No Risk Millions E-Book by Daniel Cannon

Learn the Fastest Way to Control

NO Risk Millions:

Put Money in Your Pocket in 30 DAYS! By: Nate Kennedy

The author of this product is neither an attorney nor an accountant; nor does he portray himself as such in any way. This product is intended for informational purposes only. The information contained herein is not to be construed as legal advice or business law advice. If you have any questions or concerns, please seek the counsel of a licensed and qualified attorney. The reader, when implementing the strategies contained in this work, is solely responsible for their own actions and outcome of such actions. The author will not be held liable for any damages or any claims of damages by implementing the methods in this work. You take full responsibility for any and all legalities concerning these methods and strategies. By reading and/or acting on the information provided, you further agree that you accept the terms of this agreement without further contact. Please obey all local and federal laws. This work is protected and may not be copied, transmitted, or reproduced in any manner.

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”This book is dedicated to all the Real Estate Investors who have the dream of becoming Millionaires and living the life of their dreams!”

TABLE OF CONTENTS Introduction A great market for Investor Your Action Plan

6 7 14

How Lease Options Work

Pitfalls to Avoid

Using Options to Benefit Your Bottom Line

Putting Things Into Perspective

Be A Team Player Investors Real Estate Agent Real Estate Attorney Title Company Mortgage Professional Insurance Agent General Contractor Appraiser Accountant Mentor

42 43 44 44 44 45 45 46 46 47 47

Hold Your Team Accountable

Locate and Evaluate Deals Finding deals

53 54

Marketing Networking Direct Mail Flyers Online Forums

67 68 70 72 74

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Business Cards Websites Bandit Signs Car Signs

76 78 80 81

Communication Strategies Call Scripts

83 84

Profiles Buyer Profile Seller Profile

89 90 91

Property Analysis What is a deal? Exit Strategies

94 95 98

Property Research

100

Financial Advice Tax Free Earnings Financing

104 105 107

Conclusion Final Thoughts Glossary

112 113 114

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A Great Market for Investors

With the economy in such a state of flux, many of us are found in the uncomfortable position of having to figure out how to make ends meet. Bills pile up, our dollar stretches thin, and hope fades at finding that elusive American Dream. How can you survive in this market? The answer might just be easier and closer than you thinkâ&#x20AC;Ś in your city, your neighborhood, or perhaps right next door. Even as the stock market goes crazy, one market remains an optimum choice for guaranteed dividends: Real estate investing. Real estate investment is one of the most profitable methods for any investor to make money. It remains, however, one of the least tapped into markets, instead serving a niche market dominated by only the most knowledgeable investors.

In the real estate market, a market brimming with such promise, there is plenty of room for anyone wanting to make 7 www.NoRiskMillions.com ÂŠ 2008

money investing. Perhaps you just want something to augment your current salary, or something to pay for some short term issues you are having. IT DOESN’T MATTER. The real estate market is wide open right now, and ripe for the picking… or, profiting. Like never before, the sky truly is the limit.

Now that we have your attention, you may be wondering about a few things. Like, how do you know what to purchase? And how does one get the capital with which to purchase? Believe it or not, the purchasing is not the hard 8 www.NoRiskMillions.com © 2008

part of real estate investing. Finding the funds with which to buy a home is not difficult, even with the state of our nation’s lenders. If you can pay your rent or mortgage, you can buy a home. Sounds crazy? Perhaps, but with a little ingenuity and dedication to task, you can begin or improve your real estate investment fortune. This book was written to teach people how to make money – REAL money – in real estate. My mission is to teach real estate investors how to take control of real estate with little or no risk or start-up capital and make millions doing it. There are many ways to do this using lease options. You might choose to make money by acquiring a lease option, and then turning around and assigning it for a fee and walking away. Or, you may choose to keep the lease option and find a tenant who pays the monthly fee.

Maybe you

will choose to split the money with the seller you purchase from, maybe not. The point is, there are a great many choices and avenues through which the lease option deal can make you RICHER than you ever thought possible. 9 www.NoRiskMillions.com © 2008

With lease options, you can have virtually any home, in any neighborhood, TODAY! And the best part is that that lease ownership investing will allow you to make money with little risk or capital! Are you ready to transform your life?

Knowledge is the Key to Wealth As a real estate investor, you are in the unique position of being able to capitalize on lease options, foreclosures, and other ventures without restriction. If you take the time to educate yourself on the ins and outs of the real estate, particularly lease options, then you stand to make a killing. If this seems like an arduous task, then there is good news. Investing with lease options is just a small part of real estateâ&#x20AC;Ś so you only need to focus on the nuts and bolts of a relatively small category. Why this Book? Lease option deals can be overwhelming for the novice real estate investor. However, learning to identify potential issues and learning to select solid investments becomes 10 www.NoRiskMillions.com ÂŠ 2008

easy with experience, and as your confidence grows. There is much to learnâ&#x20AC;Ś but you can do it with this step-by-step, easy-to-understand manual. Risk and Tolerance So you have decided to jump into the world of Lease Option investing. Your next step is to do a personal evaluation both of your personal goals and finances. What kind of risks are you in a position to make? What kind of loss could you recover from? While lease option deals have minimal risk, you should still go in with your eyes open and prepared for any eventuality. While one deal might have enough potential for profit to overcome the possible risks for one investor, another investor might decide that the transaction is too risky. Your personal situation will make that determination. To make these types of choices, you must first understand the risks and benefits associated with real estate investing as a whole. Once you know how to correctly evaluate these

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risks, making decisions about individual properties will be much easier. However, you should know that while almost anyone can learn about lease purchase real estate investing, your drive and boundless creativity are essential to success. Iâ&#x20AC;&#x2122;ll teach you the skills. You just need to bring passion. This book will teach you everything you need to know to successfully complete a lease purchase deal. You will get real advice and straight talk on the advantages and disadvantages of various approaches, and get exclusive tips on how to handle virtually any situation, from dealing with anxious homeowners to sealing a deal on time and with a short turnaround on profits. You will get insider information about how and where to find opportunities in your area and beyond. You have already taken the most important step in your journey to success. Good job! By choosing to make yourself knowledgeable of lease option deals, you put yourself miles ahead of the competition. One or two deals done well can net you more than many people 12 www.NoRiskMillions.com ÂŠ 2008

make in one year. There are no limits on how much you can earn in this business. Let’s not waste anymore time! Let’s get going!

Your Action Plan Step One: Identify which type property you would be interested doing lease option deals with. Step Two: Develop your real estate investment team

Step Three: Begin finding, viewing, and rating potential investment properties

Step Four: Make contact with the homeowners

Step Five: Determine the value of the property

Step Six: Inspect the property

Step Seven: Make an offer to the homeowners

Step Eight: Create a purchase contract

Step Nine: Close the deal

Step Ten: Collect your profit!

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Lease Purchase Options: The Nuts and Bolts

Overview of Lease Purchase Options So just what is a lease option? Really, it is two things: a standard lease, and a purchasing option.

A lease

is a contract – a legallybinding document – that provides the use and possession of real property, thus creating a landlord/tenant relationship.

In contrast, a purchase option is an agreement in which the seller agrees to give the potential buyer exclusive rights to purchase the leased property. In this type of scenario, the option price is usually set at a fixed price at the outset of the lease, but it does not have to be. At any time during the 16 www.NoRiskMillions.com © 2008

option period—usually the life of the lease – the tenant can exercise his option to purchase.

Options and regular purchase contracts are hardly the same animal. Options are unilateral agreements, while regular purchase contracts represent examples of bilateral agreements. With a bilateral agreement, both parties are legally bound to said agreement, whereas an option only binds one party: the seller. The option to buy or not buy is the buyer’s throughout the life of the agreement and there are no negative consequences for backing out. To get into more detail, let’s look at the basics of the option to purchase, lease option, and lease purchase agreements a little more carefully and compare them. Really, the variances we see in the different documents are state specific. Not all states have the same laws, so buyers should be well versed in the real estate laws that apply to your state before entering into an agreement with a seller. Thus what follows is simply an overview. 17 www.NoRiskMillions.com © 2008

Basics of an Option In an option: •

The buyer pays the seller a predetermined amount to secure the right to purchase property at a later date. The option

money can be for any amount – even as low as one dollar. •

The purchase does not have to occur immediately. The buyer and seller may complete the sale now, or the buyer can opt to agree to purchase the property at market value at some future time when the option is exercised. It is negotiable. However, it is to the advantage and preference of most buyers to lock in the future purchase price upon inception of the option.

•

While the life of the term is negotiable, the average length of the term is usually one to three years.

•

The option money is not refundable except in rare instances.

•

No one else can buy the property during the option period; however, the buyer has the right to sell the option to someone else.

•

If, by the end of the option, the buyer does not purchase the property, the option expires.

•

At not time is the buyer under any obligation to buy the property.

Basics of a Lease Option In a lease option: •

lease options, the amount paid by the seller is usually pretty sizable. •

Again, the buyer and seller may negotiate a purchase price now, or opt to pay market value at the time of the execution of the option. Please note, however, that it is to the advantage of the buyer to lock in the future purchase price from the start.

•

During the term of the lease, the buyer signs an agreement to lease the premises from the seller for a specified amount.

•

The term of the lease option is commonly one to three years. However, options can last for any amount of time that the seller agrees to – thirty years if the buyers wants!

•

The option money paid at the inception of the agreement does not usually apply to the down payment on the purchase. However, a percentage of the rental payment is commonly applied to the purchase price –

of course it all depends on the deal you have negotiated. •

Option money is not refundable, usually.

•

No one else can buy the property during the term of the lease option period. In addition, unlike with traditional options, the buyer is not allowed to reassign the lease option without seller approval. This depends, however on how the contract is written. For example, the option can be sold or assigned if the contract is as, “Nate Kennedy and/or Assigns,” or using similar language.

•

If, at the end of the lease option period, the buyer does not exercise the lease option and purchase the property, the option expires. Again, the buyer is not obligated to buy the property.

•

Buyers are financially responsible for the maintenance of the property and paying all expenses associated with its upkeep, including taxes and insurance, even throughout the rental portion of the agreement.

•

The buyer is obligated to buy the property.

Doing a Lease Option / Lease Purchase Regardless of which option choice you make, make sure to retain the services of a real estate lawyer. Hire a real estate lawyer to draw up necessary documents and to explain your rights, including possession and consequences of default. The property could be cluttered by loans which contain basic terms of alienation, giving the lender the right to accelerate loans upon the completion of the sale. The option money is paid to the investor. Depending on how the deal is structured, this money may or may not be split with the seller.

When putting together a lease purchase, you must exercise all due diligence just like you would in the even of a regular sale. You should obtain all of the disclosures as well. You should also check the title for any liens and have a handyman inspect the property. Other things that you may opt to do include: •

Examine the title policy.

•

Obtain an appraisal and home inspection.

•

Consider having pest inspections and a roof certification conducted.

•

Enact a home warranty plan and hire any other qualified inspectors.

It is important to remember that these extra tasks are not needed. One thing we do NOT recommend is spending huge amounts up front in a deal, especially when you are going to be assigning your lease option for an additional fee. You could spend upwards of $1000 for the extra details, and that is counter-productive.

Lease Purchase Benefits for Sellers and Buyers It is common to see lease purchase agreements offered by sellers of hard-to-sell properties. After all, if the property was easy to sell, the seller would sell it to a traditional buyer who would pay the seller cash. Their thorn is your goldmine, however, as there are many benefits to Lease Purchase for both parties. Sellers commonly are looking for relief from paying a mortgage on a property that is vacant. Investors can capitalize on this by acquiring homes at a rate that is significantly below market value. â&#x20AC;˘ Although the lease payments might exceed market lease rates, the buyer is building a down payment and trusting that the property will appreciate beyond the purchase price to which both parties have agreed upon. You shouldnâ&#x20AC;&#x2122;t depend on appreciation for any given property. The goal of the lease purchase system is to make your money when they buy.

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• Buyers typically make a small deposit on the property, with minimal or no qualifying, making a lease purchase an appealing means by which to ease into the benefits of home ownership. • Buyers also obtain a forced savings plan since a portion of the lease payment is being credited toward the purchase cost at the end of the lease option agreement. Again, as an investor, you will never, ever finance this property. Instead, your profit will come by reselling each one for a profit through an assignment fee. This keeps your risk down! A lease with option arrangement is not a sale. It is instead a landlord tenant situation. In fact, the IRS does not classify a lease option as a sale until the option is exercised. Let me describe another scenario. Say that I am an investor, and I have an agreement with a seller to lease purchase his home for $100K and a monthly payment of $1000. I could then find a buyer (not a problem because 25 www.NoRiskMillions.com © 2008

with this system youâ&#x20AC;&#x2122;ll have buyers lined up before finding the sellers). The buyer will pay $5000 down and $1200 month. Bingo! Now I have made $5000, plus $200 per month to boot! This way I control real estate and have no risk. Could you get excited about that?

Avoiding the Pitfalls and Black Holes: What Not to Do Like any other venture, you have to go in knowing the risks and the pitfalls. It is best to be proactive rather than reactive, to be sure. Here are a few pitfalls of lease option deals that you should strive to avoid. 1. Ensure that the seller/owner is making payments A common approach to managing a lease option is to create a sandwich situation of sorts. In this scheme, you lease the property from the owner with a purchase option, and you sublet to a tenant. You must make sure the seller is upholding the bargain by making his payments on his mortgage as scheduled. If he defaults on his mortgage due to default, you can get wiped out in a foreclosure. You do 26 www.NoRiskMillions.com ÂŠ 2008

have a couple options at your disposal.

You could make the

payments for your seller, and deduct them from what you would otherwise owe, but that could add up to be more money than you are prepared to pay, and more money than the deal is worth. It is to your benefit to find out sooner rather than later that the seller is lapsing in the payments. Perhaps the easiest way to make sure that the seller makes the monthly payments is to set up an escrow account. Escrow companies are prevalent everywhere. For a monthly fee, they will collect your payment, and make the seller’s mortgage payment for them. One way to keep tabs on the seller’s payment history is to phone the bank. Many banks offer a twenty four hour customer service hotlines that allow you to enter the borrower’s loan account number and social security number to verify when the last payment was made. 2. Disclosure Disclosure is the name of the game in real estate. Whether you are the seller of the property or simply leasing it in a 27 www.NoRiskMillions.com © 2008

sandwich deal, you are required to disclose. Not only are there laws that govern what the seller must tell the buyer about the property being acquired, but it always pays to be honest and upfront with your intentions with the buyer and seller, as the investor in the deal. Don’t get too caught up in this part of the deal! As the investor, your main goal is to facilitate– after all, it is in your best money-making interests. You are simply playing Matchmaker with buyers and sellers by controlling the property with options. As such, you should make sure that everyone is playing nicely in the sandbox, so that ultimately everyone, including you, profits. Finding a tenant or buyer for your lease option properties is fairly easy. The cash they give you upfront is nonrefundable and is considered to be income that is taxdeferred. And if the tenant does not exercise his option to buy, you keep his money and find a new tenant. There is a snag to this, however. Sometimes, less than honest buyers who choose not to exercise the purchase 28 www.NoRiskMillions.com © 2008

option conveniently "forget" that the money isn't refundable. This could lead to litigation attempts to recover their funds. It is important that you protect your best interests. Make sure your paperwork is in order and that everything is clearly spelled out. You might even consider tape recording your conversation with the tenant/buyer, so you can "refresh" his memory. You donâ&#x20AC;&#x2122;t have to have a doctorate in real estate investing to be successful. Still knowledge is the key to making sure that you profit. Some of it is on the job training, and some of it is honest to goodness research. But your persistence and dedication will pay off, in less time than you might imagine.

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Using Options to Benefit YOUR Bottom Line So far, we have discussed what options are and how they work. We have hinted at their purpose. But really, how do they help the real estate investor? The lease option is one of the most powerful deals you can do in real estate investment, and if you do it right you could control millions of dollars in properties, without minimal personal investment. Let’s look at what a lease option really does for you. An option is a contractual agreement to create a future right to real estate. Simply stated, an option, when executed, gives you the right to control property – that is, to rent, lease, buy, sell, paint, and/or modify any aspect of a property according to your desire and wishes. With a well-done option agreement, you as the holder of the option can have just as much power over a property as you would if you had a deed. In exchange for the option, you agree to give due consideration to the person from which you acquire the 31 www.NoRiskMillions.com © 2008

option. For any option to work the only consideration has to be acceptance, not necessarily money. Common options that are arranged regarding real estate include: • Option to purchase at the end of a lease term • First right of refusal to match a competitor’s price to buy, • Option to renew a lease • An option to substitute collateral • An option to pay off in shorter time • Option to prepay the payments at a discount • Options to extend a lease • Options to cancel for a fee As the optionor (the giver of an option), you are in the position to control the income of a property. And when you control income of a property, you control its value. In exchange for the option, optionees pay a specific amount of earnest money to secure their deal. At the end of the term of the option or lease, that money can remain with the

optionor. You can also sell an option, known as assignment, which is another avenue of potential revenue.

Putting This Into Perspective To put this into real money terms, let’s look at a real deal, and see how a single lease option generated cashflow in multiple ways for the investor.

Case Study: The House in Suburbia The Back Story: A seller responded to an investor’s yellow page ad (one that stated that the investor bought houses).

A meeting was

scheduled. In the meeting, the investor provided the potential client with a FREE report, which explained how the investor could help the homeowner. The investor quickly worked to gather information from the seller: • Motivation for Selling: The husband had gotten a job transfer 150 miles away and they had already 33 www.NoRiskMillions.com © 2008

purchased another house. The realtor had been by and told them they needed to spend more than $5,000 to fix it up before they could sell it because the basement was not finished. It was a nice house in a good area. • The investor then provided a solution: The investor stated that he would be willing to lease the house for one year, for $600 per month, as long as there was an option for at least a one-year extension. The sellers’ underlying payment was $750 a month.

As a

condition of the lease, the investor then said that in order for him to lease it, the sellers would need to subsidize the payment at least $150/month. In this manner, the investor could make a profit. WHAT? You may ask why sellers would ever agree to something so crazy? Well, there are lots of reasons: 1. They wanted to sell the house, not just rent it. 2. A real estate agent would never agree to make the payments while the house was listed.

3. A payment of $150 a month is a whole lot easier to make than $750/mo. 4. There was no way the sellers could swing two house payments. The investor developed an instant rapport with the sellers, and they were confident the investor knew what he was doing. They also knew that the investor could solve their problems quickly. So, just how did this generate money for the investor? Pay-Day #1: A Monthly Payment Spread Within a few weeks, the investor rented out the house to a new buyer, creating a monthly payment spread of a $200 that equaled $2,400 a year.

Payday #2: Front-End Option Consideration Front end revenue is the difference between the amount of option consideration that you pay the seller, and the option consideration you charge the buyer to get into the deal. In this case, the investor had to make the property payments 35 www.NoRiskMillions.com ÂŠ 2008

the sellers owed. Since they were moving, that meant $600 due in about 2 weeks.

The investor immediately began marketing the property as a “Rent to Own.” Within a few weeks, he had found a buyer a mortgage broker with a few dings on his credit. He figured he would be able to buy in about a year or so, and was willing to give me $5,000 as option consideration, and rent of $800 a month. The broker didn’t have the money all at once, so he and the investor negotiated a payment plan to allow the investor to collect option payments over time: $2,000 to get in; $500 in 30 days; plus $2,500 in 6 months.

So let’s talk again about the sellers. They were payment sensitive, and credit sensitive. That was why they were willing to subsidize the payment. They were willing to basically give the investor their house for their payoff, plus $5,000. That was the equivalent of a purchase price of $85,000. This brings us to the third form of cash flow. 36 www.NoRiskMillions.com © 2008

Payday #3: Back-End Spread “Back-end spread” is the difference between the investor’s contract purchase price ($85,000), and the price that the investor sold it to the new buyer ($115,000), less the option consideration to be paid by the new buyer. The reason investors call this the back end is because the money is paid to them when the new buyer exercises his offer to purchase. Essentially, the investors earn the spread between the two contracts.

Let’s review the buyer’s position in all this. The investor sold the property to them for the option consideration of $5,000, paid over time, plus monthly payments of $800. You may ask why would he pay so much to get into a house that he wasn’t sure he wanted to buy? The fact is, most buyers in the broker’s situation will do almost anything to buy. On his part, the buyer was a former homeowner. He knew his credit situation would not allow him to get better then an 80 37 www.NoRiskMillions.com © 2008

percent loan to value in the near future, which meant he needed at least $20,000 to get a loan. He didn’t have it, and he needed at least a year work on getting his credit scores up. To further convince him, the investor offered the buyer a monthly credit of $250 towards the down payment, from his rent payment, making the deal a sure thing. The $250 is known as a rent credit. On a monthly rent payment of $800, the investor gave him $250/month back, deducted off the option purchase price in the form of a credit. Not bad, huh? Once the buyer realized that he was basically only paying $550/month in rent, and $250/month towards the purchase price, it was an easy thing to seal the deal. Structuring a lease/purchase for the buyer this way helps mitigate any concerns they may have about paying a little higher rent payment. Lease options are a snap. Finding the buyers, if you have the right properties, just isn’t that hard. Just look at the numbers… PAYDAY #1: 38 www.NoRiskMillions.com © 2008

Monthly Payment Spread Payment Out (Monthly) To Seller - $600 Payment In (Monthly) From Buyer +$800 Monthly Cash Flow: $200 x 12 months = $2400

PAYDAY #2: Front End Option Consideration Option $ Collected from Buyer $5,000 (Paid in 3 Installments) Option Payday = $5000

PAYDAY #3: Back-End Spread Purchase Price to Seller $85,000 Sale Price from Buyer $115,000 (less the $5,000 option consideration) Rent Credit to Buyer ($200 x 12 mo.) $2,400 Back End Profit = $22,600 GRAND TOTAL (ADD UP ALL 3 PAYDAYS): 39 www.NoRiskMillions.com ÂŠ 2008

$30,000.00 PROFIT!! WHO WOULDN’T WORK FOR THAT TYPE OF RETURN?

What Makes an Option Legal? The goal is to set up the transactions to have NO LIABILITY. Well, how do you do this? Options should have four main characteristics, according to the gurus. Number one, they must feature acceptance – in other words, there must be a meeting of the minds, with an offer made and agreed to. Next, an option must feature consideration. Whether it is a dollar or a thank you, whatever you agree to exchange for the option must be laid out on paper. The option must also be executed for legal purposes (in other words, don’t break the law people), and must be signed and dated by all parties. Option agreements do not have to be witnessed. Further secure your interests by placing the option and all supporting documents into escrow. You might consider recording a mortgage on the option as well. This will serve several purposes. A mortgage secures the option and 40 www.NoRiskMillions.com © 2008

insures satisfactory performance of the option. As such, it is an insurable interest. By having a mortgage, you publicly declare your interest in a given property, and secure against default.

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Be A Team Player Pulling together an option deal takes diligence and expertise. You shouldnâ&#x20AC;&#x2122;t try to do it all alone. Build a team of experts to lend you that helping hand, and benefit from the contributions of the collective. Everyone on your team plays a valuable role. Here is an overview of who ought to be on your team, and what they ought to do.

Investors Yes, other investors just like yourself make excellent REI team members. You can provide each other with leads, 43 www.NoRiskMillions.com ÂŠ 2008

support, and tricks of the trade. Shared knowledge lends itself to the success of everyone. Real Estate Agent Having a real estate agent on your team can be a good thing. She can do a lot of the footwork for you, and provide you lists of the best deals based on you needs and wants, with respect to your budget. Many agents do charge commission, so there are other options for low cost or nocost lead generation. Real Estate Attorney Get a good lawyer on your team who is familiar with the laws and legal customs of your area. Make sure that they also have experience in the type of deals you intend to do. For example, suppose your plan is to acquire properties and use them as rentals. In this scenario, you would want and need a real estate lawyer who is familiar with doing evictions. Title Company

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Get a representative from a reputable title company on your team as soon as possible. Having a good one on the team will help to close deals that much faster, and with attention to your best interests. Mortgage Professional You need to have either a mortgage broker or mortgage banker on your REI team. The former can offer many financing options and advice on each, and the latter can make the loan decision. Each one has advantages. You might consider having both on your team, at that. Make sure to clearly communicate, as it is important they understand what you want (fast closings, lower interest, etc.). Insurance Agent The expertise of a good insurance agent is important. The best ones will understand the type of coverage you want and find ways to help you get it, while at the same time saving you money. Insure all your properties with one agent, and you're likely to have better service. 45 www.NoRiskMillions.com ÂŠ 2008

General Contractor It would be a rare find indeed to find a property to purchase that didn’t at least have a few issues. While it might make for a much lower purchase price, it could mean expenses on the other end as you strive to fix up your diamond in the rough. A good contractor can seem almost impossible to find, but they are out there. They can make or break your profit margin. Search and seek someone who can get ‘er done, on time and under budget! Appraiser A good appraiser will give you an accurate valuation of a property, and will be able to suggest ways in which you can raise the value of a property. Appraisers know the market and the area in which you are trying to purchase property.

They can make sure you get the fairest deal possible. They, too, are invaluable to your REI team. Accountant You will need the services of a good accountant, preferably CPA. Whomever you put in charge of your bottom line also be well aware of the ins and outs of real estate. Come tax time, this is the person you will rely on, especially when it comes to the write-offs! Mentor Seek out an expert in the field who can mentor you. By training under the watchful eye of one smarter then us, we can only get smarter. Start at your local investment club.

Hold Your Team Accountable So, how do you get team members to do what you want them to do? This is a great question. There are several points to consider when seeking out ways to make your team accountable. Everyone on your REI team has a job,

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and must perform effectively in order to make certain that everyone else is equally successful. Keeping your team accountable starts with clearly envisioning specifically what it is that you want a new team member to do. Long before you fill your team, you need to have this part done, so that it can be clearly communicated. After all, if you donâ&#x20AC;&#x2122;t learn to manage effectively, team members will add to your work load rather than ease it. Just like the big companies have a system in place, your team needs to have a management system, as well. A successful system in which everyone pulls their weight on the team leads to the overall success of the whole group. A good way to look at this is to realize that even though your team members all have different jobs you are all working toward the same goal: money and the American dream. You are also working to grow your business, and as such, you need to keep the wheels greased. 48 www.NoRiskMillions.com ÂŠ 2008

Regardless of what management system you choose, you should avoid doing something we like to call “Seagull Management.” Seagull Management is the practice of occasionally swooping into the office, dumping a load of work on your assistants, flying off to pursue other things, and then whining and screaming when things don’t get done. Babysitting your team members is the last thing you want to do. After all, the reason you made this person a part of your team this person was to get help, not to add to your workload. If you’ve recruited will, you will be able to do your job, and trust that your team members will each do theirs. Again that will only happen if you have communicated those expectations to them. Every single one of your team members should have a crystal clear understanding of what you expect of them, both on a day-to-day basis, and in the long term. In order that these expectations are met, you need to:

• Ensure that two-way communication occurs regularly and formally. Consider having a weekly or biweekly meeting with all members of the team present. During this meeting, review objectives, the status of current purchases, and answer their questions. • Track and post the performance of each member so that they can track how effectively they are meeting the team’s objectives. Note that you will be leveraging your team members – NOT PAYING THEM. You should not be having to hire or train anyone. When creating your team, your goal is to build a strategic alliance with them…you all make money together and you are all stakeholders. You are the investor, and you need the counsel and services of experts in various fields to be successful. You leverage these people because they are gurus in their respective fields not because they have to know what they do…Performance, Production, and Reliability is what should be the expectation of every Strategic Partner. Seek to create a management system to make sure that day 50 www.NoRiskMillions.com © 2008

to day responsibilities are being carried out. Daily reports, as simple as an email from each member detailing their performance, can be useful here. These practices make your team members accountable, not just to you, but to the team as a whole.

Be Loyal to Your Team Once you establish your team players you should be loyal to them. They should have first dibs, so to speak, on every aspect of your business. Including your team member and honoring them with your continued loyalty ensures that they will go to bat for you to get you the price and terms that 51 www.NoRiskMillions.com ÂŠ 2008

they already know you are looking for. And as an added bonus, you will likely be the one they call when they spot a deal that could benefit you.

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The Thrill of the Hunt: Locating and Evaluating Deals

Now that you have a clear picture of what you want out of your real estate investment career, and have put together the best team in the world, it is time to go out and do your first deal. You are probably very excited, and thrilled by the idea of moving forward in your business. So now what? Locating houses that are for sale is easy: check listings in the paper or online, drive through a neighborhood, talk to a friend… no doubt, you will find plenty of options. However, not every house that’s for sale represents a true deal. The only way to determine that is to look beyond the surface and inspect the property and the fine print.

Finding Deals Real estate investors striving to make that first big REI deal can soon become disheartened by the task. It can almost seem like all the good real estate investment deals are either impossible to find or have already been snatched up. 54 www.NoRiskMillions.com © 2008

The truth is that you can find a good real estate investment opportunity. Many of the best ones are hidden from plain view. Here are some tips. 1. Look for builder-developers. Keep an eye out for those who are in the business of selling their own real estate. Often you can find someone with a lot of inventory that they are all too happy and motivated to sell off. 2. Look for code violations. During the lifetime of a property, it is possible for local building codes to change. This can place the owner in an awkward spot when they attempt to sell the property. For example, an owner attempting to sell his property may learn that his building falls into a category of buildings that now require fire sprinklers to be installed. Or perhaps the newest regulations require that certain homes have additional earthquake reinforcement. The funds required to do that work may be more than the owner

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has to spend. It might just be enough to convince the owner to sell at a reduced price instead. 3. Use your relationship with your real estate agent to its fullest potential. A qualified real estate professional can be an excellent resource for you. By only working with one agent, you build a relationship of trust and loyalty. 4. Look for foreclosure-REO. When lenders foreclose on a delinquent loan and buy the property themselves at a foreclosure sale, they end up with real estate owned property (REO property). In almost all cases, the bank would rather sell the property than manage it themselves. For this reason, REO properties are a prime source for good deals.

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5. Look for sale by owner. Many owners prefer to market their own properties in order to avoid paying a real estate commission. Truth is, when done correctly, for sale by owner (FSBO) can be a good source for good deals. 6. Look for management problems. Rundown properties that show an obvious state of disrepair can indicate that the owner no longer has the desire or the resources to manage the property and might be in the market to sell. A call to the owner expressing your interest in the property might be all it takes to negotiate a good deal for yourself. 7. Run your own numbers. Regardless of what avenue you might pursue, always check and double check the figures yourself. Catastrophe can strike if you simply 57 www.NoRiskMillions.com ÂŠ 2008

accept what you are told about the income potential of a property you are looking to acquire, especially if the owner is really desperate to make the sale. Making a small investment into affordable real estate investment software will help point you in the right direction.

There are several other ways to find the right deal for your investment. Some other options might be: 1. The Courthouse. The courthouse can be a great place to obtain leads with which to begin your search for the perfect property.

When a borrower becomes

delinquent, the mortgage lender files a Notice of Default with the County Recorderâ&#x20AC;&#x2122;s Office. In judicial

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states, a Lis Pendens is used in judicial states. Note, however, that a Lis Pendens does not necessarily indicate a loan default. Lis Pendens is a Latin phrase meaning “suit pending,” and can simply mean that there is legal action pending against the property. The information filed with the County Recorder’s Office is public record, so anyone who wishes to see it can have access. In fact, to keep ahead of the demand for this valuable information, many county recorders’ offices have created Web sites to supply this information. Using the site, you can usually find the names of owners in default, and the document number of the public notice. The actual documents might even be available here too, but if they aren’t a quick trip to the recorder’s office will suffice. Take your list of NODs and conduct a search using the owner’s name or the document number. Then, you can then view the document, which will list the original lender, the property’s address, and the defaulted amount. Of 59 www.NoRiskMillions.com © 2008

course, you could bypass the Internet and just go straight to the county recorderâ&#x20AC;&#x2122;s office.

Guaranteed,

the recorderâ&#x20AC;&#x2122;s office will have the most recent and upto-date pre-foreclosure listings available. 2. The Classifieds. A lot of homeowners on the brink of foreclosure try to sell their property as quickly as possible. You will often see real estate ads in newspapers authored by homeowners in preforeclosure status. These ads usually do not reveal a lot of info about the property or the homeowner. However, what you do get from them is the indication that the seller is highly motivated to rid themselves of the property, and might be willing to simply cut their losses. For you, that is the golden signal to make your move! The primary benefit is that you get a major step out of the way: making contact with the 60 www.NoRiskMillions.com ÂŠ 2008

homeowner. Establishing that relationship now can work in your favor later.

And, don’t forget, in this age

of technology, placing ads online is highly effective. And, unlike the newspaper, there are many places you can search online for properties or place an ad yourself for FREE. Free is always a great price. Some sites you might check out include: i. Craigslist.org. Craigslist, the brainchild of a San Francisco entrepreneur, is a central network of online communities, featuring free online classified advertisements – with jobs, internships, housing, personals, for sale/barter/wanted, and many other categories, as well as forums on various topics. With Craigslist, you can post your ads in multiple markets and major cities and gain national exposure in just a few clicks. And it costs you nothing.

ii. Backpage.com. Backpage is another site similar to Craigslist that allows you to post an ad. While some categories can be posted to for free, others do require a small nominal fee. BUT THE FEE IS WORTH IT. Many people avoid ads like those on these types of websites. The fee insures premium status, meaning preferred listing and placement â&#x20AC;Ś and higher response from serious lookers. iii. FSBO.com. FSBO.com is one of the most popular For Sale By Owner Real Estate sites on the internet. FSBO.com helps sellers and buyers alike by providing them with a simple to use and cost-effective route to selling, buying or renting properties online. They boast the ability to save their customers thousands of dollars each in the process. FSBO includes great features, like video footage and unlimited photos to each 62 www.NoRiskMillions.com ÂŠ 2008

property listing at no additional charge. Listing packages start at $69.95, and run for nine months. Is it worth it? Well, with a site generating 30 million hits a month from over 300, 000 unique visitors, it might just be worth the investment. iv. ForSaleByOwner.com. Another leading website for do-it-yourself sellers and buyers, ForSaleByOwner.com boasts that it has saved home sellers more than one billion dollars by helping them to sell their own homes. ForSaleByOwner.com has lots to offer, including Internet marketing services, real estate guidance and information, downloadable legal forms, and customer support. Their packages range in price from $89 to $899. Prospective homebuyers can browse the ForSaleByOwner.com database of properties at no charge. 63 www.NoRiskMillions.com ÂŠ 2008

3. Title Companies. Title companies are the first to know when a home is about to be foreclosed. Some title companies will provide you with Notice of Default lists free of charge. In return, they will likely expect you to give them your business. This isn’t such a bad thing, since you will likely require the title company’s assistance for several parts of the process, so establishing a partnership should be no problem. You might also consider finding out whether or not the title company releases a regular e-mail or mailing list for NOD information. If so, this might be the company for you. If, by the same token, you find that the company you’ve chosen to work with will not give you this information, consider looking for a new company that will. Depending on your target market, some of the methods will take more time than others, so be prepared to try each method until you find which strategies work best for you.

Organizing Your Results As you get into your research and begin to find leads, it wonâ&#x20AC;&#x2122;t be long before you become overrun with potential leads. You will need to maintain some level of organization to keep up with them. When you go looking for potential properties, arm yourself with a notepad and pen and get ready to take notes. When you find property listings, write down as much information about each property as possible. Record the name, address, phone number, and any other details available from the listing. If you can, take a snapshot of the property, and use it and the other information to create a file on the property. This way your entire history of involvement with the property can be stored in one place, easily retrievable when needed.

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The key to nailing down that killer REI deal is speed. The sooner an investor can spot and act on a real estate investment property, the better. Unfortunately, sellers are not always going to shout from the rooftops or run television ads about their inventory or financial situations. Use the tools you have at your disposal to your best advantage.

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Marketing Your Services Initially, hunting for those golden opportunities is necessary. But if you want to maximize your success, you must get sellers to come to you. And you do that through advertising. Many real estate investment experts get much of their business by using different marketing tools to advertise themselves. The key to being successful with Lease Option deals, in particular, is to find the buyers first and then use the previously-discussed resources to find sellers. Any way you can legally put your name and services in the public eye is a good idea. That’s how you will find the properties you would otherwise overlook. Hence, there are lots of different types of marketing tools available. Let’s discuss the most effective ones. Networking Networking is a critical marketing tool. Talking to people, letting them know what you do, is a great way 68 www.NoRiskMillions.com © 2008

to make contacts. This is not the time to let your shy reserve get the best of you. Push it to the side! For every prospect you meet, introduce yourself, briefly say what you do, and ask them a question about themselves. People love to talk about themselves, and it is to your benefit to listen. It goes a long way toward establishing a personal relationship. Create a database to keep up with your contacts. And remember the name of the game is CONTACT. You should mail, email, or call your contacts once a month or more – we personally recommend doing this 5 times per week. Keep your name and image in the forefront of your potential customers’ minds. Make it so that the first person they think of to help them in times of crisis is YOU.

An important part of keeping your contacts organized is keeping your list segmented. This means that your buyers should be in one section, sellers in another, and investors in still another. You might consider a 2 or 3 inch binder with 69 www.NoRiskMillions.com © 2008

dividers to create sections for buyers, sellers, and investors. You should keep them all together in one notebook, to make it easy to access and cross reference information. Direct Mail Top professionals in this business realize that they need to make contact with as many people as possible without breaking the bank or taking up too much time. They also know that this contact must be made several times â&#x20AC;&#x201C; as many as eight â&#x20AC;&#x201C; before that contact even considers doing business with the professional. Direct mail is a way to accomplish this, and to close your deals. The fundamentals of direct mail are simple. Basically, you send out a message with an invitation for a prospect to act by contacting you. Your biggest challenge after targeting your specific audience is making your message stand out from all of the other junk mail that your prospects receive. Then you need to layer your contacts by delivering your message multiple times.

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To target the audience, you must first identify the type of client are you specifically looking for. Is there a particular age group? Are you playing to their interests or fears? Is there a particular neighborhood you want to break into? Knowing the demographic that you are aiming at will help you personalize the mailing that you will send and compel them to call you. Next, determine how many people you are going to send your message to and where. Keep in mind that even a direct mail using bad marketing will generate at least a 1% response.

The translation: for every 1000 pieces of direct

mail you send out, you will get at least 10 phone calls in return. You can increase these numbers by improving your marketing techniques. The items we send out get anywhere from 5% to 11% return on responses. How? The key here is to be different and not the same as everyone else! Guerilla marketing is a great approach to consider. Also, post cards get more attention than envelopes in people's mail boxes. 71 www.NoRiskMillions.com ÂŠ 2008

The goal of direct marketing is to take offline traffic and get them online. The key is to drive potential clients to websites for more information. Here are some examples of my websites: • www.24HourHomeOffers.com • www.LeasetoPurchaseBuyer.com • www.InvestorsLookingForDeals.com Now, you are ready to create your marketing message. It should invoke emotion and request a response. Some of the most effective messages offer something free for calling back, such as a special report or assessment. Another good tactic is to display newly-listed properties in the area, and encourage owners to "cash in" on their rising home values.

Flyers Flyers are some of the best forms of advertising. And they are a cheap way to go, making them a popular choice, especially for those new to the business. Flyers can be distributed by putting them on doorknobs or in newspaper 72 www.NoRiskMillions.com © 2008

boxes. However, DO NOT put them in or on a mailbox. This is a criminal offense with a fine of $5,000. The U.S. Postal service is very serious, and they will fine you. Some people put flyers on car windshields. I know this works, but I do not recommend it. People are fanatically protective when it comes to their cars. Imagine the impression you might make if you spend all day putting you nice, brightly colored flyers on every car in the parking lot of the local mall or shopping center, only to have a huge thunderstorm hit. Your flyers will get results alright. People will be calling, not to give you their business, but to send you the bill to have their paint jobs repaired after the dyes in the paper the flyers were printed on ruined their cars. Not a good way to start a relationship, is it? Really, you could save yourself the hassle of paying for carwashes or replacing any windshield wipers you might break by skipping this method of distribution altogether. Flyers can be put out anyplace. Always keep them in your vehicles, as you never know when opportunity will strike. 73 www.NoRiskMillions.com ÂŠ 2008

Another type of flyer that effective is the pull tab flyer. This flyer is half a page and has pull tabs on the bottom. Potential clients can pull off your phone number and leave the ad with other pull tabs for next customer.

I always pull

off one or two of the tabs myself to make it appear as though others have already taken phone numbers. This seems to encourage others to take them. I put them on bulletin boards at supermarket, post office, church, etc. Replace them frequently, as the tabs disappear. Make sure your flyers standout by using bold print and bright colors. Donâ&#x20AC;&#x2122;t use common white, as it will not draw attention, and will be overlooked. Colored paper is worth the investment to make your flyer more appealing and likely to be read.

Online Forums Online forums and blogs are a great way to market your business. Forums are good marketing tools because they 74 www.NoRiskMillions.com ÂŠ 2008

are free and offer a way to connect personally with your market. This can be very lucrative for you, but care must be exercised to avoid common pitfalls. Many marketers new to the business tend to over-post, spamming the other members and putting themselves at risk for being removed from the forum. If you do not have something meaningful to share then donâ&#x20AC;&#x2122;t post to the forum until you do. Although forums can be used for advertising that is not the purpose for which they are meant. Your posts should be subtle in their promotion of your services. Also take care to post in forums that fall within your chosen niche. It wonâ&#x20AC;&#x2122;t be hard to do, because forums are everywhere on the internet. Since the purpose of forums is to have discussions they are actively used by search engines when indexing content. This means that when you post in the relevant forum with a link to your website you actually are helping build backlinks that will receive a high rank when posted on a popular forum. This is among the leading ways of getting quality and targeted traffic for your website. Your new website needs 75 www.NoRiskMillions.com ÂŠ 2008

the benefits of backlinking, because it increases your web presence. It also increases your credibility and gets your website a higher page rank.

Business Cards Business Cards are one of the most inexpensive ways to market yourself and your business. You have to have business cards. You can get them at your local printers, office supply stores or the internet. It is recommended that you get two varieties of business cards: one to target sellers, one to target buyers. On the card you use for sellers, make sure you include the phrase, “We Buy Houses.” Short, sweet, and to the point. Sellers will be more likely to call to ask about this than if your card said, “We Lease Houses.” You will be able to screen potential customers later to see if they match your needs. Right now, it’s all about getting your name out there. Getting sellers to call you is your top priority to build 76 www.NoRiskMillions.com © 2008

your inventory. And even then, when you get them on the phone, DON’T go into details about how your system works. This is best saved for a face to face meeting, when all owners of the property can be present. Explaining over the phone is just too difficult, and almost always will result in a negative response. Your other business card should say “We Lease-to-Own Homes.” This card is to be given to potential homebuyers. Of course, if you are just starting out, you could probably put both messages on one business card, but in the end it is best to have both types of cards ready to hand off at all times. Don’t even bother wasting important space on your card by putting your picture on it. People don’t care what you look like, only how you can help them. For this reason, we recommend that the largest lettering on the cards should be your best action to help clients. Consider making your card as bold and vibrant as possible. Neon colors are good Business cards are an important part of your marketing toolbox. You should always have cards on you. Keep them 77 www.NoRiskMillions.com © 2008

stashed in all your cars, wallets, purses, briefcases and anywhere else you spend time. It reflects badly if someone asks you for a card and you do not have one. It could be costing you the deal of the year! Give out cards everywhere you go. The grocery store, the post office, public bulletin boards, restaurants… all of it is fair game. Operate under a five foot rule: Anyone coming within five feet of you should be getting a card!

Websites Let’s face it. We are a point and click, web-surfing society. The prevalence of the Internet has never been more evident, with Internet and Cable now considered needs for the common household – as important to many as light, water, and telephone service. In your Lease Option Purchases, you would be remiss to ignore the lead generation potential of the World Wide Web. The beauty of setting up a website with forms and autoresponders is that people are coming to you. And your 78 www.NoRiskMillions.com © 2008

business is always open. You can be out playing with the kids, at dinner with your spouse, at your other J-O-B, evenâ&#x20AC;Ś and leads from SERIOUS potential clients can be pouring into your site. On the weekends, in the middle of the night, your site is working for you. One option for your website is the sales letter. Imagine spending major bucks on your webpage design, and lots of extras like a flash intro, and an array of colors. And then having nothing to offer. Not only are you out of money that you could have spent more effectively elsewhere in your business, but you are also missing the whole point of having your webpage. Your web site is a key sales tool. Your website should function as an automated 24-hour salesperson, seven days per week. Your sales letter is much more than a business card or flyer. A well constructed sales letter can stand alone, and can quite possibly close sales by itself. Your sales letter should draw clients in from the very beginning, instilling in them trust, faith, and confidence in 79 www.NoRiskMillions.com ÂŠ 2008

your ability to help them out of their current situation. The letter should be packed with unique content that drives visitors to you and captures their interest. In addition to telling them what you do, and how you can help, your sales letter should explain the benefits of choosing you over anyone else in your area offering similar services. The most successful of sales letters speak to their targeted audience and fulfill a genuine need. The right letter not only invokes trust, but it tells an interesting story along the way. While they are no guarantee of an instant sale, they go a long way to establishing your credibility. Include forms and consider offering free incentives for those who sign up on your site. This will allow you to use autoresponders to keep in contact with them, making the whole process automated and self-monitoring. And that is money well spent.

Bandit Signs

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Are you looking for motivated sellers? Are you trying to rent or sell a home? Bandit signs are one of the most affordable ways to reach any target audience. Used correctly, Bandit signs can be one of your top lead generators. Beware however. Bandit signs are illegal in some municipalities. Placing them on private or public property, or in places like telephone poles, can get you fined. Some gurus will tell you the fine is worth it… but you will have to make your own decision about that, and research the laws in your local area. Car Signs Car signs are a must. A pair of magnetic signs to display on either side of your vehicle aren’t that expensive, averaging about $70 or so. You can also get Vinyl signs (which are of higher quality, and don’t cost that much more) They should be of a good size, attention-getting, and include a message and your contact info (your website or a phone number).

Encourage your family members and friends to place your signs on their cars as well. If you really want to get noticed and show the world that you are serious and passionate about your lease purchase business, consider having your car wrapped. Basically, this entails having large vinyl lettering and your logo applied across the entire body of your car. You might see this on news vehicles, or on cars touting new businesses and such. It is expensive, but lasts as long as you wish it to, and will definitely get you noticed.

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The Phone is Ringin’ Off the Hook… Now that you have succeeded in getting the phones to ring, you are now faced with a new challenge: What in the world do you say to them? What follows is two scripts. One is meant to be used with sellers, and one is tailored for buyers. Seller Script: Thank you for calling Nate Kennedy’s Office. 1. May I have your name please? 2. What is the address of the property you are interested in selling? City? State? Zip? 3. What is the best phone number to reach you at and the best time of day to reach you? 4. Do you have email address that you can be reached at? 5. Thank you. Now, I need to obtain some basic information about the property… 6. What is the property type? – Ranch, 2-story, Bi-Level, Condo, Townhome, Other 84 www.NoRiskMillions.com © 2008

7. What is the square footage of the property? 8. How many bedrooms does it have? 9. Number of baths? 10. Is it listed with a realtor? 11. Does the house need any repairs? If yes, How much do you think it will cost to fix it upâ&#x20AC;Śjust a ballpark? 12. Do you have tenants at the property? If yes, how much are they paying in rent? 13. If the property is vacant, could someone live there now? 14. How long have you owned the property? 15. How much do you owe on the property? 16. Will you sell the property for what you owe? 17. Why are you selling? 18. Are the mortgage payments current? 19. Are there any other liens against the property? If yes, for how much?

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20. How much are you asking for the property? (If they say they don’t know, ask them, “can you give me just a ballpark figure?”) 21. If Mr. Kennedy pays your mortgage up to 24 months, can you wait for the full retail price? 22. What will you do if Nate can’t help you? Thank you for calling. Mr. Kennedy will review this information and will contact you if he’s interested in moving forward.

Buyer Script Thank you for calling Nate Kennedyâ&#x20AC;&#x2122;s Office. 1. May I have your name please? 2. What is your address? (Make sure to get Street, City, State, ZIP) 3. What is the best phone number to reach you at? 4. Do you have an email address for Mark to send you homes? 5. Do you currently live in a house or apartment? 6. Do you rent or own? 7. What is your current monthly payment? 8. How much do you have for a down payment? 9. How much can you afford for a monthly payment? 10. Do you have a 401k or IRA? 11.

How many bedrooms do you want?

12. How many bathrooms? 13. How soon do you need to (or can you) move? 14. Why are you moving? 15. What areas are you interested in moving to? 87 www.NoRiskMillions.com ÂŠ 2008

16. Do you want to leave any comments o questions for Mr. Kennedy? Thank you Mr. Kennedy will be in touch with you shortly. **** In both scripts, you are able to quickly get enough information from potential buyers and sellers to determine up front if they will fit into your program. This is good from several standpoints; for one, you don’t waste valuable time chasing a lead that won’t work out, and for another, you have valuable information with which to put things in motion on your end if the potential buyer or seller is a credible lead.

It is important to have a script when talking to a potential client. It helps to frame and guide the conversation. It provides you with a measure of confidence, which is especially valuable if you are prone to being a little nervous. Having a script allows you to appear professional and in control. It will win you points, and it might just close the deal. 88 www.NoRiskMillions.com © 2008

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The Profile of A Buyer Finding that perfect buyer isn’t so hard. Once they have been pre-screened there are only a few other things you need to consider in order to feel good about signing on the line. In the perfect world, your potential buyer should be basically financially strong. Should they need extra time to seal the deal, it isn’t much, and it is due to an extremely rare extenuating circumstance. An example of this might be found in the potential buyer who is in the final stages of closing on their current home, and is waiting on the proceeds of funds from a verifiable estate to pay you. Another example would be the buyer who might be waiting for some certificates of deposit to mature in order to avoid the penalty for early withdrawal. It's sometimes difficult to tell if the lease purchase buyer is legit. Here are some questions you might want to ask, or think about.

• Is the down payment source valid? Can it be verified and available in a relatively short period of time? • Does the buyer have a sufficient amount of option money? And, should the sale fall through, what happens to that earnest money? Is it clearly spelled out in writing and agreeable to both parties? • Has the buyer had a preliminary financing prequalification for the type of loan that he or she will need to buy the property? Further, will the seller incur any costs for the buyer to secure this financing? The Profile of A Seller It goes without saying that your business needs both buyers and sellers. But you can’t just go with any old seller… you need MOTIVATED SELLERS! Motivated sellers are where the deals are, and in a perfect world, you would have a stream of them leading to your door. So just what do we mean by the phrase “motivated seller?” Truly motivated sellers face circumstances like these:

• “I just found out that I’m being transferred in a few months. I just bought this house last year! I can’t possibly afford two payments.” • “Oh my goodness! I didn’t even know the house was going to tax sale! I am so glad you sent me that letter. You are right – getting something now is definitely better than nothing. How can you help me?” • “I just don’t have the money to fix my house up and I would just like to sell and be done with it.” • “I can’t keep up with that house since I live in another state. The tenants take advantage of me all the time. What can I do?” • “I am up to my ears in codes violations. The city says they will bulldoze it if I don’t get up to standard. HELP!” Can you buy properties like these? Of course!! And you can get them very cheaply. The key to making money from your leads is prescreening them before you ever pick up the phone talk to them, or 92 www.NoRiskMillions.com © 2008

meet with them in person. Prescreening helps to maximize your time. You know ahead of time which people you will be able to help, and only focus on them. Beware of the buyer/seller who just wants to dump there problems on you. Prescreening can help you avoid some really unpleasant situations.

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Property Analysis What is a Deal? People are going to come at you with all kinds of properties, to be certain. But you have to know what constitutes a good deal. That means knowing what to look for, and how to analyze what you find. Real estate investments can be financially rewarding if you do your homework â&#x20AC;&#x201C; called due diligence â&#x20AC;&#x201C; before you invest. Whether you are purchasing a rehab property to flip or a lease option or rental property, there are several things you need to consider. There are software programs out there that can help you analyze the properties you might consider purchasing; likewise, you can do a lot of the number crunching by hand using paper and pencil or a printed spreadsheet. Either way the goal of the analysis is simple: to determine whether a property is likely to be a 95 www.NoRiskMillions.com ÂŠ 2008

money-maker or a money pit. Once you run the numbers, you can easily compare different properties you are considering, work through what-if scenarios, figure out how much rent to charge, and plenty more. For example, say you have found a lease purchase property in a great location. Remember, you aren’t actually going to buy this property. You are simply going to obtain control of the property through an option, and then assign the property without ever risking your own money! From first glance, you determine that the rent you will charge will easily cover the mortgage, property taxes and insurance. All in all, it seems like a great real estate investment. But, before you make a deal on the property, make sure your analysis answers these questions: • How does the rate of return on the property compare to other investments, like investments in stocks, bonds and mutual funds? • Is this property a better investment than the one you saw last week, last month, or even yesterday? 96 www.NoRiskMillions.com © 2008

• If you do make this investment, at what point should you sell to maximize your rate of return? •

And what about maintenance and upkeep? How many times will you have to replace the carpet? Repair windows, the plumbing, the furnace? Replace the roof? The air conditioner? What about the rest of the house?

• How much will these systems cost to replace in the future? • Will the property produce enough income to pay for this ongoing maintenance, or will you have to cover these expenses out of your own pocket? • What if you cannot or don’t wish to increase the rent every year? • How will all the above factors affect the rate of return? • After all of that, is the property still the best investment for you at this time?

acquiring a property that proves too costly to bear. At the end of the day, we are all in this business to make money. Exit Strategies So what do you do when the market turns? What is your plan should you need to get out from under a property that is not performing like it should? How do you propose to get out? Every real estate investor on the planet should have Multiple Exit Strategies: that is, a plan of how and when you will sell your investment and take your profit. As a real estate investor, you will need to keep constant tabs on the state of the economy in your area. Things that will impact the economic picture in your city will include employment rates, current interest rates, and home value, all of which can ultimately impact your ultimate profit when you eventually sell your property. It will be necessary to think ahead about how you will use your profits: do you want to take your profits and use them to buy a new piece 98 www.NoRiskMillions.com ÂŠ 2008

of property with greater investment potential? How much money do you want to make in profits? When do you need to have your cash â&#x20AC;&#x201C; immediately, or can you wait a little while? Consider these questions regularly and reevaluate as your circumstances, needs and wants change. The key to establishing a decent exit strategy is to of course start with the end in mind. You should be thinking about the safety nets when still in the talking stages with potential buyers or sellers. Can the property you control be reassigned? Is option money refundable, or split between you and the seller of a property? Is there an early out penalty should the tenants in a property leave before the end of the term of their lease? And what about subletting? Including the strategic points of your exit plan in the contract from the start will help you to avoid problems in hindsight. Something else to consider is income taxes. If your investment property makes a healthy profit, you can sell the property using the 1031 tax exchange to defer taxes. 99 www.NoRiskMillions.com ÂŠ 2008

However, this is something you must plan ahead for and include in your sales contract.

Determining the Value of the Property Part of analyzing that perfect property is determining the value. If the property you want to buy is in default, the Lis Pendens or NOD is the first place you should look for this you should look for this information. On this document, you will find details about the mortgage amount, the lender, and the homeowner. The mortgage value can be a good indication of the homeâ&#x20AC;&#x2122;s worth, but it should not be the only thing you rely on. Alternately, you can conduct a Comparative Market Analysis (CMA). A CMA is an informal assessment of the value of a property. The CMA is used to determine a fair listing price 100 www.NoRiskMillions.com ÂŠ 2008

for the property. You DON’T need a realtor to help you determine the CMA. As you work more with the properties in the different neighborhoods you target, you will get a feel for the current prices and home values, and thus be able to assess the value of a property on your own. The main things a CMA will tell you are: • The number of similar homes currently for sale in the area you are looking at. • How long similar properties stay on the market in that area. • The number of properties that have sold in the last 6 months. • The listing and sale price of those properties that have sold in the last 6 months. The CMA can also be used to determine the gross equity, or total value, of the property. Gross Equity = CMA – Default Amount of Mortgage

Let’s look at an example of this. Say you are looking at a house that you have determined to be worth $225,000. The homeowner still owes $185,000 on the mortgage loan.

$225,000 - $185,000 = a gross equity amount of $40,000 Using these numbers, you can determine the gross equity:

What does gross equity mean for an investor? The amount of potential equity in the property will determine whether or not the house is worth pursuing. If there is little or no gross equity in the property, there isn’t much profit potential. There are ways, however to increase or create additional equity in a property. For example, a property with little or no gross equity might be ideal for a short sale. Gross equity can help you determine the profit potential of a property, but this number is only an estimate. More important than the gross equity is the net equity of the property, which takes into account closing costs, 102 www.NoRiskMillions.com © 2008

rehabilitations, the possibility of additional liens against the property, and other relevant factors. Use these two tools to help make your property analysis a breeze: • http://www.NoRiskMillions.com/negotiate • http://www.NoRiskMillions.com/calculator

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Tax Free Earnings Initially you will probably be seeking to fulfill a short term goal of generating income with your lease option acquisitions. However, as you plan for the long term, you will want to begin saving for that rainy day, or your retirement. That is where the Self- Directed Roth IRA comes in. Arranging your deals so that they run through your IRA account can generate thousands of dollars of tax free income. You are limited in the number of of transactions you can do. Therefore, you’ll only want to put your best deals through your IRA. Of course, you could always set up IRA’s for your spouse and your children as well, further maximizing your tax free earning potential. As long as you continue to you invest using the funds out of your SD IRA has the potential to make you unlimited profit, as long as those profits made stay in IRA. So were you to use your IRA funds to purchase a new home, and then you turn around and lease purchase that same home for a profit of $10,000, the profits are tax free, as long as it all goes 105 www.NoRiskMillions.com © 2008

back into your SD IRA. Since you didn’t get any tax advantages upfront, the government will let you draw on the funds you have stored up when you retire – tax free! So you don’t have to depend on Social Security, or the kids to take care of you.

Financing There are many options available to finance your business. However, it should be noted that the whole point of lease purchase is to reduce your start up costs and risk while MAXIMIZING profits. That said, there are some situations in which having extra capital is necessary, if for nothing more than to have a resource for your buyers to explore. We have briefly touched on some of the options available. This chapter will explore funding options in detail. Once you have a contract, you need to fund the deal. Finding money for your real estate deals depends on which investing strategy you are employing, and your exit strategy. There are many avenues to pursue to get the money for your real estate investment purposes.

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Now, if you just happen to have bucket-loads of money sitting around in your bank account, you have an option that most people don’t when they’re starting out. You can use your own money. For those who don’t have an ample cash flow (and for the record, most of us DO NOT), you may find that you need to exercise other options. Besides, even if have the cash, you may opt to use a different source of funding. After all, you can do a lot more deals if you don’t have all of your own money tied up in one or two properties. Here, we will discuss the most popular funding choices. Private Investors Private investors are people who will put up money for you to use in your REI deals, in exchange for either a considerable interest rate or a percentage of the net profits on the deals they fund. Many real estate investors use private money lenders and investors – in fact, a number of the most successful investors have private investors on their success team, so that they always have a dependable funding source at hand. Having a network of private 108 www.NoRiskMillions.com © 2008

investors established will allow you (and your buyers) to always have a source of funds, while retaining most of the profits on your deals. A one-stop shop to fully serve all the needs of your buyers and sellers will make the whole process that much quicker, and smooth. Just make sure your attorney has drawn up your agreements with your investors so that you do not run into trouble with the securities laws in your state. This is very important.

Hard Money Lenders Hard money lenders put up short-term money with no security except the property. They don’t require any money down from you and they require credit checks of proof of income. They do, however, charge a very high interest rate. Therefore, they should be used wisely, and only for short periods of time. Hard money lenders are easy to find. Try checking with your local REI club, or just Google the phrase “hard money” and your city or town… you would be amazed at what crops up from your research. 109 www.NoRiskMillions.com © 2008

Here’s a good site to use to find hard money lenders: www.VirtualMoneyMan.co m One thing to consider when using hard money lenders is that they will usually only loan up to a certain percentage of the ARV (after repair value) of any given property. This is important to keep in mind, because you will need to ensure that you are getting into the property for less than that if you intend to use the hard money approach. Say for instance you are trying to fund a deal on a property that you have assessed to be worth 200,000. This means you should be getting it for less than $140,000 if you intend to use a hard money lender. Some lenders will give you funds for rehab, others won’t. Read the contract carefully before you sign! Real estate investing can be so profitable that you may only need to use one of these sources to get you through your first deal and be able to fund your next deal with the profits. You should always know where you can lay your hands on 110 www.NoRiskMillions.com © 2008

fast cash if you need to do so, and these sources are used by real estate investors all the time. Many investors would rather use these other sources for funding even if they can afford to fund the deals themselves because it doesnâ&#x20AC;&#x2122;t tie up all of their money in just a few deals. Using these sources will allow you do more deals if you choose to while leaving your resources freed up for other things and reducing your risk.

111 www.NoRiskMillions.com ÂŠ 2008

112 www.NoRiskMillions.com ÂŠ 2008

Final Thoughts Lease Options are a powerful tool to help you make the money to live the lifestyle you deserve. Everyone, and I mean EVERYONE can use this system – you don’t have to be a marketing genius or a real estate pro. You have the ability to control real estate with no money, no credit, and no risk. With the state of the nation’s financing is in shambles, many people’s lives have been ruined with bad investing. Perhaps you know of someone who has lost their life savings, their whole fortunes, through the misdeeds of a failing economy and stock market. This is a way for them to build their lives back up with little investment and risk – with an UNBELIEVABLY HIGH RETURN.

GLOSSARY Acceleration – The process by which the mortgagor is able to bring the entire balance of the debt due immediately in the event of a default in order to begin foreclosure proceedings and recoup their losses Appraisal – A professional appraiser’s opinion of the market value of a property Appreciation - An increase in the value of property over time Broker’s Price Opinion (BPO) – A realtor’s opinion of the value of a property Closing – The final step in a real estate transaction in which all loan documents are signed and funds are disbursed Closing costs – The fees paid at the closing of a loan. Closing costs typically range from 2% to 6% of the mortgage amount Default - Failure to make mortgage payments on time or to meet other requirements of the mortgage agreement Equity - The difference between the value of a property and the outstanding mortgage balance Escrow - The process of placing funds and documents with a neutral third party for fair disbursement and distribution Fair Market Value (FMV) - The estimated value of a property in a real estate transaction First Mortgage – The most senior lien on a property

Foreclosure – The legal proceeding by which a bank or other lender repossesses and sells a property for a violation of the mortgage or deed of trust terms - usually for a payment default Lien – A creditor’s legal claim on a property. If said property is ever sold as a consequence of a default, the lien holder has a legal to part of the property or their share of the profits from a sale Lis Pendens – A legal document filed with the court that signifies legal action is pending against the title of a specific property Listing Price - The asking price of the home Loan-to-Value Ratio (LTV) - The ratio between the unpaid principal of a loan and the appraised value of a property Mortgage - A legally binding agreement between a lender and a borrower that specifies the terms of loan repayment and the process by which the real property will be repossessed in the event of a loan default Mortgagee - The lender named in the mortgage agreement as the recipient of payments Mortgagor - The borrower named in the agreement who is obligated to repay the loan

mortgage

Multiple Listing Service (MLS) – A computer services that provides realtors with detailed listings of homes currently on the market Notice of Default (NOD) – The process by which the lender formally informs the court of the payment delinquency Promissory Note – A legally binding contract detailing the terms of the lender’s promise to pay 115 www.NoRiskMillions.com © 2008

Real Estate Owned (REO) – Refers to a property which has been repossessed by the bank in a foreclosure. REO properties are homes that were not purchased in the auction phase Short Sale – A real estate transaction in which the lender accepts a payoff for less than is owed Title – A legal document used to provide evidence of ownership Title Company – A business that specializes in insuring and examining titles to real estate properties Title Insurance – A type of insurance designed to protect the investor from problems with the title including forgery, information gaps, and unknown liens Title Search - An examination of title records by a title company used to determine the legal ownership of property. A title search will also reveal liens against the property