volume 3/3 smart investor’s eight ways to get properties ... · marketing for sellers is the...

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Ed and Bob Diamond’s

Smart Investor’s Eight Ways to Get Properties Without Cash or Credit Bob Diamond 2nd Generation Real Estate Investor, Foreclosure expert Attorney Ed Diamond 2nd Generation Real Estate Investor, Foreclosure expert, MBA Diamond Law Center, LLC 333 E. Lancaster Avenue, #346 Wynnewood, PA 19096 [email protected]

Copyright Diamond Law Center, LLC, 2011 All Rights Reserved

New strategies for 2011 Volume 3/3

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Copyright Diamond Law Center, LLC, 2011 All Rights Reserved

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TABLE OF CONTENTS

How to Use this Course 5

Critical Elements to Success 13

Finding Deals 23

Marketing 29

Evaluating Deals 37

Creative Financing Strategies 41

Master Lease Option 47

Seller Take-‐Back Financing Using a First Mortgage 69

Wrap Around Mortgage 73

Money Partners and Private Money 75

Installment Sale 103

Subject-‐To 119

Taking Stock or Options in the Company that Owns the Property 133

Seasoned Refinance 139

Conclusion 141

Index 143

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How to Use this Course

We have found that using a combination of written materials and internet based webinars and our web site using the latest in Learning Management Systems works best for teaching you.

Therefore we have put together this book for you to read and very comprehensive on-line video training for you to access. We do both books and video training because some people learn better with books, others by video, and some by a combination.

The on-line training features recorded presentations that reinforce and expand upon the information in the books.

The combination of books and video presentations allows us to teach you in a very organized manner. You should have your login ID to our system, if you have any challenges email [email protected]. During your support period support is free.

This should be fun and easy for you! Here is some information for you to best use this course and understand resources:

www.diamondlawmembers.com - your membership site containing training and forms

www.diamondlawcenter.com - our main site

[email protected] - for use in contacting us for support

(800) 981-2846 Extension 0 – Our phone number for use in contacting us for support or any other reason. Manned every business day. Best to use email first for support as we get to it more easily and you will get an answer faster that way.

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INTRODUCTION

You are holding in your hands the key to success in profiting from real estate without down payment or credit.

As with any business your success depends upon your execution. In order to be successful you must perform all the steps in the system. Follow the steps and work consistently towards your goal and you will be successful.

The way this business works is as follows:

• Learn the techniques

• Market to locate motivated sellers

• Get control over the properties using one of our techniques without needing cash or credit

• Get your check!

This course is unique because we teach you how to profit from properties without needing down payment or financing! The financing is built in! This makes it possible for you to profit from properties without dealing with banks and other institutional lenders.

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The creative “no money down” and “built in financing” techniques we teach you in this manual include:

1. Master Lease Option;

2. Seller Take-Back Financing Using a First Mortgage;

3. Private Money in Whole or Part;

4. Installment Sale, a.k.a. Contract for Deed;

5. Subject-to the Existing Mortgage;

6. Taking the Stock or Options in the Entity that Owns the Property;

7. Seller Take-Back Financing with a second Mortgage, aka Wraparound Financing; and

8. Seasoned-Refinance.

In another book we explain how to use Loan Mods/Loan workouts and Challenging Lenders to acquire properties. Those are also a “no money no credit needed” techniques. We separated the material because those techniques involve an understanding of loan modifications/workouts and challenging lenders legally that is beyond the scope of this book.

As you can see from the list up above there are plenty of ways to acquire and/or control a property “no money down” and most do not need a bank loan - with the rules and regulations attendant to bank loans. Like a toolbox with lots of tools in it, there is a no-money down technique to match almost any situation.

Study this course and you will be able to acquire properties without using your own cash or credit.

How to Complete this Course.

• Read this book and the companion books. It does not matter what order you read them in.

• Attend all live support and training calls and events. How to Get Started in the Business.

• Set up your on-line websites.

• Pick out your marketing materials from the online materials and/or forms set.

• Send out marketing materials (letters and postcards) to sellers provided by the computer system. If you need more sellers get additional lists from Melissa Data, your county assessor’s office or other sources (more detail in this book and in the on-line training on the topic of marketing to find buyers and sellers)

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• Network with buyers and sellers at your REIA club, meet up events, and anywhere you find real estate investors

• When people call or register on your website talk to them. Be sure to follow up on all leads promptly.

Simultaneous and Continuous Marketing. You should always be marketing for more sellers. The more you market the more deals you will do. Your goal in your first six weeks should be to send out an initial mailing of 800 to 1,000 mail pieces to prospective sellers. Unlisted Properties. There are many sellers who think that given the current market conditions listing their property with a broker would be a waste of time. To a degree they are right – traditional brokerage practice does not work well. Traditional buyers are fewer and banks are strict on lending and require enormous down payments. Yet many owners still want to sell. Many owners of properties that do not have their property listed with a broker would sell if approached. Your job is to approach them – mostly via mail or Internet and let them know you are in the market to buy. Stay Away from Brokers and Listed Properties Many students first intuition is to contact a real estate broker or agent to go see properties. Or to look on an on-line listing of properties for sale such as Loopnet. Those are not the right sources for creative financing deals. In creative financing the idea is to get properties with as little (or no) money out of pocket as possible and to have the owner financing, allow you to pay the existing loans on the property or otherwise get you into the property without down payment or credit. Real estate brokers and agents need cash to pay their commissions. They are also not accustomed to creative financing deals and are generally hostile to them because they are not used to them. If you have cash and can qualify for traditional financing by all means pursue properties through real estate agents and brokers. If not, stay away from them, you will not get properties and you will be wasting your time.

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Steps to a Deal. The concept is to locate a motivated seller who will be more flexible on terms, gain control over a property by putting it under contract, and then either hold it for rental or flip the property for a profit.

Step 1: Market to sellers to get your phone ringing.

Step 2: Sift through your Sellers to find motivated sellers who want to sell and will be flexible on terms.

Step 3: Do preliminary research on the property and meet the seller to discuss the deal

Step 4: Negotiate to a price or terms that will allow you to resell or rent at a profit

Step 5: Sign the papers to get the property under control

Step 6: Rent or resell the property for a profit

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Frequently Asked Questions

Will These Techniques Work in My Area? Many new investors question whether no money down and no credit techniques can work in their area. They wonder if they are putting their proverbial ladder up against a viable wall. Let me put your doubts to rest. These techniques work everywhere. High cost areas and low cost areas. Cities, suburbs and rural areas. The same techniques apply to million dollar mansions and blue-collar houses. Your success is going to depend upon your action. Follow the system and it will work. Market to find sellers and use the techniques in this book to put together the deals. Are there Sellers in All Areas? The business system and methodology is the same in all markets. What is different is that in areas with stronger real estate markets for sellers you will have less highly motivated sellers who will give you the terms that you need. More affluent areas and stronger resale markets will require you to do more work to find sellers BUT it will be easier to find buyers on resale or tenants if you are renting. Less affluent and slower selling markets will require you to expend more efforts to locate ready, willing, and able buyers or tenants. In each market where it is easier to find one party (a buyer or seller) it will be harder to find the other party. The good news is that you can successfully use these techniques in all markets. What Types of Properties Should I Look For? Ultimately you want to locate properties that you can flip or rent easily. The type of property that is popular varies by area but stick with properties that sell in the most volume in your area. Stay away from “outliers” such as mansions in neighborhoods with regular houses, oddball properties like log cabins amongst tract-developed ranch homes and property types that are unpopular in your area. Where Should I Work? You should work in one market area to start with, preferably close to home. The easier and faster it is to go and see a property, accompany a buyer and meet with the seller the easier and faster your business will be. Do not go look for a “hot market” that play is overdone and unless you are going to move there, stay close to home. What if the Market Falls? We recommend that you buy properties that will pay their own way as a rental even if you are buying it with the intention to flip the property. That means you use the rental property analyzer for all properties you are considering.

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Critical Elements to Success Marketing Marketing for sellers is the first and most important step to your success as a real estate investor. You must locate sellers to sell and are motivated enough to give you terms. That is done through marketing. Market consistently and well and you can make a fortune. Fail to market and you will fail. Marketing takes three primary forms.

• Broadcast marketing (internet, lawn signs, billboards, radio, TV, newspaper),

• Targeted marketing (direct mail, email) and

• Networking. You must do targeted marketing and networking as much as possible. Broadcast marketing is generally too expensive and you will generate time-wasting leads. Networking is not generally effective for finding motivated sellers. The only exception to that rule is that sometimes real estate agents and other professionals will run into a motivated seller for you. Not very frequently, but sometimes. So keep doors open – but make your main efforts direct marketing.

Action Luck finds people who act. Even if what you do is not perfect or ideal, taking action will lead you to success.

• Study the materials then implement this system.

• Set up your websites, send out your marketing, and return your phone calls.

• Take action and get results.

• Take no action and you will get no results. It is all up to you in that regard.

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Follow Up and Finish Up

• Here are the keys to success in this and every other business:

• Successful business people follow up.

• They return communications promptly.

• They follow through.

• They finish what they start.

• If they say they will be there at a certain time and place they make it happen.

• They get to the final result.

• They do not make excuses.

• If you are failing look first to yourself – what are you failing to do that is leading you to lack of success? What can you do to lead you to motivated sellers?

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Successful Real Estate investors and Business people

Action oriented The single most important trait of any businessperson is the ability and desire to take massive action quickly. Successful people ALWAYS have this trait; they tend to quickly move to the “money” generating activities. In this case that means marketing to sellers. Successful people do not waste a lot of time on business cards, stationary, web sites and “getting it perfect.” The good news is that all kinds of people can be successful. Black, white, yellow, brown or anywhere in between. Men and women. Young and old. College educated and high school dropouts. Anyone with desire, focus and effort can succeed in this field of real estate. The bottom line is that you should assume that any deal you look at has 5 other people on the deal who are very adept business people and real estate investors that are very capable of getting the deal tied up. You are using option agreements so there is NO REASON to hold back, get the deal on paper and done NOW! You will thank me for this later. Success Traits:

• Get 100% in and market aggressively

• Goals are set and written down

• Goals are specific and numbers are set for profit

• Fears are set aside and do not stop actions

• Decision making is immediate and sure

• NO SECOND GUESSING

• Outside opinions are sought from SUCCESSFUL people

• Risk is calculated and reward to ensure that there is more reward than risk Please take this as it is intended, you have little to no risk and if you just stop thinking and get the deal done you will be successful.

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Sales Skills Everyone sells, your wife or husband “sold” you on his or her ability to be a good supportive mate. When you are a child, you are ALWAYS SELLING AND CLOSING, watch children, they are always selling you on why you should give them a treat of food, later bedtime, a little side trip or more time with you. They are natural closers and negotiators. This skill is invaluable and actually if you are quiet it means you are a great listener and thus have NATURAL selling ability. Every day you sell yourself to your spouse, children, employees, your boss, literally everyone you work with. Your credibility is measured by your ability to follow-through on your commitments. Marketing generates leads, selling converts those leads into money. The more marketing you do, the more leads, the more conversations you have and relationships your form and the bigger your network, the bigger your income level, pretty simple stuff folks. The education that you have in the industry will give you the basis to have intelligent conversations about properties and give you the ability to sell better. It is critical that you invest in yourself at all times, building Real Estate Investing expertise is a lifelong pursuit that is really a lot of fun. Watch children, they LOVE learning new things and watch most adults, they LOVE teaching children. Do you really think it is any different for us? When you come to our live events, you will see the love that Bob and I have of teaching, can we make more doing other things? I do not care because I love helping people succeed, I’d rather teach someone to fish than give them a fish and its what we love to do. I personally coach soccer, tennis, and kids speed and strength training. Why? Because that is the way that I am built. If you re-connect with your passion and love of learning you will become more successful. One more thing, negative comments and people can’t sell anything; this is the most important thing that you can learn in selling. Try a test, when someone asks you how you are spend 60 seconds and say something mildly negative and I’ll bet that they leave in 60 seconds after there eyes glaze over. Now, with the next person say ONLY positive things, repeat there name 5 times in 60 seconds and watch how they are DRAWN to you. When you are making small talk do not ever, ever, ever talk about politics or religion - this is not the time for that. This is the biggest mistake I see people make, when they run out of things to say they drop into this discussion and you will find that it always ends badly. Politics, Religion and Business make terrible bedfellows as not everyone has the same belief as you and it’s your job to do business not to use it as the way to convert people to your beliefs.

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There are wonderful books on selling by Dale Carnage, Zig Ziglar, and others, which I suggest that you read. My personal favorite is Harvey Mackay and his approach to networking and sales has really helped build my personal network and ability to sell. I find that when I stick to the simple principles on the next page my success rate is very, very high. You can do this, its very simple! Critical traits of ALL successful sellers

• Great listener

• Positive

• Active listener

• Smiles

• Uses the other persons name often in the conversation

• Great eye contact

• No foul language

• Speaks about the future in glowing positive terms

• No political comments

• No religious comments

• Strong work ethic

• Follows-up relentlessly

• Ethical and trustworthy

• Knowledgeable about current events (read the local business newspaper or magazine, read the local papers, watch the news. listen to the radio to stay informed)

• Organized

• Respectful of others time

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Work Ethic Ok, I have to break this to you, the 4 hour work week is a lesson on being efficient, no successful person works 4 hours a week. If you love what you do, are passionate and well read you will be efficient with your time. The key is that you work smarter not harder, our dad used to say this all the time. As an engineer with 2 very demanding boys he always found time to coach our teams, work on our projects and homework in spite of a demanding job at Boeing and owning rental property. Real Estate can build one heck of a passive income stream if you work hard at it and work SMART. Here are the success traits you need to work on:

• Get Excited about real estate and the money it will bring into your life

• Get up early and work late when building your business

• Weekends are necessary in the beginning

• Roadblocks are inevitable and you LEAP over them, go around them, crush them, you treat them like the enemy they are and CONQUER them. If you do not know how to get through the issue go to your network of SMART people and get some help

• Do not hang out with slackers, lazy people are like a communicable disease, you will catch the disease.

• Network with other hard workers. People Skills People come in all shapes, sizes and mindsets and you need to learn to deal with all of them. Its actually very, very simple to do this, Bob is incredibly good at this actually. Here are his principles for success:

• Do not judge anyone

• Accept people as they are

• Mirror there emotions

• Mirror there speech patterns

• Smile when conversing

• You have one mouth and two ears BE QUIET AND LISTEN Yep, it’s really this easy. Try this, the next time an angry person gets on you shift the conversation to the thing they are angry about and get angry at the PROBLEM with them. If they have a negative cash flowing property agree with them, YEAH I’M MAD TOO THAT STINKS, let them completely vent like a bad storm. When they get tired switch to, ok, I think I have some solutions to the problem let’s talk about those. Well, since you let

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them rant, they are now ready to listen. Yes, always mirror and move to the POSITIVE and solutions. Now, lets take a happy person that says, “It’ll all work out” you jump in there and get happy with them. Yes, and it’ll be great when I sell this property for you and you can take all that time, energy and money and go do new things! Yes, always mirror and move to the POSITIVE and solutions. Organization Have systems to deal with things and finish what you start. If you have systems in place to deal with things then you will be organized and waste little time. If you pick up a copy of the e-myth this does a fantastic job out outlining the right way to organize and run things. Schedule your work, the most important thing that you can do here is have a set time for things. For example I am a morning person and am at my best so here is an example:

7-8 Breakfast as a family

8-9 writing and recording training

9-11 email and phone calls with employees, network, etc.

11-12 Review newspapers and other news sources for articles related to real estate

12-1 workout

1-2 Administrative review (receivables, payables, etc.)

2-4 Open time to handle any open items

4-5 Email and calls returned

5-6 Organize tomorrow and finish what I started

6-9 family time

9-10 Time for my spouse

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Risk tolerance and management Risk management is critical in your life and you do it every day. When you get up in the morning if you eat properly, take care of your teeth, take your nutritional supplements and spend some quiet time you will live longer and be healthier. If you don’t then you are taking risks. When you drive to work/school/wherever and you take the safe route not the fastest route you lower your chances of an accident. If you are a runner and you run on the street you increase your chances of getting hit by a car or truck, if you ride a bicycle you have the chance of getting hit by a car or truck (ask most cyclists they have either been hit or almost been hit) etc. In Real Estate investing you limit your risk by using an entity to do business in and avoiding signing personally. Keep your risk low by using an LLC or other entity, and not signing personal guarantees. Do smaller deals that you can afford to support for a short time if necessary. You need to make a certain amount of money to live you life the way that you choose to, if you need monthly cash flow you will be working on smaller deals constantly with a big deal or two in the hopper. This is how you mitigate your risk and have big upside potential, with simultaneous deals. Communicating effectively with people This is closely coupled with the sales skills above, you have to start by knowing if you are a good communicator or not. A good communicator is built not born just so that we are clear here and it doesn’t matter if you have an accent, have poor vocabulary skill or stutter. Some of the most effective communicators in the world have these challenges. Lets analyze this below. 1. Is the person you are conversing with focused and listening? Eye contact, tone of voice, body language, and line of sight can all effect how the other person hears you. Be sure you have their attention before you begin communication. If you are in a noisy distraction filled environment it will be very difficult to have a good conversation, examples are a pool, sporting event or bar, these are not good places for a good conversation unless you create the right space. For example, in a restaurant get a table that is out of the way and quiet. 2. Active listening Eye contact, repeating key fragments of what someone says, enthusiastic facial expression, open body language, and overall interested demeanor will ensure that the other person will know that they are being heard. In order to earn someone’s trust and respect you must show them that you care about what they are saying and give them the respect of listening. 3. Clear concise specific conversations When you converse keep things concrete and specific. You didn’t make “about $10,000 on a property, you made $9,853 on the property and be prepared to back it up. When you

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set a meeting you say will 1:15PM at 23 Spruce Street on Wednesday the 14th work for you? And, for goodness sakes are 10 minutes early, I cannot tell you how many relationships being late have crushed. If you tell someone that “I need to excuse myself for 5 minutes to use the rest room” be back in 5 minutes! Be clear not vague and DO NOT BE LATE. Good Decision Making Good decision-making is actually very simple, it comes from choosing the decision that has more upside than downside. This means that you have to make decisions based on FACTS not EMOTIONS and taking responsibility for YOUR decisions. Here is a guide for you to make fast, accurate and logical decisions:

• Purpose Correctly identify the decision to be made and the CORE opportunity that is in front of you.

• Information. Gather the relevant FACTS about the situation.

• Solution sets. Brainstorm about the opportunity or solutions to the opportunity or challenge.

• Risk/reward What are the +/- of each solution set

• Best solution highest return and the lowest risk. Have someone who is a very good decision maker second guess you and defend your decision with LOGIC.

• Take action Execute the plan quickly

• Learn from the action In hind site did this go as planned? Learn about your ability to make decisions and improve constantly.

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FINDING DEALS

Marketing is the single most important thing in the Real Estate business. The most effective marketers always have the most deals to work on. The key is to set up effective funnels to get activity moving and keeping it moving. Your level of effort in this area will directly determine how many deals you have to work on, enable you to work on deals that are very profitable and ignore marginal deals. The Best Marketers are the people who make the most money The best marketers make the most money because they can work on the most profitable deals. The best marketers also attract the most attention and people WANT to be around them. Two of our students got so enthusiastic about marketing that they made up these yellow and red Alligator shirts showing Alligators eating money and event put up web sites like this. Guess, what? They have more deals than any of our other students and that is because they LIVE the marketing and have FUN with it. They wear these shirts all the time and write crazy copy that gets people excited. Get Bill Glazer’s book “Outrageous Marketing that’s Outrageously Successful” to give you some ideas. Marketing Can Be Learned quickly and easily Marketing is actually very simple and all that you need to do is follow our systems. Send out the letters we give you. Send them to each prospect seven times. Effective Marketing The goal of this endeavor is to purchase properties significantly below their current market value or which cash flow on “soft terms.” Motivated sellers that are willing to sell their properties at a low price are out there, and when they are motivated they will work with you on terms. You may be sitting there saying, “Why would anyone sell below market value?” Trust me, I know you are sitting there saying this and the question is are you open minded enough to accept the FACT that owners do this all the time? Listen Negative Nellie, it happens EVERY day! Lets look at some reasons that a motivated seller will get rid of a property for less than retail value and/or offer you “soft terms”:

• Management Problems: They hired a property manager and did not manage the manager or they did not hire a manager and failed to manage the property. They are now frustrated and want to be rid of the property.

• Divorce: The sellers are getting divorced, have spent their disposable income on Attorneys and are just too beleaguered to sell the property and want this over NOW.

• Moving: They have been trying to sell the property for months or years and now they can no longer wait and HAVE to get cash for this property because the family

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is split up and they want to move to their new city together. They may also be having trouble paying for both properties.

• Medical: The person needs money now to handle a medical emergency.

• Legal bills: The owner has legal bills that must be paid; they may have to defend themselves against a criminal or civil proceeding.

• Pending bankruptcy: They have a pending bankruptcy and want to sell this house to pay off family members that they owe money to.

• Tax bills: They may have to pay a tax bill or have things taken from them.

• Loss of a job: Kept the rents in the property and failed to pay the mortgage

• Loss of a spouse: Can’t keep up on payments

• Failed business

• Vacant property

• Title Problems

• Job Transfer

• Retiring and just wants to move NOW!

• Hit the lottery (really, this happens and they just want to go have fun)

• Inherited property and wants cash now

• Life ending and just wants to go have fun before they leave

Where the Money is made There is a lot of money to be made in solving situational and financial distress of the property owners at lower risk than rehabbing properties. Financial rehabilitation is easier and takes less time than rehabbing a property, trust us, we have had to learn this lesson many times and in today’s market there are lots of FINANCIALLY distressed properties. It takes a lot less effort to stop foreclosure or negotiate a lien release than it is to rehab physically distressed properties. While fixing up houses makes great TV, it makes for tons of risk. Financial rehab’s make for lousy TV but great profit with surety, imagine the excitement of watching Ed (he is a Financial guy) sifting through paperwork and going back and forth with some pasty overweight loss mitigation person in a tan and beige office…yuk and terrible TV. Now some comely young woman cutting wood, tearing out cabinets, and interacting with contractors, wow, that’s great TV! Let the TV stars stick to making entertaining TV you and I will stick to making money. The goal here is to create value without doing anything physically to the property other than negotiating discounts on liens, buying second mortgages, etc. And to have an option to sell it the next day for a healthy profit if you choose to do so.

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Ideal properties First are the financially distressed properties and owners sick of owning a rental. We go into finding these through the tax records, bankruptcy records and probate records later in this book. If you are inexplicably drawn to rehabbing, and we all get there sooner or later let me offer you my expertise. First, stay away from heavy rehabs unless you are a professional in that business. Heavy rehab projects usually go over budget on time and money. The risk inherent in structural fix ups and large construction projects is very high. Meaning you can lose money even though you do a lot of work. Here are some guidelines.

• No structural repairs – no cracked foundations, extensive termite damaged properties, and no jacking up the house to fix the basement.

• No mold properties

• No radon properties

• No crystal meth houses

• Yes carpets, counters and paint are ok

• Yes landscaping changes Get three estimates for the job from your GC and after you have decided which offer you’ll accept. Understand that the estimate is probably 30% below what the work will actually cost you. I do not care what you think you know, the estimate is low by 30% AT A MINIMUM. Becoming an expert at rehabbing properties is not necessary to make big money. In this market there are literally so many properties available that are financially distressed that it is easier business and better business to work with financially distressed owners and properties. The joy in this business is from making money - not in making a blighted building pretty again. There can be opportunities to make money by changing the use of a property. For example, an abnormally large lot that can be subdivided into two parcels and one sold off or better yet one rented as a cell phone tower or billboard site can make incredible money. Zoning regulations are of great importance when you are dealing with properties that have very large lots or a lot of land attached to them. These can be the biggest moneymakers that you will ever find and understanding the process and paperwork involved is something you should take time to do when and if you run into a property that has a double lot or some other indicator that a zoning change may be possible. Target customer The target customer is someone that is in a hurry to sell his or her property. There are young ones, old ones, heavy ones, thin ones, hairy ones, bald ones, beautiful ones, ugly ones, rich ones, and poor ones! Don’t over think this. You just need someone who needs to sell NOW. Let me give you an example, if you won the lottery tomorrow do you give a hoot about your $100,000 house? No, you just want FREEDOM! On a different note, if you found out you

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had only 1 year to live do you want to LIVE the last year of your life or mope around your house or fool around with your tenants and their issues? Nope, you want to go LIVE the last year not WORK the last year. People are in all kinds of situations. Do your marketing and let the motivated ones who want to sell more than they want to dicker over price raise their hands by responding to your marketing. Seller’s motivation When you are meeting with motivated sellers remember its about what THEY need/want and meeting there needs. They need:

• Cash now

• To be relieved from a rental property they are tired of (many are tired of rentals in as short as two or three years)

• Another place to live

• Assistance in moving

• Credit rebuilt

• Reduce debt

• To work with someone they trust

• Need to know you are listening to their concerns How many motivated sellers are out there? Just read the news, every foreclosure property, tax lien property, job loss, divorce situation, bankruptcy and probate property is a potential deal for you. There are millions of these opportunities.

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Sources of motivated leads

• People who have owned rental properties for more than 7 years

• Absentee owners lists

• Bankruptcy lists

• Building code violations

• Divorce Lists

• Judgments lists

• Pre-foreclosure lists

• Probate lists

• Real Estate Tax Liens List

• Probate lists Reaching prospects Sending direct mail, email marketing, Internet marketing, web sites, reverse email marketing through Craig’s list, phone campaigns. These are all valid methods and very simple to execute. Property owners that are missing in action! The owners that are the hardest to find will result in the best deals because you will have less competition for the deals. Very few investors (thankfully) know how to find and follow-up effectively thus you will have a HUGE advantage here. Lets look at some examples You can use Internet sites like www.411.com , www.anywho.com , www.intellius.us and www.merlindata.com. The Internet sites should enable you to find many of the people you are attempting to find. Skip tracing costs you between 25 cents and three dollars per name to find these people, and is actually a great investment, as most investors will not go this far. You may be the only buyer contacting this investor.

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MARKETING

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Direct Mail Marketing Direct mail has become very effective since so many advertisers abandoned it for on-line marketing. Lists are obtained from on-line providers such as Melissadata.com and mail is sent in a pattern of seven letters per prospect. Here are some lists that you can mail to:

• Absentee owners lists (from tax assessor’s office or an on line service such as Melissa Data)

• Bankruptcy lists (we have a separate course on Bankruptcy leads and how to handle them. Contact our office for more information)

• Building code violations

• Divorce Lists

• Judgments lists

• Pre-foreclosure lists

• Probate lists

• Tax Liens

• Probate lists If you want to telephone or use email to contact these prospects you can often find emails through www.intellius.us, which can match their email address and phone numbers. You can hire VA’s to do this work for about $3 per hour from the Philippines or from the Far East and they will get this done in a hurry for you. You can really save a lot of time cross referencing the owners lists for real property with the tax, foreclosure and judgments lists and only market to the people/companies that have derogatory information. You use our letters to get them to respond. You want to send an email every 7 days for a total of 4 letters in 30 days. Wait fifteen - days then repeat the cycle.

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Direct Mail List Management

Simple data management and merge system like Act or Goldmine can manage the data. Lets take a look at what you need to do with direct mail to make it really deliver.

• First there is the message. Use one of our letters or write your own. The message should be simple – one page only – letting the prospect know you are in the market for property.

• Next there is the envelope – a handwritten address on the outside of an

envelope virtually guarantees your letter will be opened. If you have the budget you can hire one of the specialty firms to create your campaign, manage it and send the letters. We have suppliers that will do this for you for very reasonable prices. Contact us for a referral.

• Next you want to pick a list to mail to – choose prospects who should be

more motivated than most to sell. There is a list up above.

• Do sequential mailings. You must approach each prospect seven times or until they ask you to stop mailing them.

• Give them an easy way to get in touch with you (your website, phone or email)

Rate of Return We have found that using direct mail should get you at a 1% response rate. You can expect to get about 1 response for every 100 people you approach via direct mail. Ultimately, the number of responses you get depends on your market. And, the more letters you send out, the more responses you will get. Note that you must send repeatedly to the same people. For some reason many prospects will only respond when approached four, five, six or seven times. That is why most direct marketer’s fail – they give up too early! Track the number of responses you get per 100 letters. Also track the quality of the leads. “Quality” leads are sellers that are interested in selling at a bargain price. You need to determine how many quality leads you are getting as a percentage of your marketing materials sent.

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SAMPLE MARKETING LETTER – Digital copy available to you on our membership site. April 20, 2011 David and Sally Bach 2384 Fountain Ave Houston, TX 76776 Dear Mr. And Mrs. Bach:

Many owners of rental properties find after several years or owning they are ready to move on to another investment. Tired of tenants and toilets they are ready to deploy their cash into a less management intensive investment. We are professionals in the field of investment properties and are looking for a rental property like yours…and in case you are wondering our researchers located your rental property in the public records. Here is a short list of what we can do for you:

• Buy your property today for top dollar

• Offer within three business days on most properties

• Close in a month or less

• No sales commissions Call me right now at (215) 555-1213 and we can talk about your situation or visit our web site at www.xxxxxx.com Sincerely, Bill Investor

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Rental Property Buyers, Inc.

We buy unwanted rental property in “as is” condition and you don’t even have to clean out the property of any unwanted junk like old junk stored in

the house, shelves, storage cabinets, etc.!

Let us make this easy, we can address: • It does not matter if they cash flow or not

• It does not matter if they have equity or not

• It does not matter if they have lien problems or not

Call me at 555-1212 for a free telephone consultation.

I will be glad to go over your situation and tell you how I can help you.

Call me today and make your job easy!

Sam Investor at 555-1212

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Networking Networking is an important path to success.

1. Serve – Always seek to understand how to help others first then they will reciprocate.

2. Interests – People with aligned interests easily network. This is why REIA clubs are natural “hunting’ grounds and you should have your 45 second “who am I an how I can help you elevator pitch ready at all times.

3. Goal of networking – To have people get to know, like and respect you will make them share with you and do business with you. Face to face contact is the best way to achieve this goal.

4. Opportunities – Limited only by your imagination. Joint ventures. People to fund your deals. New techniques. Suppliers.

5. Mindset – You have a subject that fascinates everyone, the one goal of just about every American is the goal of property ownership. In these times, anyone with half a brain understands that it’s the time to be investing in Real Estate as we are near the bottom of this market.

Who You Should Network With

• Mortgage Brokers

• Probate Attorneys

• Bankruptcy Attorneys

• Real Estate Attorneys

• Real Estate Brokers

• REO Real Estate Brokers

• Business Brokers

• Hard Money Lenders

• City Officials

• Building Department Officials

• Tax Lien Buyers

• Successful businesspeople in your community

• Anyone with Serious MONEY to Lend!!!!!!!!!

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EVALUATING DEALS

Deal Evaluation from your desk Quickly and accurately evaluating a deal is a critical path item to avoid wasting time. With a great marketing plan in place, generating a ton of leads, you’ll need to be able to filter through all the deals you will be presented with. The goal of this section is to figure out if there is a profit left and has exit strategies. Six Initial Essentials for Deal Evaluation By mastering this technique it should take 15 to 30 minutes to evaluate a deal. One: Why is the owner selling the property? You will find most motivated sellers will readily divulge this information, and those who question why you need this information typically have no motivation to sell. If the seller says that they are looking to sell quickly to meet some need they have then you have a motivated seller. If they say they are just testing the market, or seeing if there is a market you need to push further in your questions. If they tell you that they are just “testing the market” or seeing if they can get their price then reveal that you are an investor and its not workable if they have a retail expectation. Politely tell them that you need a property at a good price and terms. Many times they will immediately retract from their statement and try to stop you from getting off the phone, this be called “the take away”. Remember, there is no negotiation if you are not willing and able to walk away. Two: How much do they NEED for the property? When they hit you with their price remind them that you are an investor and need to know what they really need. Notice that I clearly did not say what they WANT for the property and that is a very important distinction. Three: How much is owed on the property, this includes all mortgages, liens, second’s, utility bills in arrears, the whole load. This is an important piece of the overall equation and you should begin determining this in your initial phone call with the seller based on the lead interview sheet. Now that you know what they need for the property and what they owe you can figure out whether they think they have equity or not. Four: What repairs does the property need? Now, I know this will shock you but a part of this game is the seller forgetting to tell you about the bad furnace, bad roof, etc. and you can pretty much be assured they are leaving things out. I like to be very direct, when they tell you it needs nothing go through the checklist with them right then and there or tell them that one of your contingencies in the contract will be an inspection and if material problems are found that the seller pays for the inspection. They will usually open up like a flood gate " ... or you might ask, "How are the mechanicals, the HVAC, water heating, sprinkler system, lighting and the electrical system" ...or, "Do you know the last time the roof was replaced?" By being very direct but not rude the seller will realize that you are a pro and that you may have been born at night, but not last night.

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Five: Figuring out the retail value is very important; the way that you really figure this out is by doing on-line research to find comparable sales (nearby, similar properties that have sold within the past six months) then going to see those properties and checking on similar properties that are currently on the market and going to see those properties. If you are looking at a rental run the numbers to find the NOI (Net Operating income) of the property. Deal Evaluation Process By obtaining the information above, using the flipper spreadsheet and the rental spreadsheet you’ll be able to see what the right value for the property is to make a fair return. Notice that this has nothing to do with the value on some Internet tool (like Zillow) or opinions, this value is derived by hard data and it is the correct way to value a property. Rental properties in today’s market should yield a 10% return to make any sense. No one is buying these buildings based upon anything else. To flip a property profitably you need to get a 30% discount from fair market value minus your fix up costs. Below is an outline of your lead initial in-office evaluation process:

1. Flipper spreadsheet or Rental Spreadsheet- Obtain all necessary information from the seller to fill this in (pick the one that fits your deal – flipper is for properties held for resale, rental is for properties you are going to rent out. Copies of these spreadsheets follow below and are also part of the forms set available on line

2. Comparable Properties - Also known as comps, these are similar properties nearby the property you are evaluating, which will give you a more accurate indication of the property’s probable value. Also be sure to look at properties that are listed for sale and which will compete against your property. This will show you the direction of the market – up or down, when you compare the pricing of sold properties (comparable sales) and properties currently for sale. When real estate brokers provide lists of properties for sale they call is a “competitive market analysis.” You can get started on that process with realtor.com

3. SiteXdata.com - Confirm debt figures and check past transfers of the subject property.

4. Zillow.com - A very rudimentary means to check a property’s value. Be careful relying too much on Zillow – the values are sometimes far off true market value. Be sure to use all the sources above to get a full picture of the value or the property you are looking at.

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Flipper Spreadsheet (digital copy is on the on-‐line forms set)

Flipper SpreadsheetUse this Sheet to Calculate your estimated profit for property you plan to buy, fix and resellType Information in yellow areas only - the rest is automatically estimated for you!This sheet can estimate how much you can afford to pay for a property and still have it be profitable

_______________________________________________________________________$150,000 Value of Property when you resell$100,000 Price you are planning to pay for property

6 Number of Months it will take you to resell the property6.0% Real Estate Commission you will pay when you resell (% of price)0.0% Discount from Market Price you will to give a buyer when you resell (% of market value)

6.75% Interest Rate you will pay on money you borrow0.0% Points on the Loan0.0% Transfer Tax percent paid when you are buying (your portion)0.5% Transfer Tax percent paid when you are selling (your portion)

$10,000 Estimated cost of repairs and renovations$2,600 Annual Real Estate and School Taxes

$650 Annual Insurance cost for the property$500 Legal and Accounting$200 Utilities, lawncutting, etc. (monthly)

$1,200 Title insurance expense for you when you buy$0 Miscellaneous Items or items without a category

5.0% Contingency for unexpected expenses (in percentage of resale value)Profit: $14,513

Color coding - red - losing money, Yellow, caution, green - profitableNote: Interest is calculated on 100% of the acquisition and fix up costs, not on any of the other expenses

Print out section below for a reportProperty Address:

Calculations Item

$150,000 Fair Market Value of Property Once Renovated($100,000) Price to be paid for property by investor

($750) Transfer Taxes Paid (total)($9,000) Commissions paid

$0 Cost of Discount to Retail Buyer$0 Points on Loan

($3,713) Interest Cost due to money borrowed for Purchase and renovation($10,000) Repair & renovation expense

($1,300) Property Tax Costs($325) Property Insurance Costs($500) Legal expenses

($1,200) Utilities, lawncutting, etc. (monthly)($1,200) Title Insurance Cost

$0 Miscellaneous Items or items without a category($7,500) Other anticipated costs/contingency reserve$14,513 Estimated Profit

Monthly Costs (broken out from above)$619 Monthly Interest$217 Monthly Taxes$54 Monthly Property Insurance

$200 Monthly Utilities$1,090 Total Monthly Carrying Costs

Copyright 2011 Diamond Law Center, LLC. All Rights Reserved www.diamondlawcenter.comRev 4.2C

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Rental Spreadsheet Electronic copies are included in the on-‐line forms set at www.diamondlawmembers.com using your member name and password.

Ed and Bob Diamond'sRental Property Profitability Spreadsheet1231 Haverth Avenue, Freeport, ME

4/11/11 9:45 AM FILL IN ALL TAN COLORED CELLS ONLY

ITEM Per Month Per Year AssumptionsPlanned Monthly Rental Income $1,200 $14,400 Vacancy/Credit Loss In % of rents (suggest 7-10% of rents) 10.0%

Other Income (laundry, garages, etc.) $50 $600 Avg Maintenance and Repair Costs (suggest 6-8% of rents) 8.0%Gross Monthly Income $1,250 $15,000 Accounting and legal (suggest 3% of rents) 3.0%

Advertising (suggest 1/2% of rents) 0.5%Less: Monthly Operating Expenses Property Management (suggest 6-8% of rents) 8.0%

Vacancy/Credit Loss In % of rents $125 $1,500 Total Operating Costs 29.5%Real Estate & School Taxes $175 $2,100

Maintenance and Repair Costs $100 $1,200 Information About the Purchase Price and DownpaymentJanitorial, Pool, and Lawncare $0 $0 Your Purchase Price for the Property $85,000

Trash $0 $0 Your Downpayment as Percent of Purchase Price 5.00%Supplies $0 $0 Renovation Expense $5,000

Electricity $0 $0 Settlement Costs $2,200Gas and Oil $0 $0 Total Basis in Property $92,200

Sewar/Water $0 $0 Cash into The Property $11,450Telephone $0 $0

Accounting and Legal $38 $450Advertising $6 $75 Mortgage Payment Calculator Amortizing Loan

Property Insurance $50 $600 Length of Mortgage (Years) 20Property Manager $100 $1,200 Annual Interest Rate % 6.50%

Annual Permits $4 $50 Loan Amount $80,750Miscellaneous $0 $0 Payment (not including escrows) $602.05

TOTAL OPERATING EXPENSES $598 $7,175

Gross Operating Income (from above) $1,250 $15,000 Interest Only LoanTotal Operating Expenses (from Above) $598 $7,175 Annual Interest Rate % 6.20%

NET OPERATING INCOME (NOI) $652 $7,825 Loan Amount $80,750Payment (not including escrows) $417.21

Mortgage Payments $417 $5,007 CASH FLOW BEFORE TAX CONSIDERATIONS $235 $2,818

Results SummaryEstimated Tax Benefit (see below) $63 $757 Monthly Cash Flow $235

Total of Tax Benefit and Cash Flow $298 $3,575 Annual Cash Flow $2,818 Annual Net Operating Income $7,825

Monthly Net Operating Income $652POTENTIAL TAX BENEFITS OF THE RENTAL PROPERTY CAP Rate Given Inputs in this Spreadsheet 8.5%Ask your accountant to confirm. Some people cannot take advantage of depreciation (for example if your income is to high)

Depreciation is normally over 39 years Desired Cap Rate 12.0%Purchase Price for Desired Cap Rate $63,008

Deprecition Estimator Debt Service Coverage Ratio 1.56Your Basis in the Building (total cost in dollars to

acquire and renovate the building) $92,200 Gross Rent Multiplier Given Inputs in this Spreadsheet 5.67Depreciation term in years (usually 39 39 Cash on Cash Return 44%

Annual Depreciation $2,364 Desired Gross Rent Multiplier (GRM) 0.00Your Tax Rate 32% Value based upon desired Gross Rent Multiplier $0.00

Your Possible Annual Tax Savings $757

Revision 4.3 CCopyright 2011 Diamond Law Center, LLC

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Creative Financing Strategies

The Strategies that we use to acquire properties with no money down and no bank credit required are set out below and we also have video and audio training that is delivered through our Web site at www.diamondlawmembers.com. When you login with your login ID you can view those trainings. Here are the creative financing methods you will learn and an overview of them. Each is discussed in detail in this book. TABLE OF CREATIVE FINANCING STRATEGIES

Technique Advantage Summary

Disadvantage Summary

Credit Needed?

Down Payment Needed?

Bank Loan

Needed? Master Lease Option

Quick, no loans needed to get property under control and profit from it. Can hold for cash flow. Can get cash back at settlement. You do not HAVE to close and can walk away if the property does not work out.

Since you do not hold title yet the title can get tangled up with liens or judgments entered against the seller. You do not get to use depreciation until you take title to the property.

No – at least not with a bank. Seller may look at your credit.

No. All you may need is a deposit like any other tenant. You can fund this from the pre-paid rents you receive at settlement.

No.

Seller Take Bank Financing (first mortgage)

Quick. Get title to the property so seller cannot tangle up property from liens or judgments entered against seller. Get to use depreciation on the property. The seller makes a lot more money so use the spreadsheet that shows the seller financing analysis to help sell your seller on this idea.

Existing lender, if any, can call the loan. You are the owner of the property and cannot walk away from the deal if it is not working out.


Typically no down payment. You negotiate that with the deal. Depends upon what the seller will agree to. This is typically a “no down payment” strategy.

No.

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Credit Needed?


Bank Loan

Needed? Private Money in Whole or Part

Fast. Private lenders tend to act quickly. Good solution to fix and flip deals.

Private money is usually expensive and most private lenders prefer to lend short-term. Not typically a great solution for long term holds, although some lenders do like longer-term investments.

Not usually. Most private lenders are looking at the property much more than your credit.

Not usually. No.

Installment Sale Quick. Get title to the property once you make a certain number of payments (this is negotiable). Once title is in your name seller cannot tangle up property from liens or judgments entered against seller. Existing lenders is very unlikely to call a loan if the property is not yet transferred.

Existing lender, if any, can call the loan once the deed is transferred to your name. You are the owner of the property and cannot walk away from the deal if it is not working out.


Typically no down payment. You need to negotiate that in with the deal. Depends upon what the seller will agree to.

No.

Subject To Quick. Get title to the property so seller cannot tangle up property from liens or judgments entered against seller. Get to use depreciation on the property.



Typically no down payment. You need to negotiate that in with the deal. Depends upon what the seller will agree to. .

No.

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Credit Needed?


Bank Loan

Needed? Taking Stock or Options in Entity that Owns the Property

Quick. Get to use depreciation on the property. Can limit risk by using an option to take the stock (see extended description of this technique down below for more on this,

Existing lender, if any, can call the loan if they discover the transfer. In commercial properties they will find out when you are asked to turn in a financial statement, which they typically ask for once a year. You do pay transfer tax on the sale. If the entity has liabilities (taxes, lawsuits) which may not be filed at the time you take the transfer you will inherit them.



No.

Wrap-Around Mortgage (using a second mortgage)

Quick. Get title to the property so seller cannot tangle up property from liens or judgments entered against seller. Get to use depreciation on the property.




No.

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Credit Needed?


Bank Loan

Needed? Seasoned Refinance

Quick. No down payment if you can source a property with 20 – 25% equity in it, or that you grow to 20 – 25% equity prior to refinancing. You start out with owner financing for twelve to eighteen months then refinance after you have six months of good payment history on the property and six months worth of expenses to show the bank.

The conventional lender you will likely use for the “take out” loan to pay off the seller for his mortgage will look at your credit and net worth as well as appraise the property.

Yes. No, if you can source a property that will have 20 – 25% equity when you refinance it with the conventional lender. That can happen from increases in rent, decreases in expenses and/or property fix up as well as negotiating a great deal up front.

Yes.

Loan Mod and Loan Workouts (info on how to do this technique is in another book).

Can create equity in a property and/or cash flow by modifying the existing loan. Very easy properties to put under contract – especially from investors who own negative cash flow and no equity properties.

Existing lender, if any, can call the loan once you take it “subject to” which you do after modifying the loan. You are the owner of the property and cannot walk away from the deal if it is not working out. You have to spend time and effort modifying loans.

No. No. No.

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Credit Needed?


Bank Loan

Needed? Challenge the Lender (info on how to do this technique is in on line training only).

Can create equity in a property and/or cash flow by modifying the existing loan. You gain leverage over the lender to modify the loan by challenging the loan. Very easy properties to put under contract – especially from investors who own negative cash flow and no equity properties.

Existing lender, if any, can call the loan once you take it “subject to” which you do after modifying the loan. You are the owner of the property and cannot walk away from the deal if it is not working out. You have to spend time and effort modifying loans.

No. No. No.

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Master Lease Option

Digital copies of the forms on www.diamondlawmembers.com that are accessed using your member

name and password.

Master lease agreements have been around for a long time. A master lease is a lease that allows you to sub-‐lease the property to other tenants. You make a profit by leasing from the owner at a “wholesale” price and re-‐leasing the property to others at a “retail” price. You bring value to the seller by taking over management and maintenance of the property.

In simple terms, you will buy the seller’s property by giving him a small (or none) down payment in exchange for all rights and privileges of owning and operating the property without legal title changing hands. At close, you get a lease and an option and are entitled to the property’s cash flow. You also have the right to purchase the property in the future for a specific price.

Because your purchase price and terms are set, all of the upside is yours to keep. The more efficient you are, the more you make. As the property appreciates or you increase the NOI, the property’s increase in value becomes yours. The seller gets a monthly payment from you and no longer has to worry about the property. Once you rent the property, every dollar over the amount you pay on your lease with the owner is your profit.

Master Lease Option Benefits:

The Seller Gets:

Quick and easy relief from managing the property.

Lease payments every month without having to manage the building. You do the property management.

Freedom from involvement in the operation of the property.

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No worries about due on sale clause being called. Although a lender may be able to call the loan due if they discover a master lease and option on the property, the likelihood of having any

problems with a lender under this arrangement is minimal. Although I am sure it has happened sometime, somewhere, I have never personally heard of a lender calling a loan due when a seller granted an option and master lease on a property.

The Buyer Gets:

Profit from the property without banks or lenders or down payment.

All cash flow and profits above the master lease payment.

An option to buy within a set period of time. Ideally seven years.

All profits above the option purchase price when you exercise the option.

Immediate closing – can be done in a week!

Low closing costs. In fact you can get cash back at closing on the lease.

Buyer can create a good amount of cash flow and equity build-‐up.

Master lease option disadvantages:

Termination of the agreement by seller is easy if buyer does not perform per lease agreement.

Seller just evicts you if you do not pay.

Seller still gets the depreciation tax benefit, not you as the buyer.

You eventually need a loan or to resell the property and double close when you exercise your option to purchase.

If the seller has a judgment entered against him or an IRS lien the title to the real estate can get tied

up or even lost.

Master lease option practical pointers:

Have an attorney review and revise as necessary out model master lease agreement, especially in Texas, Illinois and Arizona, which have laws affecting use of Options. Other States may have laws as well and we cannot keep up with all the latest in all fifty states. Use our Master Lease and Options as

starting points.

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As part of your due diligence perform a title search to make sure the title is clear and there are no liens, or understand what liens do exist and make sure they are not more than your option purchase

price. Also check existing lawsuits to see if the owner is involved with litigation that could affect title to the property in the future. If a judgment is entered in the county where the real estate sits against the owner it will become a lien on the property.

Do your inspections to make sure the property does not need a lot of repairs. You should not put a

lot of repairs into a property where you will not be the owner of record (meaning there is a deed recorded in your name in the county real estate records). The risk is too high of something going wrong – a judgment, tax lien, or a seller who changes his mind and does not want to transfer the

property to your name at the end.

Use the Master Lease Option Analyzer to help determine how much you can pay for the monthly lease payment on the master lease. The spreadsheet is on the forms set. A sample appears below.

Note that the seller will receive less cash flow when he master leases the property to you but the seller will no longer need to manage the tenants, collect the rents, manage the contractors or have

to pay for repairs other than capital improvements. You take on the day-‐to-‐day management and repairs and get paid for that.

Sample Master Lease Option Analyzer – An electronic copy is included in the on-‐line forms set at www.diamondlawmembers.com using your member name and password.

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Diamond Law Center, LLC Master Lease Option Pricing Model100 Main Street, Memphis, TN 4/10/11 6:17 PM

ITEM Per Month Per Year Assumptions

Planned Monthly Rental Income $1,500 $18,000Vacancy/Credit Loss In % of rents (suggest 7-10%

of rents) 7.0%

Other Income (laundry, garages, etc.) $75 $900Avg Maintenance and Repair Costs (suggest 6-8%

of rents) 6.0%Gross Monthly Income $1,575 $18,900 Accounting and legal (suggest 3% of rents) 3.0%


Vacancy/Credit Loss In % of rents $110 $1,323 Total Operating Costs 24.5%Real Estate & School Taxes $67 $800

Maintenance and Repair Costs $95 $1,134Janitorial, Pool, and Lawncare $0 $0 Mortgage Info

Trash $0 $0 Current Mortgage Payment $475Supplies $0 $0

Electricity $0 $0Gas and Oil $0 $0 Results Summary

Sewar/Water $0 $0 Monthly Cash Flow to Investor $264Telephone $0 $0

Accounting and Legal $47 $567 Master Lease Payment $800Advertising $8 $95 Portion of MLO rent paid to mortgage co. $475

Property Insurance $54 $650 Portion of MLO Rent paid to owner $325 Property Manager $126 $1,512

Annual Permits $4 $50 Cash flow of owner prior to MLO $589Miscellaneous $0 $0 Cash flow of Owner after MLO $325

TOTAL OPERATING EXPENSES $511 $6,131 Net Monthly cost to owner to do MLO $264

Gross Monthly Income $1,575 $18,900 Rev 4.4 C

Total Operating Expenses -$511 -$6,131 Copyright 2011 Diamond Law Center, LLC

NET OPERATING INCOME (NOI) $1,064 $12,770

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If the seller is agreeable, escrow an executed deed so when you exercise the option to purchase you do not have a seller that changes his mind. The escrowed deed is a “would like to have” item not a

“must have” item. If the seller will not give you a deed in escrow just record the memorandum of option so you tie up title.

Record the memorandum of master lease agreement against the property. A recorded memorandum will cloud title and prevent the seller from selling the property out from under you.

Sample is on the forms set and appears below.

Get an appraisal or estimate the value yourself after careful study.

Pay the monthly mortgage payment and real estate taxes yourself and let the seller verify on line that the mortgage is paid.

Include both seller and buyer names on the existing insurance policy.

Strictly adhere to your duties under the Master Lease and Option. When the value of the property increases the seller will have incentive to try to call a default and not sell you the property. If you

adhere to the Master Lease and Option you will be able to hold the seller to the agreements in the event he tries to wriggle out.

SAMPLE MEMORANDUM OF OPTION and other deal documents appear below –Electronic copies are included in the on-‐line forms set at www.diamondlawmembers.com using your member name

and password.

57

Real-‐Life Master Lease Option Deal – the Kate Wiggins Story

Vacant A-‐class 8,600 sq. ft., former Re-‐Max real estate office complex went out of business. The deal was found on Loop net and was built in 2005.

Owner was 3 months behind on her mortgage, sunk her life-‐savings into the building and business and wants to avoid bankruptcy and foreclosure.

Kate’s idea is to turn the space into office suites after studying the area’s needs.

$1.3M purchase price, $75K down payment (5.8% of purchase price), taking over mortgage

payments.

The $75K down payment was used to catch up with late payments, pay off liens, and pay broker commissions.

Kate borrowed the down payment from her mother and sister at 8% interest paid annually plus 25%

of the profits when she sells. Note that the mother and sister could NOT have a mortgage against the property because that would cause a default under the current loan on the property. Most commercial loans prohibit the owner from putting another mortgage on the property. Kate could

give a Note against the property.

Kate completed the purchase with a Master Lease Agreement that lasts 7 years. Once it is 80% leased, the property will be worth $2.3M at the current cap rate. Kate can close any time within 7 years.

The seller will not be getting monthly payments, only a payout at the end. Instead, her reward was

avoiding losing her life savings, foreclosure, and bankruptcy. This helped Kate keep the cash flow healthy.

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SAMPLE MASTER LEASE. Digital copies of the forms are accessible at www.diamondlawmembers.com using your member name and password.

MASTER LEASE

1. PARTIES This lease is made on March 8, 2011, between the Master Tenant Diamond Properties, LLC of 4731 Cedar Avenue, Philadelphia PA 19143 and a phone number of (215) 555-1212 and the Landlord Oaklane Gardens, LLC which has an address of 100 Main Street, Philadelphia, PA 19104 and a phone number of: (215) 456-0988.

2. PROPERTY Landlord agrees to rent to Master Tenant the following Property: 100 Oak Street, Philadelphia PA 19106 (the “Property”).

3. CONDITIONS a. The monthly rent shall be $26,000 per month. b. The term of the lease shall be one year. c. Rent is due by the eighth day of the month for any given month. If this lease

begins on a day other than the first day of the month, the rent for the first month shall be pro-rated on a daily basis.

d. Rent shall be paid by Master Tenant paying the mortgage(s) on the Property plus any overage to the Landlord.

e. If rent is more than five days late, the Master Tenant must pay the late fee of five percent of the money past due.

f. There is no security deposit under this Lease. g. This lease is renewable at the option of Master Tenant. If no notice is given

then this Lease will automatically renew for one month. If a Master Tenant does not want to renew it must notify the Landlord in writing at least thirty (30) in advance of the end date of this lease otherwise this lease will automatically renew each month for up to seventy two months after the initial term of this lease.

h. If rules are attached they automatically become a part of this lease agreement. i. List of utilities or other charges the Landlord or the Master Tenant will pay:

Landlord

Pays

Master Tenant Pays

Heat X

Electricity X

Gas X

Oil X

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Hot Water X

Water & Sewer X

Lawn Care X

Snow Removal

_____________

_____________

_____________

4. INABILITY TO GIVE POSSESSION If, for any reason not caused by the Master Tenant, the Landlord is unable to give the Master Tenant physical possession of the Property free of all Tenants or occupants or the Property possessed by a Tenant who is current on all rents on the beginning date of the lease, the Landlord shall take any and all actions to obtain possession of the property including immediately filing an eviction complaint if necessary. If the Landlord is unable to deliver possession within five days then the Master Tenant may elect to end this lease by sending Landlord written notice and the Landlord must then return any money the Master Tenant has paid as well as pay damages to Master Tenant. Damages shall be liquidated damages equal to the difference between the rent that should be paid under the lease with any tenant or occupant at the Property and the Master Lease payment for thirty-six months plus the difference between the value of the Property as of the beginning date of this Master Lease and the principal balance on any mortgages on the property.

5. DESTRUCTION OR DAMAGE a. The Master Tenant will notify the Landlord promptly if the Property is destroyed

or damaged. If the destruction or damage makes the Property partly or completely unlivable and it will take more than thirty days to repair the Property, the Master Tenant can choose to terminate this Master Lease in which case Master Tenant must make a reasonable effort to notify the Landlord by telephoning Landlord and leaving a message and by sending written notice by regular mail, first class, postage pre-paid. This lease will end as of the date notice is first given.

b. If the lease ends, the Landlord will return any rent the Master Tenant already paid for the remaining time of the lease.

c. The Master Tenant is not responsible for the negligence of any party on or about the premises other than its own negligence.

6. SALE OF PROPERTY If the Landlord sells or transfers the Property, the Landlord will give written notice to the Master Tenant stating:

a. The name of the new Landlord; b. The address and the telephone number of the new Landlord; and

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c. Where and to whom to pay rent.

7. RULES Any rules are in writing and are attached to this lease. The Master Tenant must follow the rules.

8. LANDLORD’S ENTRY ONTO PROPERTY a. The Landlord may not enter the Property except upon seventy-two hours notice

to Master Tenant and with Master Tenant’s express permission.

9. MASTER TENANT PROMISES The Master Tenant promises to:

a. Obey all laws; b. Keep the Property clean and safe; c. Not deliberately or negligently destroy, deface, damage, or remove any part of

the Property or grounds.

10. LANDLORD PROMISES The Landlord promises to:

a. Not disturb the Tenant or any sub-tenant brought in by the Tenant.

11. LANDLORD REMEDIES a. Before the Landlord can file a lawsuit in court to evict the Master Tenant for

failure to pay rent or other changes required by this lease, the Landlord must give the Master Tenant fifteen (15) days written notice. This lease ends on the forty-fifth day after the Landlord gives notice, if the Master Tenant does not pay. The Landlord may then file a lawsuit in court to evict the Master Tenant. The Landlord agrees that in no case will it contact the tenants at the property.

b. Before the Landlord can file a lawsuit to evict the Master Tenant for failure to comply with any provisions of the lease other than for nonpayment of rent or charges, the Landlord must give the Master Tenant written notice. The notice must describe the problem and give the Master Tenant thirty (30) days to begin to correct the problem and then proceed in a commercially reasonable manner to address the problem.

1. If the Master Tenant does not correct the problem within a commercial reasonable time then the Landlord can end the lease by giving the Master Tenant a thirty (30) day written notice.

2. This lease ends on the sixth day after the Landlord gives the second notice. The Landlord may then file a lawsuit in court to evict the Master Tenant.

12. MASTER TENANT RIGHTS AND REMEDIES a. Unless the Landlord gets the proper court order, the Landlord cannot:

1. Contact any tenant or other person on the property with permission of the Master Tenant;

2. Stop or reduce utilities or other necessary services; and 3. Remove any belongings from the Property.

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b. If the Landlord does any of these things, the Master Tenant can: 1. Go back into the Property; 2. Restore the utilities or necessary services; 3. Sue the Landlord; and/or 4. End this lease.

13. TAKING OF PRIVATE PROPERTY – CONDEMNATION The taking of private Property for a public purpose is called condemnation. The taking happens either by court order or by transferring ownership to the condemning agency. If all or part of the Property is taken by condemnation, Landlord or the Master Tenant can end this lease after giving 30 days written notice. Master Tenant may be entitled receive relocation benefits from the taking agency but agrees to waive any claims against Landlord.

14. MASTER TENANT TRANSFER OF LEASE Master Tenant may sub-lease the Property to any other person or let any other person take over the Master Tenant’s rights and duties under this lease without the Landlord’s approval.

15. ENTIRE AGREEMENT This lease contains the complete agreement between the Landlord and the Master Tenant with respect to leasing the Property. This lease creates the legal duties on the Landlord and Master Tenant and anyone who lawfully succeeds to their rights or takes their places. The Landlord and Master Tenant can change this lease only by a written agreement signed by both of them.

16. LEAD-BASED PAINT “EVERY LESSEE OF ANY INTEREST IN RESIDENTIAL 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, BEHAVIOUR PROBLEMS AND IMPAIRED MEMORY. LEAD POISONING ALSO POSES A PARTICULAR RISK TO PREGNANT WOMEN. THE LESSOR OF ANY INTEREST IN RESIDENTIAL REAL PROPERTY IS REQUIRED TO DISCLOSE TO THE LESSEE THE PRESENCE OR ABSENCE OF ANY LEAD-BASED PAINT AND/OR LEAD-BASED PAINT HAZARDS. A COMPREHENSIVE LEAD INSPECTION OR RISK ASSESSMENT FOR POSSIBLE PAINT AND/OR LEAD-BASED PAINT HAZARDS IS RECOMMENDED PRIOR TO LEASE.”

The paragraph above means within ten (10) days from the final signing of this lease, the Master Tenant can pay for a complete lead inspection and risk assessment of the rental Property by a certified lead inspector. If the inspection reveals that lead-based paint or lead-based paint hazards are present in the rental Property, the Master Tenant has:

a. Two (2) business days after receiving the report to end the lease and

b. Get back all rents and security deposits paid to the Landlord.

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If the Master Tenant does not end this lease within two (2) days after getting the report, the Master Tenant gives up the right to get an inspection or end this lease.

20. REPAIRS

Master Tenant shall be responsible for all repairs other than capital improvements including but not limited to such items as new HVAC, new roofs, driveways, sidewalks, elevator repairs over $1,000 in total, sewage line repair or replacement, water supply line repair or replacement, gas line replacement, new electrical service or panels, installation of sprinklers, or any other repair or replacement with an expected life in excess of one year. In this agreement capital improvements are defined as any repair or replacement with an expected life in excess of one year. In the event a capital improvement is required Landlord shall pay for said capital improvement or Tenant may terminate this lease immediately with no further liability under this lease.

21. WAIVER OF TRIAL BY JURY

By signing this lease, Master Tenant and Landlord waive all rights to trial by jury in any proceeding related in any way to this lease and/or the Property being lease and/or the legal relationship between the Landlord and Master Tenant.

IN WITNESS WHEREOF, the Seller and Buyer, intending to be legally bound, have hereunder set their hands and seals.

Oaklane Gardens, LLC Diamond Properties, LLC

_____________________________ _____________________________

LANDLORD OR AGENT MASTER TENANT

BY: Kelly Smith, Its BY: Randy Diamond, Its

Managing Member Manager

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OPTION TO PURCHASE

FOR USE WITH MASTER LEASE

This lease is made on March 8, 2011, between the Master Tenant Diamond Properties, LLC of 4731 Cedar Avenue, Philadelphia PA 19143 and a phone number of (215) 555-1212 and the Landlord Oaklane Gardens, LLC which has an address of 100 Main Street, Philadelphia, PA 19104 and a phone number of: (215) 456-0988.

This Agreement (“Agreement”) is between Oaklane Gardens, LLC (“Seller”) and Diamond Properties, LLC (“Buyer”).

Property and Price

1. Buyer shall have the option and privilege of purchasing the real estate at 100 Oak Street, Philadelphia PA 19106 (print property address) (“Property”) at any time on or before March 8, 2019 (“Option Exercise Deadline”) for a sale price of $2,000,000.

Buyer will pay traditional and customary closing costs such as bank fees, appraisal expenses, transfer tax, title insurance expense, and other expenses to complete the purchase of the Property.

Fees and Costs

2. Buyer has paid the Seller a fee of one dollar ($1.00) at the signing of this Agreement (“Initial Option Fee”). By signing below the Seller confirms his receipt of the Initial Option Fee. The Initial Option Fee is consideration for this Agreement constituting a fee for the option being granted to Buyer.

How to Exercise this Option

3. To exercise the option, Buyer shall notify Seller that Buyer wishes to exercise the Option and name a settlement date and time and place. The date shall be no sooner than 3 business days away and no later than the Option Exercise Deadline. The time shall be during normal business hours and the place of settlement shall be no more than 30 miles from the Property.

If Option if Not Exercised

4. If Buyer does not exercise the option to purchase in accordance with the terms of this Agreement, this Agreement shall expire on the Option Exercise Deadline, and all rights of the Buyer pursuant to this Agreement shall cease as of 5:00 PM local time on the Option Exercise Deadline.

Due Diligence

5. Due Diligence

A. Environmental Contingency. Buyer’s obligations under this Agreement are contingent upon Buyer receiving a report (the “Environmental Report”) satisfactory to Buyer regarding the environmental conditions directly and/or indirectly affecting the Property. Whether the Environmental Report is satisfactory shall be the sole and absolute discretion of the Buyer. Buyer may obtain this report any time between the date of execution of this Agreement and settlement

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hereunder. In the event Buyer determines that the report is not satisfactory, Buyer may terminate this Agreement. Buyer shall then receive all monies given to Seller back from Seller or any escrow agent holding the funds and Buyer shall have no further obligations under this Agreement. B. Condition Contingency. Buyer shall be entitled to inspection(s) of the building by inspector(s) of his choosing up until the date of settlement. The inspection(s) can cover any and all aspects of the real property both physical and legal, including the zoning, leases, correspondence with third parties of any kind, utility usage, permitted uses of the property, easements, agreements of any kind affecting the building, plumbing, heating, electrical, sewage, roofing, air conditioning, and other systems, the foundation, structure, windows, walls, and any other area or aspects of the property Buyer decides to inspect. In the event the results of the inspection(s) are not satisfactory to the Buyer, at Buyer’s sole and absolute discretion, Buyer shall notify the Seller and Buyer may cancel this Agreement, receive any and all monies given Seller on account of this Agreement, and shall have no further liability to Seller under this Agreement. C. Zoning and Land Use Contingency. Buyer’s obligations under this Agreement are contingent upon its securing the required permits, lot changes, zoning changes and any and all other land use approvals (the “Approvals”) necessary to use and operate the Property according to Buyer’s intended use. Buyer shall have until settlement to obtain the Approvals from the appropriate entities. In the event Buyer fails to obtain the Approvals, Buyer may provide notice to Seller and terminate this Agreement. In the event Buyer terminates this Agreement Buyer shall receive any and all deposits given Seller or anyone else on account of this Agreement, and shall have no further liability to Seller under this Agreement. Seller agrees, on the request of Buyer or Buyer's nominee, to execute, at the sole cost and expense of Buyer or Buyer's nominee, all instruments and documents reasonably required to be executed by Seller to enable Buyer or Buyer's nominee to secure the right under applicable zoning, land use, or building laws and regulations, such that Buyer can apply for any zoning or variance necessary to use the Real Estate in such as way as is suitable to Buyer. In the event the zoning or permitted use is not satisfactory to the Buyer, at Buyer’s sole and absolute discretion, Buyer shall notify the Seller and Buyer may cancel this Agreement, receive any and all monies given Seller on account of this Agreement, and shall have no further liability to Seller under this Agreement. D. Inspections. Seller agrees to make the property available for inspections by Buyer and his inspector(s) upon 12 hours notice and to provide all documents needed by Buyer to perform due diligence within five business days of the date Seller executes this Agreement. E. Suitability Contingency. Buyer may terminate this Agreement if Buyer is not satisfied with the economic feasibility and/or suitability of the Real Estate. If, in Buyer’s opinion the Real Estate does not have adequate utility service, suitable zoning, adequate access to public roads, adequate water or sewer for the Buyer’s intended use then Buyer may terminate this Agreement and Buyer shall receive any and all deposits given Seller or anyone else on account of this Agreement, and shall have no further liability to Seller under this Agreement. F. Certificate of Estoppel. Seller shall deliver to Buyer a certificate of estoppel signed by each tenant leasing space in the premises as of the closing date, stating that (1) as of the closing date no default exists under the terms of the lease agreement by either Lessor or Lessee; (2) no rental payments have been made in advance other than as set forth in the estoppel; (3) that the lease is in full force and effect and not under any dispute; (4) setting out the amount of the security deposit and any other amounts prepaid to landlord; and (5) the tenant has no defenses or offsets against rent accruing under the terms of his/her or its lease agreement.

Robert Diamond� 4/11/11 4:43 PMComment: The estoppels is a signed statement by every Tenant. Each tenant signs its own estoppels letter.

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G. Title. The Real Estate is to be conveyed free and clear of all liens, encumbrances, and easements and the title to the Real Estate shall be good and marketable and such as will be insured by a title insurance company satisfactory to Buyer at regular rates. In the event Seller is unable to give a good and marketable title that will be insurable by a reputable title insurance company at its regular rates, or if any existing building restrictions, ordinances, easements of roads, easements visible upon the ground, privileges or rights of public service companies are not satisfactory to Buyer at any time up until settlement then Buyer shall have the option of taking such title as the Seller can give, or of being repaid all monies paid by the Buyer to the Seller and the Seller will reimburse the Buyer for any costs incurred by the Buyer and in the latter event there shall be no further liability or obligation on either of the parties hereto and this agreement shall become NULL AND VOID and all copies will be returned to Buyer for cancellation.

Controlling Law and Jurisdiction

6. This Agreement shall be controlled by the laws of the State in which the Property is located.

Remedies

7. In the event of any dispute under this Agreement any lawsuit brought by any party shall be brought and tried in the State Court in the County where the Property is situate. All parties to this Agreement consent to in personam jurisdiction of said court. The parties agree that all remedies at law and equity, including specific performance are available to Buyer under this agreement. Seller’s remedies shall be limited to retaining any and all monies collected from Buyer during the term of this agreement as liquidated damages.

Notice

8. Notices under this agreement shall be effective on the date received by Buyer and shall be sent via US Mail, certified, return receipt requested or FEDEX or UPS (signature required for FEDEX or UPS) and via email as follows:

Hard copy via US MAIL CERTIFIED RETURN RECEIPT REQUESTED OR VIA FEDEX OR UPS SIGNATURE REQUIRED:

To Seller To Buyer


100 Main Street 4731 Cedar Avenue

Philadelphia, PA 19104 Philadelphia PA 19143

WITH A COPY VIA EMAIL:

To Seller To Buyer

[email protected] [email protected]

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IN WITNESS WHEREOF, the Seller and Buyer, intending to be legally bound, have hereunder set their hands and seals this 8th day of March 2011.

Seller Buyer


___________________________________ __________________________________



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Memorandum of Option

BEFORE ME, the undersigned, on this day personally appeared Kelly Smith, Managing Member of

Oaklane Gardens, LLC (“Seller”) who being first duly sworn, deposes and says that: An option to

purchase the real property commonly known 100 Main Street, Philadelphia, PA 19104 and further

described in the attached Exhibit "A” was entered into by and between Diamond Properties, LLC

(buyer name), (“Buyer”) and Seller, on the 8th day of March, 2011.

A copy of the agreement may be obtained by contacting Buyer whose mailing address is 4731 Cedar

Avenue, Philadelphia PA 19143.

It is intended by the parties that this Memorandum of Option to Purchase be recorded in the real

estate records of the county where the land lies.

Dated this 8th day of March 2011.

Seller Buyer


___________________________________ __________________________________



Robert Diamond� 4/7/11 7:13 PMComment: Be sure to leave the 3 inch margin at the top – many recorders of deeds require it for their stickers and stamps

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ACKNOWLEGEMENT

State of Pennsylvania:

SS:

County of Montgomery:

On this 8th day of March, 2011 before me, Joseph Albertson, the undersigned officer, personally appeared Randy Diamond, who acknowledged himself to be the manager of Diamond Properties, LLC, a Pennsylvania Limited Liability Company, and that he, being said member and being authorized to do so, executed the foregoing instrument for the purposes contained in it by signing on behalf of the limited liability company by in his capacity as member.

In witness whereof, I hereto set my hand and official seal.

[Seal]

_________________ [Signature]

Notary Public

My commission expires _________________ (date).

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ACKNOWLEGEMENT

State of Pennsylvania:

SS:

County of Philadelphia:

On this 8th day of March, 2011 before me, Bethany Page, the undersigned officer, personally appeared Kelly Smith, who acknowledged herself to be a managing member in Oaklane Gardens, LLC, a Pennsylvania Limited Liability Company, and that she, being said member and being authorized to do so, executed the foregoing instrument for the purposes contained in it by signing on behalf of the limited liability company by in her capacity as managing member.

In witness whereof, I hereto set my hand and official seal.

[Seal]

_________________ [Signature]

Notary Public

My commission expires _________________ (date).

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Exhibit “A”

Legal Description of Property (include tax identification number)

Record and Return to:

Diamond Properties, LLC

4731 Cedar Avenue, Philadelphia PA 19143

Robert Diamond� 4/7/11 7:13 PMComment: You can get the legal description from a prior deed, mortgage or deed of trust

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Alternate Signature Block for entities, estates etc. (Digital copies of the forms on www.diamondlawmembers.com using your member name and password.)

Buyer:

Delgado Property Investments, Inc.

_________________________ _____________

By: Edwin Delgado Date

Title: President

Attest:

_______________________________

By: Ellen Delgado

Title: Secretary

Seller:

Superior Properties, LLC

_________________________ _____________

By: Ellen Holmes Date

Title: Managing Member

Buyer:

Profitable Property Investments, LP

By LP Management, Inc. its general partner

_________________________ _____________

By: Elway Jones Date

Title: President of LP Management, Inc.

Attest:

_______________________________

By: Lisa Johnson

Title: Secretary

Seller:

Estate of Maureen Jones

_________________________ _____________

By: Melissa Enterman Date

Title: Executrix Estate of Maureen Jones

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Seller Take-Back financing using a First Mortgage.

Electronic copies are included in the on-‐line forms set at www.diamondlawmembers.com using

your member name and password. Be sure to go there to get the latest copy of all the forms. We add forms and modify forms from time to time. Be sure to go get the latest copy of a form when you need it.

If a seller has no debt on the property, he can act as the bank for your financing needs of the purchase. Simply put, he holds the mortgage for you.

But the question is, “why would he do this for me when he could simply get another investor to cash him out completely?” Here are 5 possible answers:

Seller makes a lot more money! If you look at the seller financing spreadsheet below the seller makes more money by accepting payments because he collects interest. In the example the seller receives $365.395 more by taking payments via mortgage!! The spreadsheet is on the website in

the forms set.

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SAMPLE ANALYSIS OF SELLER FINANCING – Original Forms is on the forms set accessible online.

Tax liability for seller: The seller can spread out his tax consequences over a period of time if he wants to. In the meantime, he’ll get a down payment and monthly payments for as long as agreed.

Eventually, he’ll get paid the entire principal, depending on when the mortgage comes due. For tax consequences, the seller will only report as income the money you pay him (down payment plus monthly payments) for the taxable year.

Distressed Property: the property is well-‐below market vacancy and in poor physical condition. This

means that a bank will not lend on the property until it can show a profit and have its physical condition remedied. This is what is commonly called a “non-‐ performing” or “distressed” property. There are plenty of these available!

Copyright 1999-2006 RL Real Estate Development, Inc. All rights reserved. Rev 1.2 HTTP://WWW.BOBDIAMOND.COM

Analysis of Seller Financing vs. Traditional Deal Address 100 Main Street

Deal Assumptions Seller's Alternate Investment InfoSales Price for Seller Finance Deal $1,000,000 Sale Price of Real Estate $940,000

Sales Price for "all cash" deal (no seller financing) $940,000 Less Comissions -$56,400Sales Commission to Real Estate Broker(s) 6.0% Less Capital Gains Taxes paid by Seller -$141,000

Seller's Capital Gains Tax Rate (usually 15%) 15% Net Investible Cash to Seller $742,600Downpayment for Seller Financing (% of sales price) 5% Annual interest income on Alternate Investment $13,367

Downpayment expressed in Cash $50,000Rate of Interest on Seller's Alternate Investment 1.80%

Loan Calculations for Seller FinancingInterest Only Loan Amortizing Loan

Length of Mortgage (Years) 20Annual Interest Rate 6.75% Annual Interest Rate 7.00%

Loan Amount $940,000 Loan Amount $940,000Payment (not including escrows) $5,288 Payment (not including escrows) $7,288

Seller Financed Deal Analysis Traditional Deal - Not Seller Financed

Monthly Mortgage Payment to Seller $5,288Monthly Interest Seller receives on alternate investment $1,114

interest portion of payment $5,288

Length of Seller Financed Mortgage (in months) 72Duration (months) of Seller's Alternate Investment (Same as length of mortgage) 72

Interest income to seller over life of the loan $380,736Interest Income over life of Seller's alternate investment $80,201

Less Commissions Paid -$60,000 Less Commissions Paid -$56,400Less Capital Gains Taxes paid by Seller $141,000 Less Capital Gains Taxes paid by Seller $132,540

Sales Price Paid to Seller $1,000,000 Sales Price Paid to Seller $940,000Total $1,461,736 Total $1,096,341

SummaryTotal Received By Seller who accepts Seller Financing $1,461,736

Total Received by Seller who does not offer Seller Financing -$1,096,341 Copyright 2011 Diamond Law Center, LLC

Net Gain to Seller by Financing the Deal $365,395 All rights reserved Rev 1.6

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Bank terms unreasonable: in general, the seller and you may want to avoid banks altogether. It may be that the bank’s current lending terms may not work for either of you. For example, bank interest

rates may be too high. For example a seller may want to retire and travel, their real estate holdings may be holding them back from this goal and banks are demanding too much yield.

Poor Record Keeping: The property may be in good condition, but the seller kept poor financial documentation (such as bookkeeping or taxes) and banks have refused to lend on such properties.

Divorce, illness, relocation, etc. Motivates Seller: the seller may need a very quick sale because of

personal circumstances such as illness, death, relocation, divorce, or a need for quick cash.

All of the above are seller motivations for you to watch for. Pay attention to every word you read in listings or when you’re speaking to an agent or seller.

To complete an owner financing deal, you’ll need to begin with coming to terms with the seller. Be sure to use the Seller Finance Analysis to show the seller how much more money he or she will

make by taking payments (on a mortgage) instead of insisting on cash. Be sure to point out that you can pay more money if they will offer owner financing since you do not have the financing expenses and you do not have to go through the trouble of going through the bank.

Next, write up a sales contract and get it signed. From there, you’ll need to write up and record a

mortgage and note for what the balance is after your down payment. Get the advice and help of an attorney. Just like a normal transaction, use a title company (or closing attorney) to escrow monies,

research the title, and close the transaction.

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Wrap-Around Mortgage

Wrap-‐around mortgages have been quite popular since the origination of mortgages. Let’s say the buyer does not have quite enough saved for a down payment – he only has 15% of the purchase

price and the lender requirement is 20%. The seller can help the buyer buy holding a second mortgage for the remaining 5% needed, thereby satisfying the lender’s 20% equity requirement. Or the seller can take back a mortgage in the entire amount of the purchase price, pay the existing

lender with the money you give the seller each month and keep the rest as his profit. The new mortgage you give the seller “wraps” around the existing mortgage.

For example, the purchase price of a 10-‐unit apartment building is $500,000. The down payment the lender requires is 20% of the purchase price or $100,000. But the buyer only has $75,000, which is

only 15% of the purchase price. In order to satisfy the down payment requirement of the lender, the seller agrees to hold a second mortgage against the property for the remaining $25,000 or 5%. Now,

everyone is happy – the seller gets to sell his property, the buyer gets to purchase the property, and lastly, the lender’s equity requirement is satisfied.

Not every lender allows sellers to carry second mortgages against the property. You will have to look at the loan documents to see if the lender in question does on the deal in question.

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Real-‐Life Wrap-‐Around Deal

24-‐unit apartment deal found on Loop net.

Asking price: $800,000.

o Ron initially backed out during negotiations because of the increasing vacancies of the apartments that were occurring.

o But Ron negotiated with the seller to cover him for 6 months of possible vacancies

through a rent credit applied at closing. o The seller accepted Ron’s offer: $700,000 with $50,000 down. • Owner to carry

$150,000 second mortgage for 5 years.

o Ron negotiated a repair credit of $10,000 at closing. o Vacancy credit of $13,500 at closing. o Security deposit of $4,100 at closing.

o Total down payment comes out to be 3.2% after adding up the credits.

Ron’s exit strategy is to:

• Hold for 3 years and then refinance or sell into a larger property. • • Property will be worth $900,000 by increasing the NOI. •

• At 10% vacancy, the property will cash flow $1,000 per month. • Keys to Ron’s success and lowering the down payment: negotiate again and again, repair

allowance, and close on the 3rd of the month.

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Money Partners and Private Money

“Money follows excitement” is a term that I’ve heard before many times. And money partners are

people who get together because they are excited about money. Combine all three – partners, money, excitement, and you potentially have something very lucrative if set up correctly and thoughtfully.

Why use money partners? The number one reason is more access to money. Two, you’ll have more

fun working together. Three, you’ll expand your area of expertise and have more access to different skills that add value to your deal overall. Four, it’ll broaden your network of contacts (remember that investing is a relationship business), and five, money partners allow you to get more done in

less amount of time.

What are money partners? Money partners come in three ways. They are:

Credit Partners Equity Partners Debt Partners

Credit Partners – It’s always good to have these types of partners no matter whom or where you are in your investing life. Credit partners are people who partner their creditworthiness with you. If you are new to investing or need more financial firepower to get your deals financed, then I encourage

you to get credit partners. A good credit partner is one who has a high credit score, liquid assets, access to collateral or credit lines, and good character. By bringing all of this to the table on your

behalf, it’ll make you that much stronger in the eyes of the lender and the seller. In exchange for their partnering with you, possible means of compensation could be a certain percent ownership, cash flows, future profits, or perhaps all of the above.

Equity Partners – A credit partner can be a type of equity partner. Or, let’s say that some-‐ one has

lots of experience in a type of deal you are putting together and you need their skill to make sure you’re successful. What is their skill and experience worth to you? Is it worth making them a partner by giving them a 10% ownership (equity) stake? If so, consider them an equity partner. Another

good example would be giving your property manager an owner-‐ ship stake in the property on the premise of him helping you reach certain performance goals on the property. In other words, they become a partner in your success, but only if they are successful. There’s an old saying, “no one

cares more about a project’s success than those who have a personal stake in it.” When you first

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start out, you may have to give away a good portion of the equity just to do the deal. Would you rather have 50% of a deal or 0% of no deal?

If you have limited funds to close on your deal and someone comes along and has access to the money you need to close the deal, it makes sense to offer that person an equity share of the deal in exchange for the money. Who knows – that person may be your money source for the next deal,

too! And the next, and the next...!

Debt partners – Quite simply, this is someone who lends (a debt) you money for your deal in exchange for a return on their investment. For example, your relative lends you $25,000 for your deal. In exchange, you will pay him 10% interest annually for however long he lends you the money.

Your relative gets no “ownership” or equity. Their investment with you is secured through a promissory note and/or mortgage. Another example of a debt partner is in the case of “owner carry seconds” which we discussed a few pages earlier.

Note: As you can see, it is possible to have one money partner who is a credit, equity, and debt

partner with you. Since every deal that you do will be different, feel free to be creative with your money partners as well. And it is also possible to have multiple money partners in any one single deal. Step out the box and do whatever it takes to secure your money partners.

MONEY PARTNER QUESTIONS

Question: When do I start looking for money partners?

Answer: Right now is the time. You never know what deal may require which type of money partner.

Therefore, always search; always be on the lookout for credit, equity, and debt partners. Keep your “money partner-‐finding hat” on at all times.

Question: What should I say if I were to run into someone who’s a possible money partner?

Answer: Simple, just say the following. “Hey Bob, do you know of anyone who may be interested in this great real estate deal I have?” That’s how it all starts. You’re not selling or pushing anything to

Bob. You’re asking for his help and people generally like to help other people. Bob may answer you by telling you that he is interested personally, or he may know of someone who is.

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Question: What do I say if they ask me how much they could make on my deal?

Answer: By law, you cannot promise them a certain amount or range or percentage. All you can tell them is that it appears to be a great deal, but every deal has risks. Get their contact info at this point

and follow up with them the next day with the deal details and specifics.

Question: What is THE ONE most important thing in finding money partners?

Answer: ASK. You have to ask! This is a universal principle. It’s quite natural to be nervous, cautious, and even intimidated in asking. All I can say to that is, “You have not because you ask not.” Later in this chapter, we’ll discuss how to prepare you to ask.

The two types of Partnerships

The first type of partner is one with whom you partner as a “working” partner. You’ll typically split

up roles, complement each other’s strengths, and work toward common goals. The meaning of true partnership applies here. Let’s call this type a working partnership.

The second type of partner is your investor. This is a person who does not work with you on a day-‐

to-‐day basis and is passive. They have partnered with you by investing their money into your deal. You give them periodic updates and pay them an agreed upon return on their money invested. This type is an investor-‐partnership.

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How to start With Working Partnerships

Here are 7 definitely critical “dos” when selecting working partners:

1. Make sure you share, create together, and come into agreement with the company values, vision, and mission.

2. Is there synergy? Do you have complementary personalities and skills? Are your morals and ethics aligned?

3. Make sure you put out on the table each partner’s needs and expectations. For example, do you need cash up front or can you postpone profits?

4. Identify the strengths of each partner and figure out ways of using them.

5. Define job roles for each partner and how you plan on keeping each other accountable.

6. The final part of the framework is trust. If there is a lack of trust, then one of you will always hold back, never quite achieving what you are capable of.

7. Create an operating agreement addressing questions such as what each partner will contribute in terms of time and money, how and when profits will be disbursed, and what happens when there is a disagreement or disaster. See the note below on the 5 “D”s.

Note: Even though you shouldn’t focus on this, you should always prepare for the worst. Be prepared for the 5 “Ds” in the partnership. They are Death, Divorce, Disability, Disagreement, and Debt. When writing up the operating agreement, it is advisable to hire an attorney.

On the next page is a list of issues to discuss with any prospective partner before seeing the attorney.

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Electronic copies are included in the on-‐line forms set at www.diamondlawmembers.com using your member name and password.

Comment – these business points will work their way into an LLC or LP Agreement. Have an attorney draft one for your situation.

SAMPLE PARTNERSHIP CHECKLIST. See online forms set for a digital copy.

1. Name of the Partnership. _________________ 2. Identity of the partners. ___________________________, ____% each. 3. How much money each partner will put up. ___________

Bob comment – Determine what you need for capital – down payment? Office expenses? Just money to form the entity?

4. Whether either partner will have to put up additional money, and under what circumstances. Bob Comment – this is usually when there is a need to put in money to pay for a business expense that the business does not have cash or credit to pay. Could be cash put into

the business if there are a lot of vacancies and mortgages or other expenses need to be paid. Usually pro-‐rata according to ownership interest.

5. Whether a partner can sell to a new partner without the existing partners’ permission or what to do in the event of a death or divorce of a partner where a spouse or heir would come into the partnership. Bob Comment – usually the remaining partners would not want a stranger to come into the business nor would you want a spouse coming into the business if there was a

divorce or a death of a partner. Usually I handle this by making a provision that if one partner wants to sell to a third party he has to offer his shares to the remaining partners 1/3 each. If they want to match his offer they can buy the shares. If a partner does not

want to buy the shares then the other partners could take those shares. If the remaining partners do not want the shares then the selling partner can sell to the third party.

In the event of death of a partner, usually there is life insurance on each partner that is payable to the partnership that allows the dead partner’s heirs to be bought out.

In the event of a divorce, I suggest that the remaining partners can buy out the spouse; if

they do not then the spouse becomes a partner.

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6. The places in which the partnership will do business. _______________. 7. The exact nature of the business proposed to be done by the partnership. (I.e.; will you

be renting properties, flipping them, doing both?) 8. What authority each of you will have to sign contracts, hire people, take loans and

otherwise bind the partnership to obligations to outside parties. Bob suggestion –select who can hire contractors, subs, mechanics, etc., all partners must consent to mortgages on the properties and purchases or sale of a property.

9. When will partnership profits be distributed? Bob suggestion – I suggest that the partnership retain a level of retained earnings before distributions other than salaries – perhaps 3 – 4 months rent per property. Also all

profits above that must be distributed no less frequently than annually to all partners. This prevents a partner from being pushed out by the partnership not distributing cash and keeps adequate reserves in the company,

10. Who will keep the bank account? This should be one person or outside bookkeeper with audit rights of all partners at any

time. Reports should go out monthly and bank account statements and check registers should be sent with the report.

11. How long you plan to do this before splitting up the properties and/or profits. Bob Suggestion – I suggest you set a date when the partnership will sell the properties unless everyone agrees to keep them. Partners can always agree to keep them. There

should be a provision to pay off a partner who wants to leave by estimating the value of his shares based upon the value of the houses and then the partners who want to stay in the houses can buy that partner out. Usually easy to accomplish by taking a loan

against the homes and using that to buy out the partner who wants to leave.

Following items will need to be done:

1. Consult with the accountant to discuss tax implications of the partnership, methods to allocated tax benefits between the partners to benefit each partner, and the tax implications of alternative forms of doing business such as Corporation, Limited Partnership, Limited Liability Company, etc.

2. Consult with another attorney to discuss the legal implications of a partnership, the roles and responsibilities of each partner, the liability exposure of each partner. Discuss the liability and legal implications of alternative forms of doing business such as Corporation, Limited Partnership, Limited Liability Company, etc. Review the answers to these questions. Everyone should have his or her own attorney.

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How to Start with Investor Partnerships:

In simple terms, what are you actually doing is raising capital for your deal. You’ll learn how to go out and find investors willing to put their hard-‐earned money into your deals in exchange for a nice payback or return.

Raising capital comes down to one thing when it’s all said and done, and that is “credibility.” When you approach your potential investor or have a captive audience of potential investors, the question of the day is, “are you credible”? “Can I really trust you to do what you say you are going to do (with my money)?”

The obvious concern going through your mind is, “how can I be credible if I am just a beginner at this?” This is, in fact, just a mental roadblock, not an actual one. Let me ask you this: how many ultra-‐successful sales people do you know that started with nothing and are now number one in their organization? We know quite a few ourselves. And they all started with nothing but product information – no previous sales or product experience. So, from this perspective, it can be done. Lack of experience can be overcome. “How bad do you want it?” I ask you.

To overcome “beginneritis”, attain credibility, and get people to invest with you, here’s what you must do:

1. Think about “preservation of investor capital.” If you are new, the potential investor will automatically think that it is risky to invest with you. Whatever you are presenting, writing, or speaking, be sure to include information on why the investment principal is safe. Disclaimer: of course, there is no such thing as a “for sure” investment, just make sure you cover all the bases as best you can. NEVER use the word “guaranteed” with your current or prospective investors.

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2. Do your homework and research. One way of overcoming the lack of credibility is to know everything about the deal from the inside out. Know what properties have sold for in the past. Know the rents, expenses, and other numbers on the property you want them to invest in (these come from the due diligence materials and the spreadsheets). Have the spreadsheets and due diligence materials organized and ready to present to an investor (AFTER they sign the non-‐compete non-‐circumvention agreement from the forms set).

That will impress your potential investors and show them that you’re smart, have good intentions, pay attention to details, and have thought the deal through from beginning to end. Be sure to use the spreadsheets in this course to help you put together a credible investment. Have the following ready to discuss as best you can:

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3. How the partnership is going to be structured. It’s best to get the advice of real estate attorney and CPA first.

• What the exit strategies are (fix and flip, hold for rental).

• How much money you need to raise and when you can pay it back.

• Who is on your team, such as other experienced partners who bring valuable skills to the table, a property manager, etc. If you have no experience you will need to do very simple deals (minimal rehab, smaller properties like single family rentals), which do not require a lot of capital. If you are doing a more complicated deal bring in an experienced team to help you. Choose a team with a record of success.

• The market, why you chose it, and why it’s good.

• The type of property you chose and why.

• Write up with a short deal summary / business plan. At this point, this is more for yourself and your investor right now. Writing up a brief business plan will force you to have clarity on the major elements of the investment such as vision, market analysis, strategy, operation, financial review, and exit strategy. This brief business plan is nothing different than others you have seen anywhere else.

• The clarity that this brief business plan gives you will allow you to “talk the talk” even when you don’t have experience. A sample appears below and is with the on-‐line forms set.

4. Write an Executive Summary – 2 pages only, please! An Executive Summary is an overview of the deal.

• After thinking through on your brief business plan, it will be easy to come up with an Opening to your business plan, which can also be called an Executive Summary. An Executive Summary is a short document that you present to the investor that explains the nature of your investment – what it is, when it is, who it is, and how it is. The executive summary of the business plan sample is pages one and two.

• The most important part here is to write this summary so that your investors will read it! Make it two pages at the most. They will not read a 5 or 10 page business plan unless the first two pages grab them.

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• A well-‐written and concise Opening/Executive Summary will definitely bring you credibility in the eyes and minds of potential investors.

Now, put yourself in your investor’s shoes. Two persons approach you with an investment opportunity. One has done all four-‐preparation steps above. The other has not and is just “all talk.” Which person would you rather invest with? Which person has more likely just built credibility with you?

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SAMPLE BUSINESS PLAN. Electronic copies are included in the on-‐line forms set at www.diamondlawmembers.com using

your member name and password.

PARTNERSHIP OPPORTUNITY

APARTMENT BUILDING – VALUE ADD PROJECT

UNIVERSITY CITY ~ WAYNESBORO, PA

Developer Partners: Linda Johnson, Nelson Harlow

Property Address: 1100 Sunrise Street, Waynesboro, North Carolina.

Building Front Column Detail

Lobby Detail –Marble Wainscoting Street View

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Summary of Project:

Linda Johnson and Nelson Harlow are Developer Partners in the 1100 Sunrise Street Apartment project. The partners have a six-unit apartment building in a “B+” class neighborhood under contract to settle by the end of September 2011 at a purchase price of $150,000. The building itself is a C+ building in terms of condition and amenities. After $60,000 in refits and upgrades, the building will be a B to B+ building with higher rents averaging $900 per month and the value is expected to be $264,906.1

The building is a late 1800’s apartment building featuring six two-bedroom units. It is in good and habitable condition but does not have the finishes or layout to maximize rents. The current finishes are C+ but the neighborhood has risen to a B to B+ neighborhood.

The developers believe the building is ripe for repositioning as a B to B+ building because there are many professionals and graduate students moving into the market area but there is little attractive and affordable modern housing. The existing apartments are mostly C grade and rent for an average of $733 per month.

The partners are looking for an investor or investors to put up $100,000 in capital for the project, qualify and sign for the loans. The money will be used for down payment, renovation, closing costs and working capital. Ms. Johnson and Mr. Harlow will bring $23,500 to the project from their own accounts.

Ms. Johnson and Mr. Harlow will be repaid from the profits.2 To secure their investment all the partners will be part owners of the real estate through ownership of shares of a LLC that will own the real estate.

The duration of the project is planned at eighteen months and the cash investor will receive forty percent of the profits. Based upon expected profits of $109,7043 the money investor is estimated to receive $43,881.60. The timing of the payout depends up on the speed with which the renovation and resale the building is accomplished. We anticipate six months to renovate the property then six three months to full occupancy and then nine months to sell

1 The target resale price is based upon an 8.5% CAP rate. According to local real estate brokers that is the

going CAP rate for small “B” class apartment buildings. The spreadsheet titled “Commercial Property Profitability Spreadsheet” is the source of this number.

2 There will be no fees or profits to Ms. Johnson or Mr. Harlow until the cash investors receives all of his/her

profits and a full return of their cash investment.

3 See the Flipper Spreadsheet for the source of the calculation of the anticipated profits

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the building. The brokers surveyed by the partners expressed an expected resale time of nine months for the building.4

No zoning approvals or variances are required for the work. All that is required are ordinary permits to do the work. The permits are readily available with no delays because no structural work is being done.

Developer Background:

Ms. Johnson and Mr. Harlow have been in the real estate business for three years and five years respectively. Mr. Harlow is the owner of Harlow construction, which is a Waynesboro based construction business. He has thirteen full-time workers in the field. Ms. Johnson is a real estate investor in Waynesboro and has been purchasing, renovating and holding or reselling one to four unit housing units at the rate of four per year.

Between the two of them Ms. Johnson and Mr. Harlow have sufficient experience in renovating and reselling residential properties in the Waynesboro area to handle this building, which is residential in nature. Mr. Harlowe’s construction business routinely works on apartment buildings as part of his business.

Ms. Johnson and Mr. Harlow will be responsible for the day-to-day operations, financing, renovation, administration and marketing of the project. They will hire a real estate broker to resell the property.

The Property:

The building is a functioning apartment building and is structurally in good condition. The units are approximately 1,250 square feet.5

The building is cosmetically tired and dated but it does have many attractive features including 9’ X 14’ balconies on most units, a southern exposure, many historical details including marble wainscoting in the entry hall, extravagant detailing at the top of columns supporting the balconies and oak hardwood floors.

The building will be completely renovated and brought up to a B to B+ standard to be rentable as modern apartments at higher rents than are currently realized. The renovation will include acid washing of the exterior brick, landscaping, refurbished common areas with modern lighting and renewed finishes. The units themselves will feature new kitchen

4 The partners surveyed the three leading local commercial real estate brokers, Keller and Hansome, Cox &

Associates and Zybeck Commercial Brokerage to reach this conclusion

5 Units vary slightly but have equal bedroom and baths and are within 50 square feet of one another.

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cabinets and countertops, more lighting, updated bathrooms, refinished hardwood floors, and washer/dryers in each unit.

The Neighborhood and Schools

The neighborhood is referred to as the “University City” section of Waynesboro and is home to students, alumni, professors and staff for the University of North Carolina (walking distance), Blue Heron University, Children’s Hospital and the Hospital of the University of North Carolina. It is also the home to working professionals who work in “Center City” Waynesboro which is where the banking, accounting, law and major employers such as Sanya Industries and Hallowell Industries are located. The major business district is less than four miles away, which takes 10 minutes by car or fifteen minutes by bus.

The neighborhood has undergone ten years of gentrification as a result of the University of North Carolina’s investment of millions of dollars in the area over the past ten years. The investment includes street lighting, continuous security patrols, grants and loans to University Employees to purchase and improve homes to live in. The plan has worked remarkably well and values have soared as evidenced by run-down twin homes priced under $60,000 ten years ago now renovated and running above $150,000. The neighborhood has transitioned from a “C” neighborhood to a “B” to “B+” neighborhood but the apartment stock has not risen about “C” grade.

The neighborhood has further enhanced by the Alexander Charter School, which is the public elementary school serving the area. That school is run by the University of North Carolina and is comparable to a private school without the expense.

Good public schools are rare in the City of Waynesboro and the Alexander school district is drawing young families who cannot afford houses in the area.

The Real Estate Market:

University City is a hot residential area that is receiving lots of positive press (see, for example, September 7, 2010 article from Waynesboro Weekly).

There is a strong demand for housing in the area.

The gentrification and positive press has lead to many young professionals, MBA students, Law Students, Medical Students, medical residents, and new professors moving into the area. They cannot afford the newly refurbished homes yet they have a taste for modern housing. There is virtually no apartment product to meet this demand and this development will fill that void in the market. We expect to be able to substantially increase

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rents with the refurbished apartments. Current rents average $733 per month and after renovation we expect rents of $900 per month per unit.6

The Partnership Opportunity: The developers are seeking investors to supply $100,000 in capital towards the project. The developers will supply $23,500 and the cash partner will apply for the bank loan.

The cash partner will receive all of their capital investment and profit before the developers receive any profits or fees from the project.7 The developers will not charge management fees, overhead, construction over-rides, or any other fees to the project.

The exact timing of the return of capital and profit to the investors will depend upon the speed with which the building is renovated, rented out and resold.

Return On Investment

4921-25 Sunrise St.

Waynesboro, NC 19104

Party CASH INVESTMENT TERM PROFIT

Cash Partner $100,000 18 mos. $43,961

Linda Johnson $11,750 18 mos. $32,871

Nelson Harlow $11,750 18 mos. $32,871

Note that Linda Johnson and Nelson Harlow and contributing time and effort to the project that they are not separately compensated for. The cash partner is not expected to contribute time or effort.

6 Rent numbers and condition assessment of competing apartments were developed in consultation with

brokers and tours by the principals of this deal of local apartments for rent

7 The developers will be reimbursed their $10,000 good faith escrow deposit from the funds provided by the cash investor (at settlement on the building purchase). The developers will not receive any funds from this

project until the cash investors have all of their cash investment and profit.

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For Further Details:

Spreadsheets are included below. Please contact Linda Johnson at (216) 561-9540 or Nelson Harlow at (216) 584-3545.

Flipper Spreadsheet

Property Address: 1100 Sunrise Street, Waynesboro, NC

Calculations Item

$264,906 Fair Market Value of Property Once Renovated($150,000) Price to be paid for property by investor

($1,325) Transfer Taxes Paid (total)($15,894) Commissions paid

$0 Cost of Discount to Retail Buyer($3,000) Points on Loan

($15,188) Interest Cost due to money borrowed for Purchase and renovation$0 Repair & renovation expense

($6,450) Property Tax Costs($4,200) Property Insurance Costs($3,500) Legal expenses($5,400) Utilities, lawncutting, etc. (monthly)($2,400) Title Insurance Cost$65,400 Rents Collected During Ownership

($13,245) Other anticipated costs/contingency reserve$109,704 Estimated Profit

Monthly Costs (broken out from above)$844 Monthly Interest$358 Monthly Taxes$233 Monthly Property Insurance$300 Monthly Utilities

$1,735 Total Monthly Carrying Costs

Copyright 2011 Diamond Law Center, LLC. All Rights Reserved www.diamondlawcenter.comRevision 4.3 C

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Rental Property Analysis at Lower Rents Prior to Renovation

Average rent of $733/mo.

Commercial Rental Property Profitability Spreadsheet1100 Sunrise Street, Waynesboro, NC

4/10/11 10:59 PM FILL IN ALL YELLOW COLORED CELLS ONLY





Maintenance and Repair Costs $267 $3,204 Information About the Purchase Price and DownpaymentJanitorial, Pool, and Lawncare $250 $3,000 Your Purchase Price for the Property $150,000

Trash $300 $3,600 Your Downpayment as Percent of Purchase Price 25.00%Supplies $65 $780 Renovation Expense $60,000

Electricity $175 $2,100 Settlement Costs $6,000Gas and Oil $600 $7,200 Total Basis in Property $216,000

Sewar/Water $170 $2,040 Cash into The Property $103,500Telephone $40 $480

Accounting and Legal $134 $1,602Advertising $22 $267 Mortgage Payment Calculator Amortizing Loan

Property Insurance $233 $2,800 Length of Mortgage (Years) 20Property Manager $312 $3,738 Annual Interest Rate % 7.00%

Annual Permits $4 $50 Loan Amount $150,000Miscellaneous $0 $0 Payment (not including escrows) $1,162.95

TOTAL OPERATING EXPENSES $3,286 $39,433

Gross Operating Income (from above) $4,450 $53,400 Interest Only LoanTotal Operating Expenses (from Above) $3,286 $39,433 Annual Interest Rate % 6.50%

NET OPERATING INCOME (NOI) $1,164 $13,967 Loan Amount $150,000Payment (not including escrows) $812.50

Mortgage Payments $1,163 $13,955 CASH FLOW BEFORE TAX CONSIDERATIONS $1 $12

Results SummaryEstimated Tax Benefit (see below) $148 $1,772 Monthly Cash Flow $1

Total of Tax Benefit and Cash Flow $149 $1,784 Annual Cash Flow $12 Annual Net Operating Income $13,967

Monthly Net Operating Income $1,164POTENTIAL TAX BENEFITS OF THE RENTAL PROPERTY CAP Rate Given Inputs in this Spreadsheet 6.5%Ask your accountant to confirm. Some people cannot take advantage of depreciation (for example if your income is to high)





Your Possible Annual Tax Savings $1,772


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Rental Property Analysis at Lower Rents After Renovation

Average rent of $900/mo.

Copyright 1999-2006 RL Real Estate Development, Inc. All rights reserved. Rev 1.2 HTTP://WWW.BOBDIAMOND.COM

Commercial Rental Property Profitability Spreadsheet1100 Sunrise Street, Waynesboro, NC

4/10/11 10:34 PM FILL IN ALL TAN COLORED CELLS ONLY





Maintenance and Repair Costs $327 $3,924 Information About the Purchase Price and DownpaymentJanitorial, Pool, and Lawncare $250 $3,000 Your Purchase Price for the Property $150,000

Trash $300 $3,600 Your Downpayment as Percent of Purchase Price 25.00%Supplies $65 $780 Renovation Expense $60,000

Electricity $175 $2,100 Settlement Costs $6,000Gas and Oil $600 $7,200 Total Basis in Property $216,000

Sewar/Water $170 $2,040 Cash into The Property $103,500Telephone $40 $480

Accounting and Legal $164 $1,962Advertising $27 $327 Mortgage Payment Calculator Amortizing Loan

Property Insurance $233 $2,800 Length of Mortgage (Years) 20Property Manager $382 $4,578 Annual Interest Rate % 7.00%

Annual Permits $4 $50 Loan Amount $150,000Miscellaneous $0 $0 Payment (not including escrows) $1,162.95

TOTAL OPERATING EXPENSES $3,531 $42,373

Gross Operating Income (from above) $5,450 $65,400 Interest Only LoanTotal Operating Expenses (from Above) $3,531 $42,373 Annual Interest Rate % 6.50%

NET OPERATING INCOME (NOI) $1,919 $23,027 Loan Amount $150,000Payment (not including escrows) $812.50

Mortgage Payments $1,163 $13,955 CASH FLOW BEFORE TAX CONSIDERATIONS $756 $9,072

Results SummaryEstimated Tax Benefit (see below) $148 $1,772 Monthly Cash Flow $756

Total of Tax Benefit and Cash Flow $904 $10,844 Annual Cash Flow $9,072 Annual Net Operating Income $23,027

Monthly Net Operating Income $1,919POTENTIAL TAX BENEFITS OF THE RENTAL PROPERTY CAP Rate Given Inputs in this Spreadsheet 10.7%Ask your accountant to confirm. Some people cannot take advantage of depreciation (for example if your income is to high)





Your Possible Annual Tax Savings $1,772


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Finding Investors to Partner With

Let me start off by saying that the number one rule with finding investors is:

DO NOT ADVERTISE!!

If you advertise, you will be breaking the law. The Securities Exchange Commission (SEC) is the arm of the US Government that oversees all PUBLIC money-‐raising activities. If you advertise to the public, you must answer to the SEC and to its very strict rules and regulations. In fact, advertising and soliciting the public for investment money is against the law (in fact, it’s a felony) and is punishable by fine and jail time.

Secondly, before you start raising capital, seek the help of an advisor, coach, mentor and/or attorney. Discuss the how to's with someone who’s done this before. You will soon discover the many options and money-‐raising methods people use successfully.

Lastly, consider investing only with accredited investors. Accredited investors are persons with high income and net worth levels as determined by certain standards. They are least likely to be investing with you their last penny or their life savings. If you lose it all, it won’t completely wipe them out. Also, if they sue you, the judge will put an emphasis on their accredited investor status and that they should have known better (to put it plainly).

Getting started – locating investors via family ‘n friends

The easiest way to get started looking for money for your next investment is with people you already know. Let’s call them Family and Friends. Usually your family knows your character and integrity. They know your history. And there’s no place to hide! Raising money from family and friends is used a lot, and there is a good way to do this and a bad way. The bad way is to take their money and do not do any paperwork such as recording a

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note for them. The good way is to make them a member of an LLC that controls the investment, write up an operating agreement, pay them on time, and give them quarterly updates on the performance of the investment.

Oh, by the way, here’s how you approach your Uncle Steve and ask him to invest in your deal. Let’s say you’re at a family function. This script will sound familiar.

• You: “Hey Uncle Steve, how are you doing?”

• Uncle: “Doing great. I just returned from vacation with everyone.”

• You: “Cool. Yeah, I’m planning on taking some time off next month. Headed to Utah for some snowboarding and investment opportunities.”

• Uncle: “That sounds like fun. I snowboarded on the weekend. What are you investing in?”

• You: “I’m working on a great cash-‐flow deal in Salt Lake City. Hey Uncle, do you know of anyone who would be interested in investing with me on this one? When I close on it, I’ll have a ton of equity plus cash flow. And I’m willing to split it 50-‐50 with the right person. And they won’t have to do any work on it; I’ll do it all.”

• Uncle: “I may be interested myself. Tell me more about it.” Here’s where your research and homework comes into play. This is why you prepare: for opportunities like this.

After you are done talking with Uncle Steve, go search for your next family member or friend.

At family functions, it is good to talk with more than one family member at a time. Once people see a crowd, they will tend to want to listen and join in.

Another suggestion is to talk louder than average at these functions. Even though someone is not a part of your conversation, but is sitting at your table, they are listening. They are potential investors as well. You may have to approach them or introduce yourself so they won’t give the impression they were eavesdropping.

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Ways to find investors

Instead of trying to initially create ways of finding investors, the most efficient way is to start with your own sphere of influence. Your sphere of influence could be your workplace, social clubs, or your place of worship. Go through all of your personal contacts in your database, phone list, and e-‐mails.

Here are a few other ways to find investors:

• Join the country club.

• Take up or play golf.

• Hang out with wealthy folks and their acquaintances.

• Get referrals from your CPA, attorney, doctors, etc.

• Network with other real estate investors, i.e., real estate clubs, conferences, or seminars.

• Target certain groups with money such as: people with oil interests, older people, stock market refugees, business owners, high income executives, successful entrepreneurs.

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Money-‐Raising Tips During the Process:

1. Be prepared to discuss your deal on the spot.

2. Have business cards ready to hand out.

3. Get potential investors’ business cards or take down their contact info.

4. Do what you say and say what you do: if you say you are going to follow up with a potential investor the next day, make sure you do it.

5. Follow up with a phone call and e-‐mail – not an email only.

6. Once you get a lot of interest, consider having an evening teleconference to explain the whole deal and answer any questions. This does two things for you: one, it allows you to get the investment opportunity in front of a lot of people at one time; two, it builds excitement and anticipation to the ones who are still “on the fence” about whether to invest or not. Hearing all the other people investing with you may get them to finally commit.

What is my Money-‐Raising goal?

Your main money-‐raising goal is to produce leads. Leads are people whom you have good reason to believe fit the profile of the type of investor you want. Leads lead to prospects. And prospects lead to candidates. And candidates lead to actual investors. Therefore, the more leads you can generate, the more actual investors you’ll have, and finally, the more money you’ll raise. Pretty simple math. In the previous pages, we discussed how to find those leads.

Here is a formula that I personally agree with.

25 leads will produce an average of 7 prospects. 7 prospects will produce an average of 4 candidates. 4 candidates will produce an average of 2 actual investors.

Therefore, on average to get 2 investors for your deal, you need to generate 25 leads. This is for the average new investor. Once you are experienced and have a few deals under your belt, you will not need to generate this many leads because your current investors will keep investing with you. Eventually, with hard work and good results, you may be able to close

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off your investments to new people and only pick and choose the investors you want involved in your deals.

Caution: Never stop prospecting. Keep your pipeline full and flowing at all times during the life of the deal. You’ll never know when one of your investors may back out before closing. Often times you’ll find that people have lots of money until it comes time to write the check. Never stop prospecting.

Types of Money to Go After

It is a good idea to know the various ways money exists. Once you have this knowledge, you can focus on the types of money to go after or target.

1. Estate Money: this may be money that was set aside to be given to kids as an inheritance. Or it may be money that is in an estate that needs to be invested for the beneficiary.

2. Patient Money: this is money that can wait for an extended period of time to be used. This may belong to a person who is many years away from retirement.

3. Retirement Money: this may be money that is or was set-‐aside for a person’s retirement. Stock market refugees or people who lost some of their retirement funds in the stock market may be candidates here. Often this money is in IRA and 401K plans which can be directed into your project(s).

4. IRA Money: this is money that is currently in an IRA. There are many companies that will help convert a person’s IRA money into liquid funds for your deal without causing taxes to be paid by the IRA holder. Pensco and Equity Trust are two companies that do self-‐directed IRAs.

5. College Education Money: obviously, this money is intended to grow over time and won’t be needed for years down the road.

6. Money-‐Finder Services: Companies exist those “broker-‐dealer” relationships where they work with individuals and companies who are licensed by the SEC as official money-‐ raisers.

Selling Your Deal to investors – getting them to Write the Check!

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You’re at the point now, where you have enough information on the deal and you have a few prospects. What’s next is getting your investors to write the check.

The Trust Factor

Again, it all goes back to the trust issue. Do the investors trust you with their money? Let’s look at trust for a second. Do you trust someone yourself? Maybe a spouse, a parent, or a best friend? Why do you trust them? I bet it’s because you know them well and they know you well. The intentions of both sides are for good, right? Well, how did you get to this point in the relationship?

You’ve done several things. You spent quality time together even in the short amount of time you may have known each other. One of you or both of you are probably good listeners. There is also mutual respect for one another.

Well, to get investors to invest with you, you must establish the same rapport and trust in each other.

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Selling versus Counseling

Since you probably don’t have years to develop this with all the potential investors you have in mind, you’ll need to act and develop quickly. Here’s how: don’t sell to them. Counsel them instead. Recall the old saying, “People don’t care what you know until they know that you care.” Every successful money-‐raiser is a practicing counselor.

How do you react when someone attempts to sell you something before they know if you need what they’re selling? You put up an automatic guard, right? To overcome this, if they asked you a few questions first, they probably would have been a little more successful. Take a counselor’s approach instead.

5 tips to becoming a Better Money-‐Raiser Counselor

1. Build Rapport First And Foremost. See the F.O.R.D. formula below.

2. Investor Needs. Ask questions such as do they need monthly or quarterly payouts or can they wait until the investment is at the end?

3. Investment Objectives. Ask questions about why they want to invest. Is it for their kid’s college fund? For retirement? To establish a trust fund for charity or the poor?

4. Risk Tolerances and Return Expectations. Ask questions pertaining to their previous investments, such as stock or other real estate. Ask how risky it was to them. Next, ask what their expectations are for returns on the investment. Are they expecting a 5%, 8%, 10%, or 50% return on the investment? Get a feel for this. And don’t forget to relay to them that you’re number one priority is to protect and preserve their investment with you.

5. Life Goals with Investments. Ask what their ultimate goal in life is. Is it to retire and move to Hawaii? Become a missionary in Africa and live there for the next 20 years? Is it building a school for at-‐risk kids in poor neighborhoods?

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A Rapport-‐Building Formula

The best money-‐raisers know the value of counseling. A good counselor makes a concerted effort to “know” their client. They begin by building rapport. So must you. Here’s a great and practical formula that you can use in any situation for your potential investors. These acronyms are talking points.

F O R D

Family Occupation Recreation Dreams

Ask them about their family make-‐up and history Ask them about what they do for a living, or about their former career Ask them what they like to do for fun or to relax Ask them about their ultimate dream and their plans for reaching it.

What Happens After Counseling? After you have your talk (your counseling session) with your potential investor, it’s time to

Ask yourself two questions:

1. Are they a good fit for my investment opportunity – both financially and mentally? If not, kindly thank them and tell them that maybe the next investment opportunity you have may be a better fit.

2. If they are a good fit, you need to ask them the question of the day: “Are you interested in investing and, if you are, how much can I count on you for?” Don’t wait too long to ask this question because they may say “no” now, but later say “yes.” Give yourself time to follow-‐up with these investors and get them back on track. For the ones that say “yes”, congratulations! Only 24 more prospects to go!

Final thoughts on private lending

Here are a few things for you to think about on your journey:

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The fewer the partners or investors, the better. It will simplify your life and business. One bad apple can spoil the bunch.

Partnerships are like marriages. Avoid the high-‐maintenance partners and investors. If you spend all your time holding their hands, you’re not doing your job.

Send out mass e-‐mails periodically and consistently on how the investment is performing. The report should contain a short, but detailed narrative as well as financial reports.

Deliver bad news to partners and investors quickly. Don’t wait for it to get better.

Success breeds success!

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Installment Sale

Electronic copies are included in the on-‐line forms set at www.diamondlawmembers.com using


Instructions and Background for “Installment Sale Agreement”, also known as a “Contract for Deed” or “Land Contract”

This is one of our “creative financing” techniques where you typically do not make a down payment and you do not have to deal with a bank to get a loan to purchase the property. You are dealing

with a private seller and as long as you develop a good relationship you have a good chance to put together a “no credit no down payment” deal!

An Installment Sale Agreement is commonly used by a Seller of property who is interested in acting as a lender to the purchaser of their property. Through an Installment Sale Agreement, the Seller

also acts like a mortgage company. This option has pros and cons for both Buyer and Seller.

The pro for you as a buyer is that you get built in financing typically with no credit check and a small or no down payment. It is also quick and easy compared to a commercial lender.

The Seller does not receive the total sales price for the property at the time of executing the installment sale agreement, but rather receives payments of principal plus interest. The Seller does

retain ownership of the property until the Contract terms are met. Since the Seller receives periodic payments, the Seller can view these payments as steady income. Since the Seller is the lender, the

Seller receives the total purchase price plus interest and makes a lot more money. You can see how much more by running an amortization or using the seller financing analysis, which is on the Rentals spreadsheet on the forms disk.

Often the buyer gets the deed to the property once he has completed part of the payments – maybe

as little as twenty percent of the payments. That part of the deal is negotiable. One important note is that the buyer can resell the property at any time and take a profit – meaning the difference between what he still owes on the purchase and what he is able to sell the property for. The seller

would give him a deed at settlement and the property would immediately be resold to the new buyer. This is a “double close” and is the way these transactions are done if the buyer resells the property before getting the deed.

An Installment Sale Agreement assists a buyer with inadequate credit to obtain financing to

purchase the property. By not using the traditional financing method of a bank or mortgage company, the Buyer can acquire a property without going through the traditional hoops involved with commercial lenders.

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The Buyer must be cautious when entering into an Installment Sale Agreement to ensure that the Seller is the actual owner of the property and has authority to sell the property. The Buyer should

order a title search to verify ownership and liens against the property. You should pay any underlying lenders (such as existing mortgage companies) directly if possible and you should record a memorandum of installment sale agreement in the county records. This will prevent the property

from being sold out from under you. The form is in the forms set.

This installment sale agreement is meant to protect you as the buyer. It allows you plenty of due diligence (same items and terms as in the regular agreement of sale) and limits your liability to money paid under the agreement. Same as the regular agreement of sale.

The IRS allows the seller to defer gains on sales of property through an installment sale agreement.

This arrangement permits sellers to declare a prorated portion of their profits over several years, as long as the proper paperwork is completed during the year of the sale. See IRS publication 537. This is beneficial to the seller because he does not have to pay all the taxes at once.

How the Installment Sale Method Works (tax wise)

Declaring gains under an installment sale is theoretically simple. The taxation of installment sales

has a prorated portion of each payment is considered a return of principal. The only stipulations are that the property being sold cannot be a publicly traded security of any kind, and the taxpayer (seller) cannot be a dealer of the sold property in any sense.

Reporting Installment Sale Income

Installment sale income can be broken down into three separate categories: gain, principal and

interest. Each of these categories is treated separately.

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Installment Sales and Capital Gains

Seller must declare the gain each year as being either long or short term depending upon whether the gain was long or short term in the year of the sale. Long-‐term gains are taxed at a lower rate,

while short-‐term gains are taxed as ordinary income. The gain from an installment sale is reported on IRS Form 6252 and then carried to the Schedule D on Form 1040.

Installment Sales and Interest

Taxpayers with installment sale income must also charge interest to the buyer at a rate that is the lower of the applicable federal rate (or 9% compounded semiannually). The buyer will pay interest

on the unpaid installments until the balance has been remanded. The interest is reported separately as ordinary interest income on Schedule B. (Note: If the interest is not reported separately, then the IRS will consider part of the sale proceeds to be interest.)

Installment Sales and Principal Repayment

Part of each installment sale is considered by the IRS to be a tax-‐free return of principal. This

amount can be determined by calculating the exclusion ratio. Divide the amount of actual gain by the sale price that gives you the exclusion ratio. Simply multiply this ratio by the amount of the installment: This is the amount that is to be excluded from tax because it is designated as principal.

Installment Sales and Mortgages and Contract Price

If the buyer of the property assumes a mortgage or some other promissory note with the purchase,

the cost basis of the property must be reduced by the amount of the mortgage/note.

Obviously the seller will need to get his accountant involved to do the taxes but bottom line is that the seller gets a lot more money by doing an installment sale than he does selling outright. This is because the seller collects interest in addition to the principal.

Be aware that Texas has some odd rules for installment sale agreements and options. In Texas and all states make sure you have an attorney working with you on putting your deals together legally and safely.

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SAMPLE INSTALLMENT SALE AGREEMENT (electronic copy is in the on-‐line forms set at www.diamondlawmembers.com using your member name and password)

INSTALLMENT SALE AGREEMENT

THIS INSTALLMENT SALE AGREEMENT (this "Agreement") dated for identification purposes May 20, 2011 and effective when executed by all parties and is by and between Ralph Cranston of 4 Woodbury Street, San Francisco, California 94101, (the "Seller") and Wise Investments, LLC of 100 High Street, Half Moon Bay, California 94019 (the "Buyer")

IN CONSIDERATION OF the covenants and agreements contained in this Agreement and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties to this Agreement agree as follows:

Sale of Real Estate

1. Seller, for and in consideration of the sum of one million dollars ($1,000,000.00) (the “Purchase Price”), does hereby convey and grant with warranty covenants to Buyer, all of the following lands and property, together with all improvements located on the property:

See exhibit "A" attached hereto (the "Real Estate").

Purchase Price

2. Buyer agrees to pay the Purchase Price in monthly installments of seven thousand four hundred and fifty five dollars and seventy three cents ($7,455.73), due on the tenth day of each month, beginning on the tenth day of the month after the Due Diligence Period (ad defined below) expires until the Purchase Price is paid in full. Buyer may, at Buyer’s choice, directly pay any mortgages, deeds of trust or other liens against the Real Estate directly, in lieu of paying Seller. Those payments shall be made by the due date each month and Buyer will provide notice that payment has been made via email to Seller by the due date each month.

Interest Charges

3. Interest of six and one half percent (6.5%) per year will be computed monthly and deducted from the monthly payments. The balance of the monthly payment will be applied to the principal amount of the Purchase Price outstanding.

Lump Sum Payments

4. Lump sum payments may be made at any time, without penalty, to reduce the principal amount of the Purchase Price outstanding.

Property Taxes and Assessments

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5. For the duration of this Agreement, Buyer will be responsible for all taxes, and assessments levied against the Real Estate.

Insurance

6. Buyer is not responsible for insuring Seller's contents and furnishings in or about the Real Estate against either damage or loss and Buyer assumes no liability for any such damage or loss.

Personal Property Insurance.

7. Buyer is hereby advised and understands that the personal property of Buyer is not insured by Seller for either damage or loss, and Seller assumes no responsibility for any such damage or loss. If insurance coverage is desired by Buyer, Buyer should purchase a policy. Buyer is not required to purchase personal property insurance.

Real Property Insurance – Physical Loss.

8. Buyer is hereby advised and understands that the Real Estate is not insured by Seller for either damage or loss to the structure, mechanical or improvements to the Real Estate, and Seller assumes no responsibility for any such damage or loss. Buyer is advised that insurance coverage from a reputable insurance company and in an amount sufficient to replace the Real Estate should it be damaged or destroyed is required by Seller. Buyer is required to purchase a physical loss policy with a deductible no larger than five thousand dollars ($5,000.00) and shall name Seller as an additional insured. Failure to insure the Real Estate is a violation of this Agreement and may result in the termination of the Agreement unless remedied within the Default Remedy Period.

Real Property Insurance – Liability.

9. Buyer is responsible for maintaining liability insurance on the Real Estate for the benefit of both Buyer and Seller, and Buyer assumes liability for any damage or loss arising from the liability of either Buyer or Seller. Buyer shall maintain sufficient insurance to replace the building in the event of a total loss and at least three times the value of the building or one million dollars ($1,000,000.00), whichever is less, in liability insurance.

Buyer's Default

10. In the event of Buyer's failure to perform any material covenant or condition contained in this Agreement, Seller will give Buyer a written notice of default. The notice will give Buyer ninety (90) days from the date the notice is received (the “Default Remedy Period”) to remedy the default. If Buyer fails to remedy the default within the Default Remedy Period, then Seller may terminate this Agreement at the end of the Notice Period. If the default is such that is it not reasonably possible to remedy the default within the Default Remedy Period then Buyer must make commercially reasonable efforts to cure the default in a commercially reasonable time. In the event of a Buyer default the sole and exclusive remedy of Seller shall be to terminate this Agreement and take back the Real Estate.

11. Buyer and Seller agree that in the event that Buyer fails to timely remedy a default and this

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Agreement is terminated, Buyer will vacate the Real Estate within sixty (60) days of the Agreement terminating. Buyer and Seller further agree that failure of Buyer to vacate within that period gives Seller a right to maintain an action to obtain vacant possession of the Real Estate.

12. In the event of default and termination of this Agreement by Buyer, Buyer forfeits any and all payments made under the terms of this Agreement, including but not limited to all payments made towards the Purchase Price, and any and all taxes, assessments, or insurance premiums paid by Buyer, as liquidated damages for breach of this Agreement.

Buyer's Right to Reinstate Agreement After Default

13. In the event of Buyer's default and the termination of this Agreement, Buyer will have the right to reinstate this Agreement so long s Buyer does so within sixty (60) days of the end of the Default Remedy Period. To reinstate this Agreement Buyer must: (i) pay all amounts due and owing under this Agreement had the Agreement not been terminated; and (ii) cure any defaults that have occurred.

Assignment or Sale of the Real Estate

14. Buyer may assign his interest in the Real Estate and this Agreement without the consent of Seller.

Deed and Evidence of Title

15. Upon payment of twenty percent of the Purchase Price, including all taxes, assessments, interest, and other charges due to Seller, Seller agrees to deliver to Buyer, within seven (7) days of Buyer’s request, a special warranty deed to the Real Estate in the name of Buyer. In the event Buyer sells the Real Estate before receiving the deed to the Real Estate, Seller agrees to deliver a deed into escrow with a title agent or attorney to be delivered to Buyer upon payment of the remaining purchase price. Such payment shall be sufficient if the payment is a check from a title agent or attorney or a wire transfer. Seller agrees to cooperate with any and all requests from the title agent or attorney to sign seller’s affidavits and other such documents that are typical in sale transactions in the area where the Real Estate is situate.

Notices

16. All notices required to be sent under this Agreement will be sent by pre-paid US Mail, Certified or UPS or FEDEX, signature required and simultaneously via email to:

Buyer: Wise Investments, LLC, 100 High Street, Half Moon Bay, California 94019 Email [email protected]_

Seller: Ralph Cranston of 4 Woodbury Street, San Francisco, California 94101 Email [email protected]

The party giving notice shall also deliver notice via email at the time the notice is sent by US Mail, UPS or FEDEX so long as an email is provided,

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Charges for Late Payment

17. In the event Buyer pays a monthly installment payment after it becomes due, there will be a late fee of five percent of the amount due assessed to Buyer.

Conveyance or Mortgage by Seller

18. Seller may not encumber the Real Estate with a mortgage or other lien or encumbrance other than those present at the time this Agreement is executed Seller agrees to meet the obligations due under the mortgage and to provide proof of the same to Buyer upon the written demand of Buyer. In addition Buyer shall be provided with an on-line login to the mortgage company’s website and the account login information so Buyer can monitor payments.

19. Seller may not convey any ownership, option, lien, possessory or leasehold interest in the Real Estate, during the term of this Agreement. Buyer may convey any ownership, option, lien, possessory or leasehold interest in the Real Estate, during the term of this Agreement.

Security

20. This Agreement will act as security for the performance of all of Buyer's obligations under this Agreement.

Time of the Essence

21. Time is of the essence for the performance of all of Buyer's obligations under this Agreement.

Entire Agreement

22. This Agreement will constitute the entire agreement between Buyer and Seller. Any prior understanding or representation of any kind preceding e date of this Agreement will not be binding on either party except to the extent that it is incorporated into this Agreement.

Amendments

23. Any amendments or modifications of this Agreement or additional obligations assumed by either party in connection with this Agreement will only be binding if they are evidenced in writing and signed by each party or an authorized representative of each party.

Waivers

24. A waiver of any rights by any party in connection with this Agreement will only be binding if evidenced in writing and signed by each party or an authorized representative of each party.

Severability

25. If there is a conflict between any provision of this Agreement and any law, regulation or rule,

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(the "Laws"), the Laws will prevail and such provisions of this Agreement will be amended or deleted as necessary in order to comply with the Laws. Further, any provisions that are required by the Laws are incorporated into this Agreement

26. In the event that any of the provisions of this Agreement will be held to be invalid or unenforceable in whole or in part, those provisions, to the extent enforceable and all other provisions of this Agreement will nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts had not been included in this Agreement and the remaining provisions had been executed by both parties subsequent to the expungement of the invalid provision.

Interpretation

27. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.

Joint and Several Liability

28. All Sellers are jointly and severally liable for the acts, omissions, and liabilities of all other Sellers to this Agreement.

Heirs and Assigns

29. This Agreement will extend to and be binding upon and inure to the benefit of the respective heirs, executors, administrators, successors, and assigns, as the case may be, of each party to this Agreement. All covenants are to be construed as conditions of this Agreement.

30. Due Diligence

Buyer’s obligations under this Agreement are contingent upon Buyer receiving satisfactory reports, reviewing documentation, and performing due diligence on all of the items listed below in this section of this Agreement. In the event any of the reports, documentation, or facts discovered during due diligence are not satisfactory to Buyer, at Buyer’s sole and absolute discretion, then Buyer may cancel this Agreement, shall then receive any and all deposits back and shall have no further obligations or liability under this Agreement. The due diligence period shall run for ninety (90) days from the date this agreement is given to Buyer in fully executed form or longer if indicated below. If Seller is in possession of the Real Estate during the due diligence period Seller agrees to make the Real Estate available for inspections by Buyer and his inspector(s) upon 12 hours notice and to provide all documents needed by Buyer to perform due diligence within five business days of the date Seller executes this Agreement.

H. Environmental Report. Buyer must receive a report that is satisfactory to Buyer regarding the environmental conditions directly and/or indirectly affecting the Real Estate. Whether the Environmental Report is satisfactory shall be the sole and absolute discretion of Buyer.

I. Condition Contingency. Buyer shall be entitled to inspection(s) of the building by inspector(s) of his choosing. The inspection(s) can cover any and all aspects of the real property both physical and legal, including the zoning, leases, correspondence with third parties of any kind, utility usage, permitted uses of the Real Estate, easements, agreements of any kind affecting the building, plumbing, heating,

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electrical, sewage, roofing, air conditioning, and other systems, the foundation, structure, windows, walls, and any other area or aspects of the Real Estate Buyer decides to inspect.

J. Zoning and Land Use Contingency. Buyer’s obligations under this Agreement are contingent upon its securing the required permits, lot changes, zoning changes and any and all other land use approvals (the “Approvals”) necessary to use and operate the Real Estate according to Buyer’s intended use. Buyer shall have until settlement to obtain the Approvals from the appropriate entities. In the event Buyer fails to obtain the Approvals, Buyer may provide notice to Seller and terminate this Agreement. In the event Buyer terminates this Agreement Buyer shall receive any and all deposits given Seller or anyone else on account of this Agreement, and shall have no further liability to Seller under this Agreement. Seller agrees, on the request of Buyer or Buyer's nominee, to execute, at the sole cost and expense of Buyer or Buyer's nominee, all instruments and documents reasonably required to be executed by Seller to enable Buyer or Buyer's nominee to secure the right under applicable zoning, land use, or building laws and regulations, such that Buyer can apply for any zoning or variance necessary to use the Real Estate in such as way as is suitable to Buyer.

K. Suitability Contingency. Buyer may terminate this Agreement if Buyer is not satisfied with the economic feasibility and/or suitability of the Real Estate. If, in Buyer’s opinion the Real Estate does not have adequate utility service, suitable zoning, adequate access to public roads, adequate water or sewer for Buyer’s intended use or for any other reason, at Buyer’s sole and absolute discretion the Real Estate is not suitable for Buyer’s intended use, then Buyer may terminate this Agreement and Buyer shall receive any and all deposits given Seller or anyone else on account of this Agreement, and shall have no further liability to Seller under this Agreement.

L. Certificate of Estoppel. Seller shall deliver to Buyer a certificate of estoppel signed by each tenant leasing space in the premises as of the date this agreement is delivered to Buyer executed by Seller (the “Agreement Delivery Date”), stating that (1) as of the Agreement Delivery Date no default exists under the terms of the lease agreement by either Lessor or Lessee; (2) no rental payments have been made in advance other than as set forth in the estoppel; (3) that the lease is in full force and effect and not under any dispute; (4) setting out the amount of the security deposit and any other amounts prepaid to landlord; and (5) the tenant has no defenses or offsets against rent accruing under the terms of his/her or its lease agreement. Buyer’s due diligence period on the estoppel documents shall run until five business days have passed after Buyer receives all estoppel certificates fully executed by each and every tenant.

32. DUE DILIGENCE MATERIALS TO BE PROVIDED BY SELLER. A. Within five days of executing this Agreement Seller agrees to provide true and correct copies of

the following to Buyer (the “Due Diligence Materials”): B. A current rent roll (the “Rent Roll”), which is a true and accurate schedule of leases, tenants, and

rents presently being collected by Seller. The Rent Roll shall include the amounts of all rental and damage deposits retained by Seller, a list of any prepaid rent, and any tenants who are occupying space within the Real Estate without a lease or other written agreement with. The Rent Roll shall also list any and all decorating, installation, and alteration work which Seller may be obligated to perform under any written or oral agreement with any tenant or occupant in the Real Estate. Seller also agrees to provide a copy of any and all leases or occupancy agreements with any person(s);

C. A schedule of insurance (the “Insurance List”) carried on the premises, a copy of the insurance bills or invoices for the twenty four months immediately preceding this Agreement, and any notices or requests that have been received by Seller from any insurance company issuing any of the policies;

D. A list of maintenance, alarm, or other contracts affecting the Real Estate; E. A true and correct copy of any notices that have been received by Seller from the holders of any

mortgage, deed of trust or any other instrument securing debt against the Real Estate regarding any default under the terms of the instrument;

Robert Diamond� 4/11/11 4:43 PMComment: The estoppels is a signed statement by every Tenant. Each tenant signs its own estoppels letter.

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F. A copy of any notices of any violations of any building, housing, fire, safety, or similar ordinance or regulation with regard to the premises;

G. A copy of water, gas, and electrical utility bills relating to the premises for the twenty-four months immediately preceding this Agreement;

H. A true and correct copy of any liens all of the personal property being sold under this Agreement such as alarm systems, washing equipment and any other items of personal property being sold under this Agreement;

I. An statement of income and expenses in a form satisfactory to Buyer for the twenty-four months prior to the date seller enters into this Agreement;

J. A true and correct copy of any brokerage agreements affecting the Real Estate; K. A full, complete, and accurate list of all employees engaged in the operation and maintenance of

the premises, giving the name, position, rate of compensation, term of employment contract or agreement, if any, and other relevant information with respect to each employee;

L. A copy of any notices of pending or threatened condemnation or similar proceeding or assessment (special or otherwise) affecting the Real Estate, or any part of the Real Estate;

M. A copy of any unpaid or partially paid bills outstanding for work done to the premises or materials provided by any persons or entities that have not been paid for, nor any notices which may result in any mechanics' lien or materialman’s lien and a copy of any mechanics' liens or materialman’s liens against the premises; and

N. A copy of any notices of the presence of any (i) hazardous substances, pollutants or contaminants (as defined in Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. section 9601, as amended by the Superfund Amendments and Re -‐authorization Act of 1986 (Pub. L.. No. 99-‐499, 100 Stat. 1613 (1986) (SARA) or 40 CFR Part 261, whichever is applicable) in, on, about or near the Real Estate.

O. If, in the sole and absolute discretion of Buyer any of the due diligence materials are not satisfactory in either form or substance, Buyer may, at any time prior to settlement hereunder cancel this Agreement, receive any and all deposits back and have no further liability to Seller or any other party under this Agreement.

33. Additional Representations and Warranties of Seller Clauses

Seller represents, warrants, and guarantees to Buyer the following, which shall be deemed made by Seller to Buyer as of the date of settlement and shall survive settlement:

A. The Due Diligence Items supplied by Seller are true, correct and complete; B. There are no rents prepaid for more than one month in advance other than as indicated on the

Rent Roll, and no tenant has been granted any rent-‐free occupancy. All decorating, installation, and alteration work which Seller may be obligated to perform, on or prior to the settlement date, for any tenant, has been performed or will be performed prior to the settlement date at Seller’s expense;

C. No default exists by lender or borrower under any mortgage, deed of trust or any other instrument securing debt against the Real Estate;

D. There are no outstanding notices or notices of any uncorrected violations of any building, housing, fire, safety, or similar ordinance or regulation with regard to the premises and that Seller shall deliver to Buyer at or before settlement a certificate of zoning classification and legality of use of premises issued by the appropriate (in the opinion of Buyer) city, township, department and official;

E. The Real Estate does not violate any provisions of any applicable building code, fire regulations, or other governmental ordinances, orders, or regulations;

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F. The buildings, equipment and improvements situated on the Real Estate, including all electrical equipment and mechanical equipment in this Agreement are and will be in good, sound condition, operation, and repair on the date of closing;

G. Seller has no knowledge of any condition or defects (latent or otherwise) not disclosed in this Agreement that would affect the sale of the Real Estate or be material to this Agreement;

H. Seller owns free and clear of any liens all of the personal property being sold under this Agreement;

I. The rental information provided will be: for rentals that are legally collectible; that no concessions having been granted to the holders of any the leases other than those set forth in the leases; All of the leases are in full force and effect and not in default; all leases will be in full force and effect and not in default at the time of closing; and that no brokerage commission is due and unpaid in connection with any lease, tenancy, or occupancy, or any renewal;

J. The monthly income from the Jones shall not decline more than five percent from that shown in the “Income and Expense Statement” at the settlement date. If the rental income has declined more than five percent as of the date of settlement, Buyer has the option of delaying the closing until the income is increased with tenants satisfactory to Buyer in order to reach the designated monthly rental income figure or to cancel this Agreement, receive all of Buyer’s deposit(s) back along with any monies expended by Buyer on due diligence and have no further obligations under this Agreement;

K. There is no proceeding or assessment contemplated by any governmental authority. These representations and warranties shall survive settlement; and

L. Environmental Clause. Seller warrants and represents that to the best of its knowledge, information and belief that: (i) no hazardous substance, pollutant or contaminant (as defined in Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. section 9601, as amended by the Superfund Amendments and Re-‐authorization Act of 1986 (Pub. L.. No. 99-‐499, 100 Stat. 1613 (1986) (SARA) or 40 CFR Part 261, whichever is applicable) is present on the Real Estate; (ii) no hazardous waste, residual waste or solid waste is present on the Real Estate, and (iii) Seller has not been identified in any litigation, administrative proceedings or investigation as a responsible party for any liability under the above referenced laws. Seller (x) covenants that neither Seller nor any predecessor in interest occupying or using the Real Estate has used, generated, treated, stored, disposed of, or otherwise introduced any hazardous substances, pollutants, contaminants, hazardous waste, residual waste, solid waste or substance (as used or defined in clauses (i), (ii) or (iii) above) into or on the Real Estate and (y) hereby indemnifies and agrees to hold Buyer harmless from and against all loss, liability, damage, expense and costs arising out of Seller's breach of the representations and covenants of this Article. The foregoing indemnification shall survive the conveyance of the Real Estate.

IN WITNESS WHEREOF, intending to be legally bound, Seller and Buyer have duly affixed their signatures under hand and seals.

SELLER BUYER

Wise Investments, LLC

_________________________ _________________________

Ralph Cranston By: Samuel Jones

Title: Manager

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Date: May 23, 2011 Date: May 20, 2011

BUYER ACKNOWLEDGMENT

State of California:

County of San Francisco:

On this 20th day of May, 2011, before me, Sylvia Lindstrom, the undersigned officer, personally

appeared Samuel Jones, known to me (or satisfactorily proven) to be the person whose name is

subscribed to the within instrument and acknowledged that he/she is the manager of Wise Investments,

LLC, and being authorized to do so, executed the same for the purposes therein contained.

In witness whereof, I hereunto set my hand and official seal.

________________________________ Notary Public

My commission expires: _____________

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SELLER ACKNOWLEDGMENT

State of California:

County of San Mateo:

On this 23rd day of May, 2011, before me, Lynne B. Murphy the undersigned officer, personally

appeared Ralph Cranston, known to me (or satisfactorily proven) to be the person whose name is

subscribed to the within instrument and acknowledged that he executed the same for the purposes

therein contained.

In witness whereof, I hereunto set my hand and official seal.

________________________________ Notary Public

My commission expires: _____________

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Exhibit “A”

Legal Description (be sure to include the tax ID number for the Property)

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Subject-to Investing (Taking over property with existing mortgage still in place) Electronic copies are included in the on-‐line forms set at www.diamondlawmembers.com using


Some other situations that occur in real estate include buying a property “subject to” an existing mortgage, a short sale, or a court authorization to sell.

Subject to is simple which is what causes investors to be confused by it.

Buying a Property “Subject to” and Existing Mortgage “Subject To” means is that you are taking ownership of a property with its existing mortgage or mortgages, and that you’re going to start

making payments on those mortgages.

That’s it.

The procedure is simple:

Have a title company or attorney draft a deed from the seller to you or your entity. Record that

deed in the real estate records in the county where the real estate sits.

Change the address for the mortgage company to your address.

Buy insurance (fire, liability, etc.) to your name/your company name.

Make payments on the mortgage.

If the lender calls the loan negotiate with them and either sell the property to pay them off, fight any foreclosure or refinance to pay off the lender. Most lenders to not call loans when you take the property subject to. You can reduce the chance of them calling the loan by transferring the property

into a trust and then transferring the beneficial interest in the trust to you (discussed below).

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A common misconception is that you cannot transfer ownership of the property unless you have the lender’s consent. That is incorrect. The lender may have the right to call the loan due and payable

through the due-‐on-‐sale clause but they cannot block the ownership transfer. Ownership it transferred by recording a deed at the courthouse. The lender’s agreement is not needed for that.

The benefits of subject to are that it’s simple and it’s quick. You don’t have to qualify for a loan on your own, and you don’t have to put in a credit application or anything else— you just start making

the payments. If you have poor credit, this can be a great solution for you.

The fear that people have in taking a property subject to is there is a clause in pretty much every mortgage document that’s called the “due on sale” clause. What this means is that a mortgage company can call the loan “due” if there has been any transfer of ownership of the property, which

is what you’re doing. If this happens, you have to either pay off the mortgage or refinance it or fight any foreclosure.

The reality is that the banks don’t have the resources or incentive to scrutinize and review all these accounts to make sure that ownership of the property has not changed. Typically, they only notice

something when payments are being missed or possibly when they pay the property taxes or insurance bill.

Subject-‐to is a way to do a deal quickly without needing a loan from a traditional because it allows you to take over the property with its existing financing in place.

Often buyers will place the property into a trust and then transfer the beneficial interest in the trust to themselves. That methodology will create a screen of privacy and make it less likely the lender will notice that the property has been transferred. The due on sale clause still is active so this is not

a legal impediment to the lender calling the loan due if they figure out what has happened.

We do like subject-‐to deals for short term financing – six months or so – perhaps time to renovate and resell or refinance a property -‐ but not as much for longer term. Over the long term the risk of having the lender call the loan due ramps up.

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Please be aware that transfer taxes are due to the relevant taxing authorities that collect real estate transfer taxes if you structure a deal this way. Samples of the trust documents appear below and

are also on the forms set.

Sample Trust Documents The digital forms are accessible using your member id and password at www.diamondlawmembers.com.

1234 Main Street Trust THIS LAND TRUST AGREEMENT is made this _6th_ day of _June, 2011, by and between Robert and Melinda Smith ("Trustor"), who is also the grantor and beneficiary hereunder, (hereinafter referred to as the “Beneficiary”), and Diamond Property Management, LLC, who is hereby named trustee of the trust, (hereinafter referred to as the "Trustee", which designation shall include all successor trustees). WHEREAS, the Trustor is about to convey or cause to be conveyed certain real property to the Trustee, in trust, and WHEREAS, the Trustee has agreed to accept such conveyance and hold the real property in trust under the terms and conditions set forth below. NOW, THEREFORE, the parties, intending to be legally bound hereby, agree as follows: 1. TITLE. The trust created by this instrument shall be known as the 1234 Main Street Trust. 2. OBJECTS AND PURPOSES OF TRUST. The purpose of this trust is for the Trustee to take and hold title to the property conveyed to the Trustee and to administer title until its sale or other disposition. The Trustee may undertake any and all activities he believes necessary. The Trustee shall not transact business within the meaning of applicable state law, or any other law, nor shall this Trust Agreement be deemed to be, or create or evidence the existence of a corporation, de facto or de jure, or a Massachusetts Trust, or any other type of business trust, or an association in the nature of a corporation, or a co-partnership or joint venture by or between the Trustee and the Trustor, or by or between the Beneficiaries should more beneficiaries be added in the future. 3. TRUST PROPERTY. The Trustor is about to convey or cause to be conveyed to the Trustee in trust certain real property as described more particularly in Schedule "A" attached hereto and made a part hereof. This property, together with any property later added to the trust, shall be designated as the "Trust Property". The Trustee will hold the Trust Property according to the terms and conditions of this Land Trust Agreement for the purposes, terms and conditions contained herein until such time as all of the Trust Property has been sold or otherwise conveyed, or until this trust has been terminated. The Trustee shall maintain a list of the Trust Property, which shall be designated as Schedule "B" under this Agreement. 4. POWERS AND DUTIES OF TRUSTEE. The Trustee shall have all of the powers allowed to him by the provisions of the state law governing this Trust (see Paragraph 18). The Trustee shall specifically have the power to make and execute contracts for the lease or sale of the Trust Property, incur debt on behalf of the Trust, to execute by mortgages upon the Trust property as security therefore, and to otherwise dispose of the Trust Property as the Trustee sees fit at his sole and absolute discretion.

Robert Diamond� 4/11/11 10:28 AM



Comment: This is the current owner of the property

Comment: Insert individual, corporation or LLC name who will serve at Trustee

Comment: You must record a deed in the county real estate records to transfer the property into this trust. If you do not record a deed from the current owner to the trust this whole exercise is fruitless.

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5. COMPENSATION OF TRUSTEE. The Trustee shall receive any monies received from sale or lease of the property held by the Trust in excess of the secured debt (secured debt being defined as mortgages, liens, and other items which must be paid to deliver clear and marketable title). The title company is hereby instructed by the beneficiaries of the Trust to pay over all of seller's funds from settlement to the Trustee at settlement. The Trustee shall be promptly reimbursed by the Beneficiaries For expenses incurred by the Trustee in the administration of the Trust. The Trustee shall have a lien on the Trust Property for any unreimbursed expenses. The Trustee shall not be obligated to advance any money on account of this Trust. The Trustee shall not be obligated to commence any legal action or to defend against any legal action unless the Trustee, in his sole discretion, is satisfied with the security provided by the Beneficiaries for the payment of the Trustee's costs and expenses in connection with the litigation. 6. LIABILITY OF TRUSTEE. The Trustee shall not be personally liable for any obligation of the Trust. No Beneficiary shall be able to bind the Trustee nor contract on his behalf without the Trustee's express written consent. The Trustee and any successor Trustee shall not be required to give a bond. Each Trustee is liable only for his own actions and then only as a result of his own gross negligence or bad faith. 7. INCOME TAX RETURNS. The Trustee shall not be responsible for the preparation and/or filing of any tax returns, which may be due for the reporting of income and expenses of the Trust, although he will sign such returns upon request. The Beneficiaries shall each individually report receipt of their respective share of the profits, earnings, avails and proceeds to the Trustee and all other beneficiaries for each calendar year by February 1 of the following year. 8. INDEMNIFICATION OF THE TRUSTEE. The Beneficiaries agree to indemnify, hold harmless and defend the Trustee from any and all liability incurred in its capacity as Trustee. If the Trustee shall pay or incur any liability to pay any money on account of this Trust, or incur any liability to any money on account of being made a party to any litigation as a result of holding title to the Trust Property or otherwise in connection with this Trust, without regard to the cause of action asserted or complaint filed, the Beneficiaries, jointly and severally, agree that on demand they will pay to the Trustee all such payments or liabilities, his expenses incurred in connection therewith, including reasonable attorneys' fees, and any other sums advanced by the Trustee on behalf of the Trust for any reason whatsoever. These amounts, if not immediately paid to the Trustee, shall bear interest at the rate of twelve (12%) percent per annum until paid in full. These amounts and any compensation due to the Trustee, until paid in full to the Trustee, shall constitute a lien on the Trust Property. Further, as long as these amounts or any compensation due to the Trustee remain unpaid, the Trustee shall not have any obligation to take any action with regard to the Trust Property. 9. DEALINGS WITH TRUSTEE. No party dealing with the Trustee, in relation to the Trust Property in any manner whatsoever, including, but not limited to, a party to whom the Trust Property or any part of it or any interest in it shall be conveyed, contracted to be sold, leased or mortgaged, by the Trustee, shall be obliged to see to the application of any purchase money, rent or money borrowed or otherwise advanced on the property; to see that the terms of this Trust Agreement have been complied with; to inquire into the authority, necessity or expediency of any act of the Trustee; or be privileged to inquire into any of the terms of this Trust Agreement. Every deed, mortgage, lease or other instrument executed by the Trustee in relation to the Trust Property shall be conclusive

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evidence in favor of every person claiming any right, title or interest under the Trust that at the time of its delivery the Trust created under this Agreement was in full force and effect; and that the instrument was executed in accordance with the terms and conditions of this Agreement and all its amendments, if any, and is binding upon all Beneficiaries under it; that the Trustee was duly authorized and empowered to execute and deliver every such instrument; if a conveyance has been made to a successor or successors-in-trust, that the successor or successors have been appointed properly and are vested fully with all the title, estate, rights, powers, duties and obligations of its, his or their predecessor in Trust. 10. BENEFICIARIES. The Beneficiaries are the persons or legal entities identified, along with their respective interests, on Schedule "C" which is attached hereto and made a part hereof. Should there be one or more than one beneficiary, the duties, rights, and responsibilities of the Trustee and Beneficiary or Beneficiaries shall be the same and each beneficiary agrees by accepting a beneficial interest in this trust to be bound by the terms of this Trust. In this document the plural “Beneficiaries” or the singular “Beneficiary” applies and refers to both an individual Beneficiary if there is only one and to multiple beneficiaries if there are more than one beneficiary. The Beneficiaries are entitled to all of the profits, earnings, avails and proceeds of the Trust Property. 11. INTEREST OF BENEFICIARIES. The interests of the beneficiaries shall consist solely of (1) the right to lease, manage and control the Trust Property; (2) the right to direct the Trustee with regard to the disposition of the title to the Trust Property; and (3) the right to receive the profits, earnings, avails and proceeds from the rental, sale, mortgage or other disposition of the Trust Property. The foregoing rights of the Beneficiaries are hereby declared to be personal property and may be assigned or otherwise transferred as such. The death of any Beneficiary shall not affect the existence of the Trust nor in any way diminish or alter the powers of the Trustee. No Beneficiary shall have any right, title or interest, whether legal or equitable, in the real property, which is held as Trust Property. No Beneficiary shall have the right to require partition of the Trust Property. The Beneficiaries shall not use the name of the Trustee for advertising or other publicity purposes without first obtaining the written consent of the Trustee. The Beneficiaries shall be required to carry liability insurance in such forms and in such amounts as the Trustee, in his sole discretion, shall deem necessary to insure the Trust Property and the Trustee. If the Beneficiaries fail to obtain or maintain the required insurance policies, then the Trustee shall have the right, in his sole discretion, to advance the money necessary to pay for said insurance policies. The Beneficiaries will reimburse the Trustee for the insurance as set forth above. No Beneficiary shall have right to bind or otherwise contract for any other Beneficiary except as provided for elsewhere under this Agreement. 12. ASSIGNMENT OF BENEFICIAL INTERESTS. The Beneficiaries do not have the right to assign any part or all of their interests under this Trust without the consent and approval of the Trustee. No assignment shall be valid or affect the interest of a Beneficiary hereunder until approved by the Trustee and the Trustee delivers a written acceptance of the assignment signed by the Beneficiaries and assignee(s).

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13. RECORDING OF AGREEMENT. This Land Trust Agreement shall not be placed of record in any jurisdiction unless recording is necessary to record a deed, mortgage or other document necessary to transfer or encumber the trust property or necessary to effectuate the purposes of this trust. If this agreement is placed of record, then it shall not be notice of any interest, which may affect the title, or the powers of the Trustee. 14. ENTIRE AGREEMENT. This Land Trust Agreement contains the entire understanding between the parties hereto and may be amended, revoked or terminated only be written agreement signed by the Trustee and all of the Beneficiaries at the time of the amendment, revocation or termination. 15. GOVERNING LAW. This Agreement shall be governed by, construed and enforced in accordance with the laws where the majority of land which is held by the trust is situate. 16. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Trustee, any successor trustee, the Beneficiaries, and the Beneficiaries' successors, heirs, executors, administrators and assigns. 17. ANNUAL STATEMENTS. The Trustee shall not be required to furnish annual or any other statements to the Beneficiaries. 18. PERPETUITIES. If any portion of the Trust Property is in any manner or time period capable of being held in this Land Trust for longer period of time than is permitted under the laws of the state law governing this Land Trust Agreement, or the vesting of any interest under this Land Trust could possibly occur after the end of such permitted time period, then, upon the occurrence of the foregoing, the Trustee is directed to immediately terminate the Trust and to distribute the Trust Property to the Beneficiaries as their respective interests may appear at the time of the termination of the Trust. As much as possible, the Trustee will maintain the Trust Property intact and not liquidate it, but, rather, distribute the Trust Property in kind. 19. TERMINATION. This Trust may be terminated thirty (30) days or more after the date upon which all of the Beneficiaries agree in writing to said termination. The Beneficiaries shall immediately give the Trustee written notice of the effective date of termination. The Trustee shall execute any and all documents necessary to effectuate the transfer of the Trust Property to the Beneficiaries as their interests may appear. 20. NOTICE. Any notice that is given in connection with this Land Trust Agreement shall be given (a) to the Beneficiaries at the address set forth in Schedule "C" as shall be changed from time to time upon notice to the Trustee from the Beneficiaries; and (b) to the Trustee at such address as he may hereafter specify. The notice shall be deemed to be validly given if personally delivered or mailed to a person by first class mail, postage prepaid, at the above-specified address. 21. POWER TO REVOKE. The Trustor expressly reserves the following powers: A. The power to revoke, alter, amend or modify this agreement at any time or from time to time by an instrument or instruments in writing, which the Trustor or his agent shall deliver to the Trustee while the Trustor is alive. However, no such alteration, amendment, or modification shall increase the duties nor change the basis for compensation of the Trustee without the Trustee’s written consent. This power shall end when and if the beneficiaries under this Trust change.

Robert Diamond� 4/11/11 10:28 AMComment: This makes this a “revocable” trust sometimes referred to as a “living trust” which means this entity has pass-through tax status. Irrevocable trusts have to pay their own taxes, like a corporation prior to passing profits to the beneficiary of the trust.

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B. The power to withdraw from the Trust any property forming a part of the Trust, which property or the proceeds there from was added to the Trust by the Trustor. Any such withdrawal, (including but not limited to, one made by check against a trust bank account) or the sale or transfer of any property by the Trustor shall be considered a revocation of this Trust solely with respect to the property or money withdrawn. This power of the Trustor shall end when and if the beneficiaries under this Trust change at which time the power to revoke shall transfer to the new beneficiary(ies) under this Trust. 22. TRUSTOR’S DURABLE POWERS OF ATTORNEY. The Trustor reserves the right from time to time to name one or more agents under durable powers of attorney (including any Trustee acting hereunder) to exercise any right or power retained by the Trustor under this Agreement. The Trustee shall not be obligated to see to the application of any money paid or property delivered pursuant to the direction of such agents. 23. TRUSTEE DELEGATIONS. A Trustee may delegate any part or all of the rights, powers, duties, discretions, and immunities that this instrument grants or imposes upon such Trustee to any other person the Trustee deems desirable. 24. INSTRUCTIONS TO TRUSTEE. All instructions to the Trustee from the Beneficiaries or Trustor shall be in writing and shall be mailed via U.S. Mail, first class, postage pre-paid, Certified, return receipt requested to said Trustee at PO Box 2355, Villanova, PA 19085_(address of Trustee) or such address as the Trustee may designate from time to time. IN WITNESS WHEREOF, intending to be legally bound, I affix my signature below. Trustor(s): __________________________ __________________________ Signature Date Printed Name: Robert Smith __________________________ __________________________ Signature Date Printed Name: Melinda Smith Trustee: Diamond Property Management, LLC, __________________________ _________________________ BY: Randy Diamond Date It’s Manager

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ACKNOWLEDGMENT State of Pennsylvania : SS County of Bucks : Before me, the undersigned officer in and for said county and state, personally appeared Robert Smith (Trustor name) referred to in the document as the “Trustor,” who is known to me (or satisfactorily proven) to be the person(s) whose name is subscribed to the foregoing instrument and acknowledged that he/she/they executed the same for the purposes contained therein. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this 6th day of June, 2011. ___________________________________________ Notary Public My Commission expires:____________

ACKNOWLEDGMENT IF THERE IS A SECOND TRUSTOR State of Pennsylvania : SS County of Bucks : Before me, the undersigned officer in and for said county and state, personally appeared Melinda Smith (Trustor name) referred to in the document as the “Trustor,” who is known to me (or satisfactorily proven) to be the person(s) whose name is subscribed to the foregoing instrument and acknowledged that he/she/they executed the same for the purposes contained therein. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this 6th day of June, 2011. ___________________________________________ Notary Public My Commission expires:____________

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SCHEDULE “A” The following is the legal description of the Trust Property contained in the foregoing Land Trust. (include tax id number)

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SCHEDULE “B” The following are the addresses of the real estate that is Trust Property: 1. 1234 Main Street, Villanova, Pennsylvania, 19085_________ 2. __________________________________________________________________

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SCHEDULE “C” The following are all of the Beneficiaries who own all of the beneficial interest in the foregoing Land Trust: Name Address Interest Robert Smith 156 Oak Tree Lane, Villanova, PA 19085 _50__% Melinda Smith 156 Oak Tree Lane, Villanova, PA 19085 _50__%

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ASSIGNMENT OF BENEFICIAL INTEREST IN TRUST

THIS ASSIGNMENT OF BENEFICIAL INTEREST IN TRUST IS between Robert and Melinda Smith (“Assignor”) and Diamond Properties, LLC (“Assignee”).

Assignor is a beneficiary (“Beneficiary”) under a certain Trust named 1234 Main Street Trust (the “Trust”) dated June 6, 2011_ created by Robert and Melinda Smith and Diamond Property Management, LLC is the Trustee. Assignor now desires to transfer all of his/her rights, as Beneficiary under the Trust to Assignee and Assignee desires to have all rights and assume all obligations under the Trust. NOW THEREFORE, for and in consideration of the sum of one dollar and other good and valuable consideration paid by Assignee to Assignor at the time of the execution hereof, the receipt and sufficiency of which is hereby acknowledged, Assignor does hereby grant, bargain, sell, assign, transfer and set over unto Assignee, his heirs, executors, administrators and assigns all rights of Assignor as Beneficiary under the Trust, and all of Assignor's right, title, interest, property, claim and demand in and to the same: to have, hold, receive, and take all of the rights incident to the Trust in law or equity, unto the said Assignee, his heirs, executors, administrators and assigns, to and for his and their only proper use and benefit forever

By affixing his/her/its signature below, Assignee hereby accepts the Assignment; assumes all of the responsibilities of the Beneficiary under the Trust; agrees to comply with all of the responsibilities of Beneficiary under the Trust; and to comply with all of the terms and conditions of the Trust. Assignee agrees to indemnify and hold harmless Assignor from any and all actions, claims, suits seller or any other person may bring against Assignor, his heirs, administrators or assigns in any way related to the Property or Trust and release the Assignor, his heirs, administrator or assigns from any claim related in any way to the Property or Trust. Assignee shall have nine months to accept this Assignment of Beneficial Interest in Trust by signing his/her/its name below. At the time Assignee affixes his signature the Assignor hereby directs the Trustee to approve this assignment. INTENDING TO BE LEGALLY BOUND, the parties hereto have executed this Assignment as of the date(s) written below.

I hereby assign my beneficial interest in the Trust.

__________________________________ (Seal) __________________________________ Robert Smith Date

__________________________________ (Seal) __________________________________ Melinda Smith Date

Diamond Properties, LLC hereby accepts the assignment of beneficial interest in the Trust.

__________________________ ________ __________________________ BY: Lisa Jones Date




Comment: This is the document you use to transfer the property that has been placed in trust to you.

Comment: Trust name goes here

Comment: These are the former owner name(s)

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It’s Managing Member

I hereby approve the assignment of beneficial interest in the Trust as the Trustee under the Trust.

Diamond Property Management, LLC __________________________________ __________________________ BY: Randy Diamond Date

It’s Managing Member

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Taking the Stock in the Entity that Owns the Property If a building is held in an entity (LLC, Corporation) there will be shares. The shares control ownership of the entity. Since the entity owns the building if you own the entity you will own the building. Said another way, by taking shares in the entity that owns the property you can become

an owner of the building.

I have placed a brief article below that outlines the different types of structures for you. Here is Ed Diamond’s secret to ensuring you have all of the upside and NONE of the downside in ownership.

Use an option, share or stock options that are exercisable by YOU and immediately vest IF YOU

CHOOSE on a change in control or ownership has a few very important benefits. First, you get paid when the property gets sold and you get a say in change of management if you want to, you do not have to participate. Why is this important? The benefit to you is that you are not obligated to

participate on cash calls and can ALWAYS walk away and if a large liability happens you can…walk away!

This can be the most important thing that we teach you, the ability to walk away. The use of an option agreement is possibly the smartest thing you can ever do in business because you keep all of

the upside while taking none of the downside.

Working with one or more partners on a real estate deal is frequently a wise decision, if not a necessity. For beginning investors, taking a partner helps offset the risk of even a small investment. More experienced real estate investors may want to take on partners for the same reason, since, as

the deals get bigger, the risk becomes greater. Furthermore, individual investors can often benefit from the wisdom, experience, and diverse perspectives that partners can bring to the table.

But of course, there are pitfalls to the concept of partnership. Many friendships and even familial relations are ruined due to misunderstanding, negligence, incompetence, or just plain bad luck

associated with doing business -‐ not to mention the financial impact of partnerships gone wrong. To avoid these dire consequences, you should always have a formal partnership agreement drafted by an attorney, and you should always establish your partnership as an official, legal business entity.

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General Partnership -‐ Just Say No!

A general partnership is established by the simple act of doing business. It does not have to be registered with any governmental body, although it can be formalized with a written agreement.

Legally, there is protection for you from the liabilities your partnership creates, which means that your personal assets could come under attack by litigants against your business. Furthermore, your business assets could be seized for actions related to the misdeeds of your partners. In other words,

do not operate as a general partnership if you engage in a continuing business relationship with any partners.

To Incorporate or not to Incorporate?

A vastly superior business entity for general business, but not necessarily real estate, is the corporation. By incorporating, you and your partners establish a legally distinct business entity with

its own equivalent of a social security number (called an EIN, or "employer identification number"). In fact, a corporation is technically considered a "person." Thus, unlike a general partnership, a corporation is legally separate from any and all "partners" -‐ or to be more accurate, "shareholders."

There are many advantages to incorporating. Chiefly among them, corporations provide limited

liability. Since they are legally distinct, shareholders cannot be held accountable for the actions of the corporation. In other words, if a corporation of which you're a shareholder is sued, your personal assets are safe. Think about it -‐ if you own stock in Wal-‐Mart, can you lose your house if

the company is sued? Of course not. Your losses are limited to your investment. There are some cases in which a shareholder can be held liable in a small corporation, but in many cases you will be protected from liabilities of the business, and, more important, the misdeeds of your business

partners and employees.

The problem with Corporations for use in real estate is that they have tax disadvantages and thus an LLC or Limited Partnership will almost always be a better choice because you will pay less in taxes

using one of those entities but you will still get the asset protection. You need to consult with your attorney and accountant about the choice of entity because the answer to which entity can depend upon your individual tax and business situation.

Limited Liability Company

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An LLC is like partnership in that the business is less formal than a corporation, but it provides liability protection for the owners of the company ("members"). An LLC also provides creditor

protection, in that a judgment against one of the LLC owners will not allow a creditor to seize the LLC's asset and potentially ruin an ongoing business.

An LLC does have a federal tax ID number, but it files as a partnership for federal income taxes purposes. For some real estate investors, the partnership taxation model is better than the

corporation because of the ability to deduct losses from rental real estate activity. For others, the corporation is better to avoid self-‐employment taxes on "earned" income from dealer activity, such as flips.

Each investor should consult with a professional tax advisor and attorney to determine which is

better for his or her own real estate business.

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Wraparound Financing There is a type of loan that is sometimes called a "wrap around" mortgage or an "all inclusive" deed

of trust.

Here's how it works...

1) Get all the pertinent information on the existing loan on the property i.e. payments, loan balance, due date, interest rate, etc.

2) You then execute a mortgage in favor of the seller at exactly the same terms of the loan that you

are "wrapping" (staying in place on the property).

3) You then handle the rest of the transaction as if you had simply taken the property subject to the original loan.

Any escrow company can create the new mortgage for you or you can get a pre-‐printed form that makes it so simple, that you can basically just fill in the blanks.

What the wrap-‐around mortgage accomplishes, is that you now make the loan payments directly to

the seller not the existing lender. The seller then makes the payments to the lender.

Another problem with a wrap around mortgage or all-‐inclusive deed of trust is "How do you know that the seller is actually making the payments, and not just pocketing your money"? If that were to happen, the lender would foreclose and you would lose your property. The way to avoid this is to

have a bank account set up in the seller's name, which requires both seller's and buyer's signatures to withdraw funds, and stipulates that any money deposited into the account is automatically paid by the bank to the lender. You make the payment to the bank, the bank makes the payment to the

lender, and you have eliminated the problem and "assumed" the loan.

As a result of full disclosure laws, in some states, escrow companies will no longer handle transactions with wrap around mortgages. These disclosure laws require escrow companies to disclose to all parties that have any interest in any transaction in which they are handling the

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escrow, any information that may be pertinent to that interest. What this means is that if your reason for the wrap around were to assume a loan without informing the lender, the escrow

company would be required, by law, to make the lender aware of that fact. That, of course, defeats the whole purpose of your "wrapping" the loan.

The main reason for using the title and escrow company is to be certain that when you buy that property, you know without doubt that it has no undisclosed liens, bonds, or assessments, and to be

certain that the seller actually owns it. Why not just go ahead and open the escrow and have the preliminary title report issued? At this point there is usually no charge, since normally title and escrow fees are charged only if the escrow closes.

You now have the title report in your hands. You have all the information you need regarding

existing liens and confirmation of legal ownership. So, what now? Close and get title insurance.

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Seasoned Refinance – No Down Payment Financing

This is a great strategy to use when you buy a property, have a rental history, and make the payments for 6 months and are then eligible to re-finance. The methods for this are changing right now as are the FHA, SBA and other options that are available thus we will be teaching this live in our modules and making this available to you online.

The seasoned refinance is a creative financing method that eliminates the need for a down payment. It does require you to have credit and to have equity in the building.

When a borrower applies to a bank to replace an existing loan and does not wish to take “cash” out but instead to just replace the current loan it is called a “rate and terms” refinance. It is easier for a bank to approve a “rate and terms” refinance than a “cash out” refinance where the borrower is walking away from the settlement table with cash.

The bank normally wants to see six months in rental history to approve a refinance loan.

The strategy is this:

Get the owner to provide you with short-term owner financing – typically with a term of eighteen months. The longer the term the better it is for you. After you own the property for at least six months and have been collecting rents a regular commercial lender can evaluate you for a “rate and terms” refinance. You being the owner means that a deed in your name or your companies name is of record in the county real estate records for six months.

The lender will order an appraisal and look at your credit qualifications but as long as the equity in the property is there (usually 25% or more equity) then they can offer you a new loan without your having to make a down payment.

This is in contrast to an acquisition loan where the lender would require you to make a 25% or greater down payment regardless of whether the appraisal shows you are buying the property with at least 25% equity. The bank would lend you the lesser of 75% of the appraised value or 75% of the purchase price, whichever is less.

Thus the seasoned refinance saves you from having to put out a down payment. The tricks to this method are that: (a) you need a property with at least 25% equity; (b) you need to owner to agree to short-term owner financing; (c) you need to credit qualify with the bank.

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Conclusion

At the Diamond Law Center, LLC we hope that you have learned a lot from this book and that you will let us know about your success and challenges. We have periodic live training events and on-line training. We also have an unparalleled coaching division where we will even partner with you as a student.

Contact us at [email protected] for more information.

150

INDEX

4

401K Money · 99

A

Alternate Signature Block · 69 ANALYSIS OF SELLER FINANCING · 73 Assignment of Beneficial Interest in Trust · 133

B

Business Plan · 87

C

Challenge the Lender · 45 Communicating effectively with people · 20 Conclusion · 143 Contract for Deed · 105 Corporations · 136 Counseling · 101 creative “no money down” and “built in financing”

techniques · 8 Creative Financing Strategies · 41 Creative Financing Strategy Installment Sale · 105 Creative Financing Strategy Master Lease Option · 47

Creative Financing Strategy Money Partners and Private Money · 77

Creative Financing Strategy Seasoned Refinance · 141

Creative Financing Strategy Seller Take-‐Back financing using a First Mortgage · 71

Creative Financing Strategy Subject-‐to · 121 Creative Financing Strategy Taking the Stock · 135 Creative Financing Strategy Wraparound Financing · 139

Creative Financing Strategy Wrap-‐Around Mortgage · 75

Credit Partners · 77 Critical Elements to Success · 13

Critical traits of ALL successful sellers · 17

D

Deal Evaluation from your desk · 37 Debt partners · 78 Direct Mail List Management · 32 Direct Mail Marketing · 31

E

Effective Marketing · 23 Entities, Corporations · 136 Entities, LLC · 136 Equity Partners · 77 EVALUATING DEALS · 37 Executive Summary · 85

F

F O R D · 102 family ‘n friends · 95 FINDING DEALS · 23 Finding Investors to Partner With · 95 Flipper Spreadsheet · 39 Frequently Asked Questions · 11

G

General Partnerships · 136 Good Decision Making · 21

H

How to Complete this Course · 8 How to Use this Course · 5

I

Ideal properties · 25 Incorporate or not to Incorporate · 136

151

Installment Sale · 42, 105 Installment Sale Agreement · 109 Installment Sale Income · 106 Installment Sale Method Works (tax wise) · 106 Installment Sales and Capital Gains · 107 Installment Sales and Interest · 107 Installment Sales and Mortgages and Contract Price · 107

Installment Sales and Principal Repayment · 107 INTRODUCTION · 7 investor Partnerships · 83 investors, Locating · 97 Investors, Locating · 97 IRA Funds · 99

L

Land Contract · 105 LAND TRUST AGREEMENT · 123 Limited Liability Company · 136 LLC · 136

LLC · 137

M

MARKETING · 29 MASTER LEASE · 55 Master Lease Option · 41, 47 Master Lease Option Analyzer · 49 Master Lease Option Benefits · 47 Master Lease Option Deal · 53 Master lease option disadvantages · 48 Master lease option practical pointers: · 48 MEMORANDUM OF OPTION · 52, 65 MONEY PARTNER QUESTIONS · 78 Money Partners · 77 Money Partners and Private Money · 77 Money, Raising · 99 Money, Raising from 401K · 99 Money, Raising from Estate · 99 Money, Raising from IRA · 99 Money-‐Raising · 98

N

Networking · 35 no down payment · 41 No Down Payment Financing · 141 no money down · 41

O

OPTION TO PURCHASE · 61 Owner Financing · 141

P

Partner · 95 Partners · 80 PARTNERSHIP—CHECKLIST · 81 Partnership, General · 136 Partnerships · 79 Partnerships, 7 Critical · 80 Partnerships, Finding Partners · 95 People Skills · 18 preservation of investor capital · 83 private lending · 102 Private Money · 41, 77 Property owners that are missing in action! · 27

R

Raising Money · 98 Rapport-Building Formula · 102 Reaching prospects · 27 Real-‐Life Wrap-‐Around Deal · 76 Rental Spreadsheet · 40 Risk tolerance and management · 20

S

Sales Skills · 16 SAMPLE ANALYSIS OF SELLER FINANCING · 73

Sample Assignment of Beneficial Interest in Trust · 133

Sample Business Plan · 87 Sample Installment Sale Agreement · 109 SAMPLE MARKETING LETTER · 33 SAMPLE MASTER LEASE · 55 Sample Memorandum of Option · 65 SAMPLE PARTNERSHIP CHECKLIST · 81 Sample Trust Documents · 123 Sample Wrap-‐Around Deal · 76 Schedule your work · 19 Seasoned Refinance · 44, 141 Selecting Working Partners · 80 seller financing spreadsheet · 71

152

Seller Take Bank Financing · 41 Seller Take-Back financing using a first mortgage · 71 Seller’s motivation · 26 Selling versus Counseling · 101 Signature Block for entities, estates etc. · 69 Six Initial Essentials for Deal Evaluation · 37 Sources of motivated leads · 27 Steps to a Deal · 10 Stock · 135 Subject To · 42 Subject-‐to · 121 Successful Real Estate investors and Business people · 15

T

TABLE OF CREATIVE FINANCING STRATEGIES · 41

Taking Stock in Entity that Owns the Property · 43 Taking the Stock in the Entity that Owns the Property · 135

the Kate Wiggins Story · 53 Trust · 123 Trust, Assigning Interest · 133 Types of Partnerships · 79

W

Who You Should Network With · 35 Working Partnerships · 80 Wrap-‐Around Deal · 76 Wraparound Financing · 139 Wrap-Around Mortgage · 43, 75