which

may be executed (including with renewals) in more than one year, a lease or any term in conjunction or

contemporaneous with an option to purchase, a transfer to a trust of any kind of which the Obligor is not the sole

beneficiary.

11. Hazardous Substances. Obligor shall not cause or permit the presence, use, disposal, storage, or release of

any Hazardous Substances on or in the Property Obligor shall not do, nor allow anyone else to do, anything affecting

the Property that is in violation of any Environmental Law. The preceding two sentences shall not apply to the

presence, use, or storage on the Property of small quantities of Hazardous Substances that are generally recognized

to be appropriate to normal residential uses and to maintenance of the Property.

Obligor shall promptly give Obligee written notice of any investigation, claim, demand, lawsuit or other action

by any governmental or regulatory agency or private party involving the Property and any Hazardous Substance or

Environmental Law of which Obligor has actual knowledge If Obligor learns, or is notified by any governmental or

regulatory authority, that any removal or other remediation of any Hazardous Substance affecting the Property is

necessary, Obligor shall promptly take all necessary remedial actions in accordance with Environmental Law.

As used in this paragraph, "Hazardous Substances" are those substances defined as toxic or hazardous substances

by Environmental Law and the following substances: gasoline, kerosene, other flammable or toxic petroleum

products, toxic pesticides and herbicides, volatile solvents, materials containing asbestos or formaldehyde, and

radioactive materials As used in this paragraph, "Environmental Law'' means federal laws and laws of the

jurisdiction where the Property is located that relate to health, safety or environmental protection.

12. Acceleration; Remedies. Obligee shall give notice to Obligor prior to acceleration following Obligor's

breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under this document

unless applicable law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the

default; (c) a date, not less than 30 days from the date the notice is given to Obligor, by which the default must be

cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration

of the sums secured by this Security Instrument and foreclosure of the Property. If the default is not cured on or

before the date specified in the notice, Obligee at its option may require immediate performance of the agreement

secured by this Security Instrument without further demand and may commence foreclosure proceedings any other

remedies permitted by applicable law. Obligee shall be entitled to collect all expenses incurred in pursuing the

remedies provided in this paragraph, including, but not limited to, reasonable attorneys' fees and costs of title

evidence.

13. Release. Upon payment of all sums secured by this Security Instrument, Obligee shall release this Security

Instrument and shall return to Obligor, duly canceled, all Agreements evidencing debts secured by this Security

Instrument. Obligor shall pay any recordation costs.



14. Waiver of Homestead. Obligor waives all right of homestead exemption in the Property.

BY SIGNING BELOW, Obligor accepts and agrees to the terms and covenants contained in this Security Instrument

and in any rider(s) executed by Obligor and recorded with it.

____________________________________

Grantor/Obligor

____________________________________

Grantor/Obligor

On ________________, 20___, before me, _______________________, a notary public in and for said state

personally appeared _________________________________, personally known to me (or proved to me based upon

satisfactory evidence) to be the person(s) whose name(s) are subscribed to the within instrument and acknowledged

that (s)he/they executed the same in his/her/their signature on the instrument the person(s) or entity on behalf of

which they acted, executed the instrument.

_________________________

Signature of Notary

My Commission expires______

_________________________

NOTARY SEAL

This document was prepared by: _________________________

When Recorded Return to:

Name and Address Name and Address

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