There are two things I love in life, real estate investing and the great outdoors. This week I’ll be in North Carolina doing some hiking in Asheville and then later in the week I’m heading to Charlotte. Hopefully as you’re reading this I’m deep in the mountains and maybe I’ve found a swimming hole or two (or maybe I’ll just disappear into the woods forever and live off the grid with the one member of my cult…yes, I’m still the only member of Jason’s cult…there was one guy who offered to join my cult if I’d murder his wife, but I decided to pass since our legal system frowns upon that type of behavior).

Make Sure You’re Using a Contract Specific to Subject-To

Anyways, recently I was doing consulting for someone who needed help with her first subject-to deal. She faxed over the contract she was going to use and as usual, it was a standard contract that could have come from Office Depot. Repeat after me: You need a specific contract for your subject-to deals. The best way to get this contact is to use a contract from one of the courses you’ve purchased. Then take that contract to your lawyer and have them look it over and improve it (and if you don’t have a lawyer, start treating this business seriously and get one). This will save you a lot of money because you won’t have to start from scratch and your lawyer will have a template to work from. So, as I promised last week here are some of the clauses and information from the contract I use (first, remember I’m not a lawyer, seek competent legal advice, these are just the clauses that I use, yadda, yadda, yadda).

• A check in the amount of: Ten-Dollars ($10.00) shall be deposited into the Escrow Account of the Attorney for the Buyer, the receipt of which will be acknowledged by the Attorney for the Buyer (”The Deposit”)………alright, that clause is not sub-2 specific, however it should be in every contract you use. There is no need to put more than $10 because we are working only with motivated sellers.
• This property is being purchased “Subject To” the existing First Mortgage- currently owned or collected by___________________……………list the name of the sellers mortgage company
• The Seller represents that the principal balance of the First Mortgage as of date of settlement shall be no more than _________________________ Dollars ($______)……..you will verify this amount using an authorization to release information.
• This property is being purchased “Subject To” the existing Second Mortgage- currently owned or collected by_______________……….list the name of the second mortgage company
• The Seller represents that the principal balance of the Second Mortgage as of date of settlement shall be no more than _________________________ Dollars ($______)……once again, you’ll verify this amount by calling the bank
• In addition to purchasing the property subject to the First and Second Mortgage, Buyer shall pay the balance of the Purchase Price amounting to _____________________________ Dollars ($________) within 5 years of date of settlement. Seller will receive approximately $___________ dollars in cash or certified funds, on or before ___________________200___……..You only use this clause if you are giving the sellers money in addition to taking over their mortgage. For example, I never put money down on a subject-to. If the seller’s want money, I tell them I will give it to them usually in 5-10 years (and when my tenant/buyers purchase the property, then the seller’s get their cash).
• The purchase price of this property is strictly predicated and contingent on the Buyer paying a total of no more than __________________________ Dollars, ($_______) for the property. Should there be any additional liens, mortgages, and/or judgments existing on the property as of the time of settlement, it shall be the responsibility of the seller to pay these amounts……just another CYA clause
• There will be no cash due to seller at closing…..I never put any money down, if the seller’s have a lot of equity in the property they will get it in 5-10 years.
• Buyer is talking over seller’s mortgage payments amounting to $________ Dollars a month. Buyer is only responsible for this amount for the first 5 years after settlement. If interest rates increase during the first 5 years, seller is required to cover any amount over the current monthly payment of $___________ a month. Should the interest rate increase on property, seller will immediately be notified in writing and will be required to cover the difference. If seller does not cover any increase above $__________ a month, then buyer has the option to stop making the mortgage payments and the property may be foreclosed on and the sellers credit may be severely damaged……..In case you took over an ARM that adjusts, you don’t want negative cash flow, so you make the seller’s responsible for the difference.
• Seller will allow Purchaser to place a sign on the property prior to closing for prospective tenants or Purchasers. Purchaser may advertise or market said property in any means until settlement. This includes public auctions or any other means of advertisement……this clause should be in every one of your contracts
• Purchaser is purchasing Property with the intent to rent, lease, trade or sell Property for a profit…..I always give the seller 100% full disclosure that I’m an investor and I plan to make money on the property.
• With regard to the existing mortgage(s), if Buyer fails to make any payment on any such mortgage when such payment is due, and such failure continues for more than 30 days after the due date, then Seller shall have the right to require Buyer to convey Property back to the Seller upon written request. At settlement, the Parties shall execute and deliver to the settlement agent documents and funds sufficient to re-convey the Property to the Seller, together with an appropriate escrow agreement………..This is one of the most IMPORTANT clauses in my subject-to contract. This gives the seller’s “comfort” that in case you don’t make their mortgage payments, they can easily get the house back.

There you have it. Once again, talk to your lawyer before you use any of these clauses. And, get off your butt and start making a killing in this market from subject-to’s like I am!

Photo Credit: Linville Falls, Blue Ridge Mountains, NC by eseering

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Tags: investing subject-to, real estate, real estate investing, subject to

I screwed myself at the grocery store again. I bought 24 cans of Spaghettio’s (no, I don’t care if that’s the correct spelling) because they were on sale two for one. Well, I finally ate a can yesterday and it was terrible. As in, I didn’t even eat it all and I will eat almost anything. I’m not a picky guy at all, but it tasted like cardboard and dead rat. So now I’m stuck with 23 cans of Spaghettio’s. (Would I be a bad person if I donated them to the homeless? I think if I was homeless I would be motivated enough for food, to eat dead rat, cardboard Spaghettio’s…there’s only one way to find out).

Anyway, before I do my good deed for the week and poison the homeless, let’s talk about this excellent market we’re in. Because, as John D. Rockefeller said, “Buy when the blood is running in the streets.” Well, as we all know opportunity is KNOCKING loud and clear for us real estate investors. For people who have been in this game a while (meaning around five years) you remember the hot market when people had 16 contracts on a house by noon. In this market, it’s like shooting fish in a barrel. I think this market is actually making me lazy because it’s so easy to find motivated sellers and deals.

So how do you clean up right now?

As a good friend of mine says, “You can’t be a one trick pony.” You need to wholesale to get cash now. But also, the big money to be made is buying and holding. Pick up 20 properties this year (which isn’t tough if you do lease options and subject-to), hold onto these properties for five years and you will make a life changing amount of money when you sell.

And, if you haven’t learned the subject-to strategy, start learning today. If I had tried going through banks when I first started, I would never have been able to purchase millions of dollars in property (it still boggles my mind the thought of putting 20% or even 10% down on a property).

Please think big and please think positive during this buyer’s real estate market. The size of your thinking determines the size of your bank account (I can’t remember who said that, or else I’d give them credit…adios).

P.S. Next week, I’m going to reveal some of the most important clauses in my
subject-to contract which help CYA and save me a ton of money.

Tags: real estate, real estate investing, subject to, wholesaling

I’m always learning important life lessons. One lesson I recently learned is this: Don’t eat an entire box of macaroni and cheese and then go for a five mile run…..you will puke your brains out, trust me on this.

In a minute I’ll get to another lesson, but first I have to tell you the $8,500 story. On two of my recent deals I made $8,500 (you gotta love wholesaling). Anyways, a few weeks ago I bought one of those flip video cameras and decided that I was going to enter the tech age and shoot a video for a new website that I’m working on. And I get the bright idea that it would be cool to flash the $8,500 in the video (and maybe make a rap video while I’m at it). So I head down to Bank of America ready to withdrawal $8,500 from my account. But, I didn’t bring a bag, so I first walked next door to McDonald’s and asked for a “to go” bag. Then I walked up to the bank teller and told her I needed to withdrawal the $8,500. They made me show 17 ID’s and the manager had to do some override thing (I was actually impressed with all of the steps). Then, since they only had one teller open, I see this huge line forming behind me as the teller is counting out the money in $100’s. And when she’s done, I tell her to put the money in the McDonald’s bag (hopefully, that’s the closest I’ll ever come to feeling like a bank robber…I don’t even think soap on a rope would save me in prison).

As soon as she had filled the McDonald’s bag, I looked over my shoulder at the seven people behind me and raced out of there, continually looking over my shoulder to make sure nobody was following me. I even checked my rear view mirror a few times (yes, I’m paranoid). So I shot the video and the next day I returned the money to the bank. I tell ya, it’s a good thing Vegas or Atlantic City isn’t close by.
Okay, here’s the other important life lesson. You don’t need to know it all or master it all…..you don’t need to be a jack of all trades. Here’s what I mean: I was talking with an investor the other day and she asked me some lawyer type question that nobody had ever asked me before. I told her I had no idea what the answer was and she seemed surprised that I didn’t know (it was a pointless question). Anyways, I said to her “Why in the world would I need to know the answer? That’s what I have a lawyer for”.

If you’ve ever read the book Think and Grow Rich by Napoleon Hill, there’s a story about Henry Ford when he’s in a courtroom. The prosecutor is grilling Ford on all of these specific questions (they were actually trying to prove Ford dumb, because they thought he was too arrogant). So Ford tells the prosecutor that he doesn’t know the answer, however, he has 10 men that work for him, who can find the answer in a few minutes…………re-read the following story, it’s very important. I have a lawyer, an accountant and a webmaster for a reason. My job is to focus on high dollar activities. I’m a marketing man, a negotiating man and an idea man. I don’t need to know HTML and I don’t want to.

Don’t get caught up in the stupid trivial aspects of this business. Outsource it all, so you can work less…..and when you do work, you should only be doing activities that will make you money.

Tags: flip, flip house, flipping real estate, real estate, real estate investing

I’m reading this book on cults and it’s inspired me to start my own cult (maybe I got the wrong message from the book?). Anyways, my cult is going to be creatively titled “Jason’s Cult”. And here’s why joining my cult is going to make you rich.

Any good cult member is going to blindly follow their leader and take whatever action he prescribes. And if you’d simply do that, you’d be rich! Check it out: How many of you own courses that are still in their plastic? Well, if you followed those courses and just did what they say you’d start making money. Over the last few weeks I have gone over lease options and if you just did what I said, you’d make money.

There’s nothing that annoys me more than when I’m at a REIA meeting and some newbie starts arguing with me when he has come to pick my brain for advice (how many deals have you closed and how many have I closed buddy?).

The fastest track to success is to find someone who is where you want to be and then just do what they did (which is why at every REIA meeting, you should be picking the brains of the seasoned investors).

So here are the rules for joining Jason’s Cult (bare with me, this is my first cult, so I may have to work out some kinks).

1. Every month you will put out 200 bandit signs and send out 1,000 pieces of highly targeted direct mail.
2. You will network like crazy and attend every meeting in your local area.
3. No whining.
4. You will refer to me as Jason The Great.
5. Every night before you go to bed you’ll make your TO DO list for the next day.
6. You’ll give me your daughters and wives (actually forget that, they would be a pain in my butt, you can keep them).
7. You will ONLY do wholesaling, lease options and subject-to. If I found out you’re using any of your own credit, bad things will happen.
8. You’ll start out wholesaling if you’re brand new, and learn how to make a steady $5,000 a month (at minimum).
9. You’ll go to RealtyTimes.com to research any market before you start investing there.
10. You’ll have consistent follow up with your marketing, hitting the same list for a total of seven times.
11. You’ll become ruthless with your time management and only check your email three times a day (8:00, 12:00, 6:00) and make phone calls only twice a day (12:00, 6:00).
12. You’ll go to BiggerPockets.com every day to network, continue learning, make deals, and market yourself.
13. You’ll repeat the following chant three times a day “Jason’s the greatest and I want to have his babies.”

So, you’re probably wondering what’s going to happen if you violate these rules? Well, obviously you’ll burn in hell….Welcome to my cult! Alright, one more important thing…..I need to know your favorite flavor of Kool-Aid? Tropical punch or grape?

Tags: marketing, real estate, real estate investing, REI

So I see one of my friends that I haven’t seen in a while when I was in Florida, and she tells me I look disgustingly skinny (basically, she calls me a hideous freak). Well, I tell her that I’m training for a marathon, so I’m sure that has something to do with it. And here’s the other reason: I HATE cooking. I have the worst eating habits. If it’s not in the frozen food section, can’t be cooked in a microwave, or made by my personal chef (Mr. Boyardee), then I don’t eat it. Anyways. About two months ago I’m at Giant staring at the TV dinners and Healthy Choice TV dinners are 50% off (yes, you know where this is going). I pretty much bought out the store and now have a lifetime supply of Healthy Choice meals. The problem is, that these meals have about .003 calories. So over the next few months I will probably wither away and die (how come they couldn’t have Hungry Man dinners on sale….gosh!)

Before I start to look like Nicole Richie back in the day, let me go over the paperwork needed when you have found a tenant/buyer. Here are the 9 necessary docs.

1. Property Condition Move-In Form - Walk through the property with the tenants and note any problems, blemishes, etc….
2. Renter’s Insurance Form - The tenants have 7 days to fax back the form with proof of renters insurance (I also staple the card to the form of the agent I work with).
3. New Tenant Information Form - A welcome letter for your new tenants. This letter should list the names and phone numbers of all utility companies, the day the trash is collected and anything else they need to know about the property.
4. Property Maintenance Agreement - This form states that the tenants are responsible for the first $300.00 in repairs and they must also get a home warranty. (I have my tenants use American Home Shield).
5. Option Agreement - States that the tenants have a one year option to buy the house at x amount of dollars. And that if they violate the terms of the rental agreement or any other agreements, the option becomes null and void. (This does NOT get recorded at the courthouse. You only record the option agreement between you and the seller).
6. Payment Policy - This form only has a few sentences in huge font that state: Your company has a zero tolerance policy for non-payment of rent, that evictions start on the 5th and there are no exceptions. (and that you can murder them for non-payment of rent…..I wish).
7. Property Disclaimer Form - This is the same form you signed with the seller. Each state has their own disclaimer/disclosures about the property.
8. Lease Option Disclosure - This form says that the tenants understand they have an option to purchase this property. And that you might not be the owner of the property and may only have an interest in the property (this is important….in a sandwich lease option you only control the property and you need to disclose this).
9. Rental Agreement - This should be iron clad and cover everything. My current lease is 7 pages. Make sure you have your lawyer review it. (Maybe in another post I’ll go over the key paragraphs of my lease).

Well, this week I’m headed to Florida again. I’m driving down, because I’m going to leave a car there….so I’m looking forward to a good ole’ 12 hour road trip. And in my car will be all of my real estate and marketing CD’s so it can be a productive 12 hours. By the way, right now in my microwave is my Healthy Choice mash potatoes (I think that’s how you spell potatoes, but I’d better ask Dan Quayle) and broccoli meal…..de-lic-ious! Til next week.

Tags: buyer, lease option, real estate investor, real-estate-deals, tenant

One of the 6,127 reasons that I’m single is because I can’t stand high maintenance women (this one’s voluntary, so two out of 6,127 ain’t bad…I’ll get to the second voluntary reason in a minute). Anyways, right now I’m working on a pretty house wholesale deal (wholesaling a house subject-to) and the seller is crazy high maintenance. This guy calls me multiple times a day… “Hi Jason, this is Mr. Seller, its 5:00, just wondering if you’ve found a buyer…Hi Jason it’s 5:05, just wondering, Hi, Jason it’s 5:07…” This guy is also a talker which is why I have my assistant return the calls and handle almost everything. If you don’t have an assistant I would get one ASAP. I got my first assistant before I could even afford one and it was well worth it. And when I say assistant, I mean virtual assistant. My latest assistant lives in Wisconsin and has been with me for almost two years. I have her make all my calls and she handles almost everything for me. Remember, us investors need to focus on high dollar activities, not making phone calls. (By the way, I found a buyer for this wholesale sub-2, and at closing I will be getting a nice $9,997 pay day).

Okay, the second reason I’m single is because I’m cheap. I just got back from a week in Florida. As I was packing for my trip, I stuffed all of my clothes in my old suitcase and I destroyed the zipper trying to get everything to fit (but I did get it closed). Then when I tried to unpack, I couldn’t get the zipper open. Being that I’m such a patient guy, I ended up “teaching the bag a lesson”, which means it ended up in a dumpster after I tore the zipper off and it was totally unusable. So, I needed a new piece of luggage and asked my friend to show me the closest Goodwill store. I ended up getting a beauty of a suitcase for $2.13. It’s a Samsonite hard shell. I’ve always wanted one of those hard shell pieces and $2.13 is right up my alley. I love Goodwill and the Salvation Army stores.

Alright folks, if you’ve been reading my posts you know that I’m going through a lease option deal from A-Z. Last week was the paperwork needed between you and the seller and this week I am going over the checklist you need to follow after you have the paperwork signed. Here it is:

1. Make copies of all of the paperwork and either mail it to the seller or scan and email a copy to the seller.
2. Make copies of all keys (so you have a key and so you can also put a key in the lock box on the house).
3. Fax or mail the lender notification to the mortgage company so they send all of the coupons and mortgage info to your address.
4. Run a credit check on the seller. Since lease options are more risky, you need to make sure the seller is not in a dangerous financial situation (if they are, do a subject-to).
5. Fax the authorization to release form to the mortgage company and check the mortgage balance and the monthly payment amounts.
6. Send a thank you gift and card to the seller. (I usually send a gift certificate to a restaurant).
7. Go to the courthouse and record the option agreement. This should cost between $20.00-$50.00.
8. Start marketing the property to find a tenant buyer. Place a sign in the front yard, run classified ads in the local paper and post ads on Craigslist.
9. Set up your Excel spreadsheets, Word documents and folders for this property.

There you have it, my million dollar checklist. Next week, I will go over the paperwork for a tenant/buyer. I certainly hope that you are writing down all this information on lease options, because you are getting no B.S. info that took me thousands of dollars to perfect. Have a great week and remember to do at least one marketing activity every single day!

Tags: creative real estate, crei, lease, lease option, real estate investing, real estate investor

I’m still training for my marathon and I still want to shoot myself as I jog through the summer heat in my Bill Clinton shorts (maybe I’d be having more fun if I had an intern?). Anyway, I’m in this marathon mess because of a promise I made to a friend. So, I was thinking, what if this friend had an “unfortunate” accident and couldn’t run. Well, then I guess I wouldn’t have to continue running either. If anyone out there wants to pull a Tanya Harding on my friend just let me know. Applicants must have a strong swing and no ice skating experience is required.

Okay, so last week I said I would go over the beginning of lease options. First, you have to find the deal. Here are the top three ways to find lease option deals (all targeting tired landlords).

1. Direct mail – Buy a mailing list from melissadata.com or another company and send out at least 1,000 letters a month to absentee owners.
2. Drive for dollars – Drive the zip codes that you invest in and call every “for rent” sign that you see. Also, write down the addresses of all vacant houses.
3. Craigslist.com – Go to the “for rent” section on craigslist. Scan the listings to find ones that meet your buying criteria. Once you find a property, send the landlord a very detailed email about how you want to guarantee his rent and maintenance and all you ask is that you can purchase the property down the line. Every single day you should get on craigslist and email at least 10 landlords. Doing this every day should get you at least one deal a month.

   Alright, so let’s pretend you are one of the 5% of people who are going to actually listen to me. You have done your marketing and found a lease option deal. Here is the important and detailed paperwork you will need to get signed by the seller:

   1. Residential lease with option to purchase – This is a combo lease and option agreement, that states the monthly rent you will pay the seller, the length of the lease and the purchase price of the property.
   2. Authorization to release – This form allows you to check the mortgage balance and monthly payments on the loan (if the sellers say they own $200,000 on the property, you need to make sure they are telling the truth).
   3. Due on sale disclosure – You need to let the sellers know that if they give you a five year lease with option to buy, that it can trigger the clause (before you freak out, this never happens…but you always give people 100% full disclosure).
   4. Lead based paint disclosure – If the house was built before 1978, go to www.hud.gov to get the form.
   5. Notice of option agreement – This is a very important form that needs to be recorded at your local courthouse. This clouds the title and lets the world know that you have the option to buy the house.
   6. Lease option consultation agreement – Another important form. This is one of my many agreements that cost me more than $1,200 for my lawyer to create. This makes sure that the seller can’t squeeze you out as the middle man and that you get the difference between your purchase price with the seller and sales price to the tenant/buyer. This will be notarized.
   7. Power of attorney – Needed so you can take care of the loan, make the payments…basically do anything you need to the account (since you are the one paying the mortgage. Always pay the mortgage directly to the company with a lease option. Never let the seller do it).
   8. Lender notification – Notifies the lender to send all coupons and loan information to your mailing address.
   9. Affidavit of liens – Must be notarized and the seller states that there are no liens against the property, such as mechanics liens.
   10. Property disclosure/disclaimer – All states have different disclosures that need to be filled out. You can get a copy from a local investor or Realtor (yes, there are a few things Realtors are good for).

   I tell you, I hope folks learn this method. I get properties all of the time with no money down (my only expense is marketing) and of course never use any credit. Also, the tenants are great and never cause problems. Last Friday, I had a tenant call me because they had problems with the HVAC. I kindly reminded them that they are responsible for the first $300 in repairs and that they needed to call the home warranty company (always make your lease option tenants get a home warranty).

   Next week, I am going to go over the detailed checklist of what needs to be done after the paperwork is signed (such as the ohhh so important task of recording the option at the courthouse). So happy trails folks, I’m on a semi-vacation this week because life is good when you’re a real estate investor…because you control your own destiny and you control your time (unless you’re married, then I guess the misses does that).

Tags: lease option, real estate, real estate investing, rent to own