All Forum Posts by: Brian Gibbons

Let me see if I have this:

The owner LOs (lease options) his own property from the master tenant buyer (me the investor) how does that work? -- Then I assign the owner's lease option to a final TB...? I am lost :) --
Does original owner deed the property to me, then I L/O it back to him, and then find the final TB so the original owner can assign his L/O over to the final tb. . . : | --

==================
Hi Matty:

I've coached 1 on 1 over 120 people in Cooperatives, so let's see if this explanation makes any sense:

You are in CALIF? Where?
What is Market Rent for a 3 B 1 B Lunch Pail Joe Home?
That is what I would look for.
Say Market Rent = 1400.

What is Market Value? Say $350,000.

So Rent to Value =
1400 x 12 = 16,800
Value = $350,000
Without appreciation, yield = 16800 div by 350,000 = $4.8%,
CD rate of return.

Another Market: Alabama
What about $1000 per month rent, 4B house, $70,000?
12,000 div by 70,000 .17 or 17% yield.

Calif does not work well on yields. Maybe Apartment Buildings.

======================

Coop Assignment is simply this.
You Find Sam Seller, He HAS to move and wants a better deal than paying a property manager.
You, Ivan Investor are the MASTER TENANT BUYER.
You LO from Seller.

Your job is to WORK WITH, not AGAINST the Seller to help him place a RTO Solution on his house.
You find a TBer with 3% down cash or cash + note.
You inflate the home sales price by 3%.
Seller is still getting all his money (similar to Seller creating a note, and selling a note at a discount.

You are principal in the transaction, first as a lessee-optionee, than as an assignor.

RECAP:
You LO w seller.
You cooperate with seller, not adversarial.
You find the TBer, you walk through the house, preferably vacant.
Avoid the Seller at all cost.
Close with an attorney, preferably at the attorney's office w the TBer.
Then YOU ARE OUT OF THE DEAL.
Negatives: No back end profit
Positives: No guarantees of paid rent or minor maintenance.
And 3% beats 1/4 of 6% (what realtors get.)

Hard part is not the houses.
Hard part is TBers THAT HAVE 3% cash. Your Fee.

If you negotiate it right, it is the easiest deal there is in REI (in a declining market).

It takes experience to do them well, as no book can teach you, but you do 10 deals with a mentor, and you learn fast.

All the best,

Brian

Q. Is that JV approach the same idea as an equity split? Where the seller gets a certain percentage of the profits when the final sale occurs?

A. Jon, expensive homes have smart owners, who have CPAs, CFPs and Attorneys. Being a financial planner (didn't bother w CFP designation :)), I hang out w these guys (and gals!) .

RE Attorneys hate sub2 (no control for owner if PITI is not paid) and land contracts - installment sale (got to foreclose - not evict - to get them out) but in this wacky market, these tools can be ethically used to protect all parties.

RE: Equity Split, yes, its all about the back end; IF the TBer gets funding. A Hybrid Equity Split is when you build in a guaranteed profit FIRST, then some % of a profit.

In a declining market, this might be a good negotiation:
Build in a minimum profit for yourselves first, say $20,000 IF you provide some service, like taking care of minor maintenance or guaranteeing the rent, which property managers do not do.

Then you agree to split anything we sold the property over and above that $xxx figure amount 80% to you the REI, 20% to them (sellers). Out of state people like this with Equity Splits. They feel like they are A BENEFICIARY. And they will help you after the sale, to chase down documents, etc.

I caution my REI students NOT TO MAKE PROMISES YOU CAN NOT KEEP.
If you are broke or cash poor, PLEEEEZE do not:
* guarantee rent or
* minor maintenance or
* guarantee sub2 payments to the bank

If you are broke, and the TBer does not pay, and you don't not pay what you have promised to pay, you will have the AG and the BBB on your butt.

RE: Contract for Option to Purchase discussion is on my site

Jon, there's alot of REI theory and stuff out there in cyberspace.
And some of it is just fluff and useless.
Some people are not talking from DIRECT EXPERIENCE.

You probably agree on that! :lol:

Brian

Since I've been doing Lease Options since 1986, I'll take a stab here:

1. Sandwich Lease Options need a strong grounding in Property Management, RE Contracts, and Legal Pitfall Management (Avoid getting sued). In an appreciating market, the "greed factor" make them fun if you know what you are doing.
2. For cheap houses, buying the house sub2 or land contract might make better sense.
3. For expensive houses and smart owners, JV Agreements with the owner for a piece of the "back-end" (when the Tenant Buys - Gets Financing FUNDED) make the Sellers more comfortable, especially long term 5 - 7 LOs..
4. Getting TBers to pony up 3% is a real problem in this economy, especially with houses depreciating in many markets. There are ways to get them to get option money, (i.e. like going to their parents, Household Finance loan, selling stuff, etc). Taking a note for your Move in Option Money is most time s necessary, or getting say $200+ more per month, but it is not taxable rent, it is tax-deferred option consideration.
5. An Alternative to Sandwiches is a Cooperative Assignment, where the Owner LO's from a Master TBer (that's you, the REI), Master TBer assigns the deal to s Final TBer for a fee paid in full or some in a Note. (If you are a Principal in the transaction, then there is no Real Estate sales license needed.)
6. You could also buy on Land Contract - Installment Sale and LO to TBer.
7. Sub2 in this market is the cleanest way to acquire.
8. I always do NOT give an option to a TBer. I give a Lease and a Contract For Option to Purchase to avoid equitable interest (i.e. when the TBer sues you to recover some option consideration, the judge rules there is some equitable interest for the TBer).
9. Getting TBers takes heavy marketing, alot of poor people, pay check to pay check. Ideas: Web Marketing, PR Marketing (articles to local rags about home ownership, local newsletters, etc), and TONS of bandit signs get leads. Many leads are tire kickers. A Good TBer website is a must, and County Name Home Solutions is a good name (e.g. AlbanyHomeSolutions.com). Get lots of helpful info about budgeting, credit reports, etc. A Good source is BankRate.com.

I have not seen Joe Crump's training. I have no opinion.

All the best,

Brian

Everything is negotiable. $10 works.

What does the Owner want?
All Cash?
Debt Releif? (meaning someone pay the payments for a while?

What's market rent? Does it cash flow (Rent > PITI)?

Do you want to Sandwich, Coop, Option Flip?

What is your exit strategy? Lease Option?

IMHO, over $400K does not cash flow. Market Rent is always less.

Will the Seller be able to "feed the short fall" between rent and (PITI + upkeep)?

A JV w the owner (Equity Split) might be a good idea if the deal is sweet.

Can you be complete on the total situation? Seller's Motivation? Type and Status of Loan in place?

Thanks,

Brian

Here is what I have learned:

A. 3 different sites for:
* We buy Houses
* We sell houses on Terms or Cash
* We give 10% for Private Mortgages from IRAs or CDs

B. Use the Problem - Solution approach
Here is the problem
What We Do
How we are Different
Our Plan of Attack
Ask Us a Question!
Sign up for Our Newsletter
Free Forms
Contact Us
About Us

C. People care only about their PROBLEM, Not YOU
Be Client Centered, not YOU centered.

D. If you are buying Lease Purchase or Sub2 or Land Contract or Seller Carrying a Second, don't describe that on your site. Do that in Person.

E. Get referrals of happy people on every page to create confidence that you know what you are doing.

F. Get a free report in the upper right or left corner.

I have used this set up for getting leads since 1998. It works!

All the best,

Brian Gibbons

Also, I might add:

If you are not licensed and are a principal in the transaction, as Jon said above, you can:

* Sandwich Lease option (Lease Option and Sublease suboption
* Master Lease and Sublease
* Cooperative Assignment (Lease Option then sell-assign the contract
* Land Contract purchase and sub lease option
* Seller Carry back purchase and lease option
* Straight Option and Assign the Contract (flip)
* Contract with a conditional S&P and then Double Close - Double Escrow (need full transparency with Seller and Escrow)

I am not licensed and have been doing the above since 1986.

Being licensed, with all the regulation, well, that is another discussion!

All the best,

Brian

I review courses but there are always good "tid bits" from any well known REI writer's course.

Is that enough, to do all your contract writing for Lease Options, Sub2, and Notes? Hardly.

RE: Lease Options - Purchase Options - Cooperative Assignments.

The best start is Matthew S. Chan's books, because he runs a Lease Option - Sub2 BUSINESS in AL and writes well. TurnKey Investing with Lease Options is a NO BS REI Book. So is The TurnKey Investor's "Subject to" Mortgage Handbook."

Other books by Mark Warda JD, William Bronchick JD, John Schaub, Peter Conti and David Finkel, and Jay DeCima (rehabs) are all excellent.

Cooperative Assignment is a hot idea for a beginner to talk to sellers about implementing a Lease Option or a Land Contract on their home. They can get a higher price than selling in this market. Cooperative Assignment means you cooperate with the seller and ASSIGN or sell the contract to Tenant Buyer for a fee. As you are acting as principal in the transaction, you do not need a RE license. The challenge in a Coop is finding a TBer to pay your fee (most of the time the assignment fee is 3% of value, and many times the 3% has to be financed in a promissory note or borrowed from a family source or a finance company).

RE: Notes, there are terrific sites about creating a note and selling the note at a discount to a note broker-note buyer. Mortgage-Investment.com is my favorite, with lots of FREE Private Mortgage forms and Private Mortgage tutorials.

RE: Wendy Patton's materials, her books are good, and her Lease Options with Realtors Agents is excellent.

Sharing materials in a REI Club is always a good idea.

I hope these ideas have helped a bit!

All the best to you,

Brian Gibbons

37. Keep Property out of your own name. Use LLCs.
38. Use Land Trusts if possible for privacy, if possible.
39. Use due diligence and memorandum of option when Lease Purchasing When Buying to prevent Seller from adding liens.
40. Never deliver an Option to Purchase on a Rent to Own. Better to Give a Contract For Option to Purchase and a Lease to avoid Equitable Interest.
41, Joint Venture with owners - sellers on Lease Purchase on Nice Houses that do not cash flow. Offer Equity Split Agreements (do not have to be 50 50) in the spread at the back end where they get some profit. This may induce the owners to feed a negative cash flow (difference of Market Rent and PITI payment).
42. Never make guarantees on lease payments from TBers to the Seller's Mortgage Company on Sandwiches. Always guarantee if you get paid, the mortgage gets paid 5 business days later. If you don't get paid, the Landlord Tenant law steps in, just like a Property Management Company.
43. Always think: How can I make chunk cash today? And big cash later? Think about consulting fees for helping Sellers and Buyers, to help cash flow. Think "one on ones" and seminars, using the knowledge you have hard won and earned.
44. Get Private Money now. Go to CPAs for Private Lender Referrals. Sell to the CPA why it is safe for the Private Lender. Go to Fee Based CFPs for referrals too. Learn Section 401 of the IRC Code. Learn Prohibited Transactions. See TheEntrustGroup, Pensco, Trustetc, for ideas.

http://www.docstoc.com/search/Triple-Net-Lease/?catfilter=1

My docs are: http://www.docstoc.com/search/REISkills/?catfilter=1

All the Best,

Brian

Hi All at BiggerPockets:

I have a busy life and a busy brain. I get distracted by family and the media.

I need to be reminded of my mission and why I play the REI Game to WIN, not to just dabble and waste time.

So, I get my coffee, check my email, prioritize my urgent tasks, THEN

I read this:

http://biggerpockets.com/blogs/3/blog_posts/tagged?tag=Daily+Reading+for+REIs

And I ask myself:

How can I get:
*More Motivated Sellers?
*More Tenant Buyers?
*More Private Money?
*More people to refer to me REI business?

And that's it.. Nothing else.

When I'm waiting for doctor's appointments-dentists, in line for other mundane consumer chores, I put stuff on index cards and study them. like sales objection handlers, marketing ideas, and the like.

Or I talk into a portable digital tape recorder.

Or I practice to complete and utter strangers my "elevator speech."

You, know, like, "What do you do for a living?"

"I help Sellers sell their house in 5 days.
I help renters stop Renting and Rent to Own.
I help people earn 10% or more on their Savings."

If they say, "Ya? How you do that?"

"Well, I'd be easier to send you an email.
I got a notebook here.
Can I have some info from you?
And I'll send you some really good info free? NO Obligation?"

Then you can qualify the lead.

----------------------------------------------------------------------

RE: Being Audacious

William Tingle (Sub2 Teacher) said,
"I WEAR A 5 inch diameter Yellow button w black letters that says:
I BUY HOUSES FAST!"

He wears it at supermarkets.
He asks questions that he really already knows answers to, just to get people to look at his button, and start a RE conversation.

You want leads?
Get a button!
Be AUDACIOUS!

I dare you!

All the best to BP.com,

Brian

PS: PLEASE PUT YOUR CREDO HERE, WHAT YOU BELIEVE IN YOUR SOUL ABOUT WHAT YOU DO FOR A LIVING IN REI!