The Anatomy Of The Deal Series: The Co-Operative Strategy How You Can Generate Quick Cash Flow

In The Creative Real Estate Niche Of Lease Purchasing DeFiore Enterprises 5640 North Marty Avenue, #182 Fresno, CA 93711 Telephone: 559-440-1358 Fax: 559-440-1358, *9 E-Mail: WEB: -------------------------------------------------------------------------------DISCLAIMER AND TERMS OF USE AGREEMENT The author and publisher of this Manual and the accompanying materials have used their best efforts in preparing this Manual. The author and publisher make no representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the contents of this Manual. The information contained in this Manual is strictly for educational purposes. Therefore, if you wish to apply ideas contained in this Manual, you are taking full responsibility for your actions. Every effort has been made to accurately represent this product and it's potential. Even though this industry is one of the few where one can write their own check in terms of earnings, there is no guarantee that you will earn any money using the techniques and ideas in these materials. Examples in these materials are not to be interpreted as a promise or guarantee of earnings. Earning potential is entirely dependent on the person using our product, ideas and techniques. We do not purport this as a "get rich scheme." Any claims made of actual earnings or examples of actual results can be verified upon request. Your level of success in attaining the results claimed in our materials depends on the time you devote to the program, ideas and techniques mentioned, your finances, knowledge and various skills. Since these factors differ according to individuals, we cannot guarantee your success or income level. Nor are we responsible for any of your actions. Materials in our product and our website may contain information that includes or is based upon forward-looking statements within the meaning of the securities litigation reform act of 1995. Forward-looking statements give our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with a description of potential earnings or financial performance. Any and all forward looking statements here or on any of our sales material are intended to express our opinion of earnings potential. Many factors will be important in

determining your actual results and no guarantees are made that you will achieve results similar to ours or anybody elses, in fact no guarantees are made that you will achieve any results from our ideas and techniques in our material. The author and publisher disclaim any warranties (express or implied), merchantability, or fitness for any particular purpose. The author and publisher shall in no event be held liable to any party for any direct, indirect, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this material, which is provided "as is", and without warranties. As always, the advice of a competent legal, tax, accounting or other professional should be sought. The author and publisher do not warrant the performance, effectiveness or applicability of any sites listed or linked to in this Manual. All links are for information purposes only and are not warranted for content, accuracy or any other implied or explicit purpose. This Manual is © copyrighted by DeFiore Enterprises. No part of this may be copied, or changed in any format, sold, or used in any way other than what is outlined within this Manual under any circumstances. _________________________________________________________ Contents DISCLAIMER AND TERMS OF USE AGREEMENT 3 Dedication 7 Purpose 8 Who Are Chuck and Sue 9 Chapter 1 What Is A Lease Purchase Deal? 11 The Lease Purchase Deal 12 Chapter 2 Lease Purchase Basics and Strategies 15 Lease Purchasing - The Basics 15 Ways To Generate Income 18 The Strategies 19 Chapter 3 Breaking Down the Anatomy The Parts of the Deal 25 The Basics of the Lease Purchase Deal 25 What Do I Need To Start? 26 Chapter 4 Selecting Property And Getting To Know The Tenant/Buyer 28 What To Look For When Examining A Property 28 Various Factors That Can Affect Home Sale Prices 30 Sellers: It Pays to Prepare 33 Create Space 34 Neutralize to Maximize 34 All Systems Go 35 Outside Check 35 Inspection Plus 35

Show and Tell 35 Vacancy Protection 35 Hot Topics 36 Invisible Hazards 37 Buying An Older Home: Special Problems 37 Lead Paint 37 Lead and/or Galvanized Pipes 38 Deteriorating Foundations 38 Insect And Water Damage 38 Little Or No Insulation 39 Single-Pane Windows 39 Outdated Climate Control 39 Outmoded Wiring 39 Remodeling 40 They Don't Make `em Like They Used To 40 Some Thoughts On Tenant/Buyers 41 Time for Your First Home? 41 A Scenario To Save By 42 How To Get There From Here 43 It Helps To Have Cash 45 The True Cost of Buying a House 45 Repair Costs 47 How Much House Can You Afford? 48 The Best Buying Advice 50 Make A Wish List 51 Aging Choices 52 New Doesn't Mean Perfect 53 Put Yourself There 53 Be Sure Before It's Too Late 54 Conclusion 54 Chapter 5 Finding the Property 56 Using the Newspaper and the Internet - Our Two Favorite Methods 56 Other Publications 59 Chapter 6 Calling On The Properties 61 Get Ready to Call 61 Chapter 7 Meeting With The Seller 71 Face To Face 74 Chapter 8 Advertising the Property 79 Dealing With Tenant/Buyers and Credit Checks 80 Using Third Party Payees 87 Chapter 9 Finalizing The Deal 89 Some Deal Numbers 91 Chapter 10 The Proper Contract 95 Having The Proper Contract 95 The Pitfalls 99 Chapter 11 Conclusions 106

Chapter 12 Final Thoughts On Lease Purchasing As A Business 110 How Do You Want To Spend The Rest Of Your Life? 112 How To Give Yourself A $20,000/Year Raise Without Asking Your Boss 117 What Can I Realistically Earn In A Lease Purchase Business? 120 Time, Knowledge And Energy; What They Should Mean To You 122 A Five Thousand Dollar Christmas Present 124 Sometimes Dreams Do Come True 127 How To Make Everybody Happy And Earn $250 Per Hour Doing It 131 How To Earn $2,500 In Two Hours 134 Being A Tenant/Buyer Means You Never Have To Say You've Wasted Your Money 137 A Few More Examples Of Lease Purchase Property 140 We'd Like Your Opinion 141 Quick Reference Flow Charts, Sign And Flyer Examples 143 Network Partners Flow Chart 144 Lease Purchase Deal Steps Flow Chart 145 Finding Lease Purchase Property Flow Chart 146 Finding The Tenant/Buyer Flow Chart 147 Rent To Own Sign Example 148 Flyer Example 149 Lease Purchase Contracts And Forms 150 Telephone Prospecting Outline 151 Lease Purchase Property Research Form 153 Tenant/Buyer Evaluation Form 155 Finance Summary 158 Assignment of Agreement 159 Residential Lease Purchase Agreement 160 ADDENDUM 167 NOTES 168 NOTES 169 -------------------------------------------------------------------------------Dedication This book is dedicated to each other, without one another we would not have survived. Through all the trial and tribulations, good and bad, ups and downs we have stood by each other and have become stronger. Strength in numbers. Ourselves, family, very good friends, and our four footed friends who give us that special kind of attention and love...the unconditional kind. Purpose The purpose of this book is to get you started in the specialized niche of Creative Real Estate known as Lease Purchasing utilizing the co-operative strategy. The book discusses the various lease purchase strategies available to you, but the focus is on breaking down the steps of the co-operative strategy. It will take you through the whole deal process.....The Anatomy Of The Deal. The Anatomy Of The Deal is for those who want to utilize the niche of Lease Purchasing

on a full time, part time or spare time basis. It is for those who want to get started quickly, with a minimum of reading, and a minimum risk and cost factor. Realize however, that hard work and dedication are necessary as in any endeavor. If you expect to be a millionaire by next Tuesday, or a get rich quick scheme, then this book is not for you. There is no magic formula - just hard work and dedication. Remember, if it sounds to good to be usually is! And anything worth having means hard work. Who Are Chuck and Sue Chuck and Sue DeFiore are the founders and principals of DeFiore Enterprises. DeFiore Enterprises is comprised of the following divisions: Home Business Consulting, Real Estate Investments, Publishing and Coaching. Chuck and Sue DeFiore are investors, consultants, and coach/mentors. They specialize in two areas. The first, a niche of Creative Real Estate known as Lease Purchasing; the other, in the establishment of home-based businesses. Through their consultations and investments in Lease Purchasing, they help sellers move their property in 30 days or less; and help buyers get into their dream home today, that they can buy tomorrow. Chuck and Sue are active both locally and nationally. They are the authors of "Who Makes It Happen, We Do: Back On The Road To Success With Creative Real Estate", and "The Anatomy Of The Deal Series: The Co-Operative Strategy: How You Can Generate Quick Cash Flow In The Creative Real Estate Niche Of Lease Purchasing" and "The Anatomy Of The Deal: Consulting Your Way To A Six Figure Income In Creative Real Estate". They have published numerous articles on lease purchasing and have five extraordinary manuals, considered to be the most complete in the industry. In addition, they have produced tapes sets on Lease Purchasing, Home-Based Businesses and their extraordinary Expert Tape Series. They have developed a revolutionary coaching program. The Partnering For Your Success coaching program is geared towards those folks who want or need to change their financial situation. This is a unique program where you work with Chuck and Sue for one full year. It has a low initial cost and together they share in your success. They are renowned innovators for the home-based business market, through their newsletter, Home Business Solutions, and their support group. They have coached individuals in business start up and all facets of home office development. Their expertise has allowed them to work with some of the largest corporations and governmental agencies. They have written numerous articles on operating a home-based business, and have been written about in New Business Opportunities Magazine, Small Business Opportunities Magazine and Income Opportunities Magazine to mention a few. Chuck and Sue's motto is "Who Makes It Happen, We Do". They have taken the

experiences learned from their successes and yes, their failures and applied that to their consulting and coaching business. Chuck and Sue will work with you on a one on one basis to help you reach your potential and achieve the success you deserve. They believe in "Who Makes It Happen, You Do". The DeFiore's currently reside in Fresno, CA where they operate a successful Lease Purchasing and consulting business. _____________________________________________________ Chapter 1 What Is A Lease Purchase Deal? A lease purchase is a process that combines a basic rental lease with an agreement to purchase, or with an option to purchase the property. The Buyer (or Lease Purchaser) pays to the seller a monthly payment that usually approximates a rental amount or a typical mortgage payment on the home. A percentage of that payment is typically applied towards the purchase price. At the end of the term, the buyer has the right to purchase the property for the price and terms to which both parties have previously agreed. Or, put another way, a lease purchase is essentially a rental agreement combined with a purchase contract with pre-negotiated terms. The buyer leases the property for a specific period of time and then purchases the property before the end of the lease agreement. Sales price, length of rental, rental amount, rent credits, escrow instructions, etc., are all contained in the agreement. You will find that Lease Purchasing is a wonderful way to control property without all the accompanying headaches of banks, mortgages, taxes or immediate loan qualifying. Lease Purchasing gives you the right to buy property, but not the obligation to buy. The Lease Purchase Deal The Lease Purchase Deal involves the following individuals: yourself (of course), the seller and the tenant/buyer. It also could involve another investor, if you flip a property, but we are getting ahead of ourselves. For our purposes in The Anatomy Of The Deal, we will be working with you (the investor), the seller and the tenant/buyer. As an investor, lease purchasing offers you the following advantages: maximum leverage; minimum cash needed; no maintenance; wonderful cash flow, excellent profit potential; no banks, lawyers, Realtors, Escrow's, mortgages, etc. needed; minimum risk and control without ownership or overhead. As a business owner, you can start your lease purchasing business with a minimal amount of capital; little or no credit is needed; wonderful cash flow can be generated immediately; excellent and realistic first year income can be achieved; the business can be started simply, no major equipment to buy; the business can be operated full time, part time or in your spare time; and best of all, the business can be operated from your own home office.

For the seller, lease purchasing offers: usually top sales price for the property; large market of available buyers at all times; better quality tenants; higher rent; non-refundable option consideration (down payment) which is the seller's to keep; all minor maintenance is delegated to the tenant/buyer; seller remains on the deed (it is still his property until the option is exercised); no fees to pay (especially Realtor commissions, closing costs, etc.) and a competent accountant or tax attorney can file legitimate write-offs, deductions, exchanges and other mechanisms provided by law. For the buyer, lease purchasing offers: low down payment to get into property; qualification restrictions are not as great; past credit problems are not a road block, like in conventional procedures; option consideration (down payment) can be fully credited to the purchase price; your rent money is working for you (part of your rent payment can be credited to the purchase price if paid on time); purchase price is locked in ahead of time; gives you sufficient time to check out all the features and faults of the house; time to check out the neighborhood; puts you in legal control of a property for a specified period of time without having to actually own the property; time to shop for and obtain the best financing; major maintenance and repairs are the responsibility of the owner (only minor maintenance is your concern); and profits, in case appreciation occurs and you decide to sell in the future. The difference between what you contracted for (paid) and any increase in fair market value is all yours if you sell the property. As you can see there are advantages for the investor, business owner, buyer and the seller. You can use these advantages in your dealings with buyers and sellers. Remember to emphasize them when negotiating with a seller or tenant/buyer. The advantages you focus on will depend on the strategy you use, however, for our purposes you can focus on the majority of them, since you will be using the co-operative strategy. _________________________________________________________ Chapter 2 Lease Purchase Basics and Strategies Lease Purchasing - The Basics The basics involved in lease purchasing are the newspaper, your computer, the telephone and your sales, negotiating and closing skills. The basics of what you need to complete the Lease Purchase deal will be covered in detail in upcoming chapters. However, you do need these basic skills to start. You need to have the drive, time management and organizational abilities to go through your prospecting materials and weed out the garbage. You should have basic computer skills so you can communicate with buyers and sellers if you want to work on the Internet. You don't need a computer to do Lease Purchasing. However, you will need something to prepare correspondence with. You cannot have an aversion to cold calling. The telephone will be your most important tool for lease purchase deals. If you don't want to make calls, then don't expect to make

deals. This might sound harsh, but it is the truth. Too many people think the deals are going to fall into their laps. Yes, by employing our full manual, "Lease Purchasing As A Home-Based Business" (http://www.homebusinesssoluti/products/products.htm) and program the deals will come to you, but you still need to talk to people and find out if that deal is for you. The first contact with the seller, building a rapport, is the most important one. It cannot be done quickly, by just asking if they want to do a lease purchase, first you have to find out what their needs are, and if a lease purchase is even feasible. In the beginning this will take time. One of the reasons we do extensive screening for our coaching students is to weed out those who want to get everything done too quickly. They are the ones who don't follow our scripts and want to skip steps. They are the ones who are too impatient and in the long run they take twice as long to get their first deal. They are also the type of students who think they know better than we do — not. So, have a little patience and follow the process outlined in The Anatomy Of The Deal. Please don't try to skip steps, thinking you know a better way, a quicker way. Some things just take time and building that relationship with the seller is one of them. Lease Purchasing is a wonderful business. However, like any other business you have to work at it. If you have poor attention to detail, however, this business might not be for you. You need to be able to keep good records of whom you spoke to and did business with. Also, if you are impatient and don't like "hand holding", rethink going into lease purchasing. Many deals will involve you walking the sellers and buyers through the deal, and giving constant reinforcement to them. Also, although the risk level is minimal, there are some risks. You may contract for a property and not move it. We feel however that lease purchasing provides a win-win scenario for all parties. We help sellers move their properties, buyers get into a property they might not have, and make money for ourselves in the process, a win-win scenario for everyone. We, however, have good contracts that support all parties, and employ very ethical business practices, please be sure you do so also. If you can't work with these basic tenants, then lease purchasing is not for you. Ways To Generate Income Lease Purchasing provides you with a variety of ways to make money. Some of them are: You make money with the assignment fee. The assignment fee is the money you receive from selling a contract you have on a property. This will vary depending upon the strategy you use.

You can also make money on cash flow. Cash flow is the difference between what the tenant/buyer pays you and the obligation you have on a property. We also, on a cooperative assignment, negotiate with the seller for a percentage of the positive cash flow. You can receive money at closing. When the tenant/buyer exercises the option to purchase the property, and if the deal is structured in this way, you can receive money at the closing, if you're employing the sandwich strategy. You can flip a contract or sell a pure option to another investor and receive money in this manner. You can consult with buyers and sellers. Sometimes the seller just doesn't want you in the deal or a buyer wants to do it themselves. In these cases you want to be able to consult with buyers and sellers and show them how to do it. You can charge a consulting fee to help buyers and sellers with lease purchasing their property. You can create your own high quality notes which can provide you with a steady monthly income. The Strategies As discussed earlier, for our purposes we're concentrating on using the co-operative strategy in The Anatomy Of The Deal. It allows us to get into a deal with little monetary outlay and out of the deal once we find the tenant/buyer to assign it to. However, we would be remiss if we did not mention the other strategies available to you with lease purchasing. First, the co-operative strategy, and the one that The Anatomy Of The Deal focuses on. It is the easiest and quickest for the beginner to start with. With this strategy, you are not making yourself liable for any payments to the seller. You also don't have to put down any large sums of money for option consideration. In fact, for the co-operatives that we do, we put down one dollar of option consideration. Some states require more. This is something you can check on with your local real estate group or real estate board. The co-operative is used when the seller may not want to give over total control of his/her property. The seller wants some say as to who goes into the property. The seller may also want some of the assignment fee, which is why we put down one dollar. Once we assign the contract to a tenant/buyer, then the seller receives half of the assignment fee, and we receive the remaining half, or whatever monetary distribution we have decided on. In a co-operative, we set the strike price (contract selling price) at or a bit above market. We try to structure the rent to obtain positive cash flow. We also adjust the property price to reflect the amount of rent credit we want. For example, if we want to offer $500 per month rent credit, that equals $6,000 at the end of the first year. We will suggest raising the price of the house by the same amount. Therefore, if the house had a price of $110,000, we would make the price $116,000. This is a selling point, the rent credit is not

costing the seller any money out of pocket. Be sure that the market in your area will allow you to adjust the price in this fashion. In addition, by structuring the rent to yield positive cash flow, you are also making the seller money, another sales point. Also, remember this can also be an additional income stream for you, if during your initial negotiations with the seller you negotiate for a portion of the positive cash flow. Remember, this is one of the options we give sellers when working with us. Always remember your goal is to get the property under contract and assign the contract to a qualified tenant/buyer. By making it more attractive to the seller, your job becomes easier. When you assign the contract, with the seller's approval, you will collect an assignment fee. This assignment fee is typically applied to the purchase price, if there is enough equity in the property to cover it. If not, the strike price of the house can be raised. Please note, however, do not raise the price more than 5% or so over market, otherwise you are doing a disservice to the tenant/buyer. Remember, this should be a win-win situation for everyone. The co-operative strategy can be utilized for all types of property: single family, mobile homes, townhouses, condos. It also works well with sellers who are semi-motivated; with investors who have rental property and for those sellers not in a rush to move their property. The other strategies available to you in lease purchasing are: The Sandwich Deal. This is when you lease purchase the property and then sub-lease to a tenant/buyer. You are taking on the responsibility for all payments to the seller. However, it also affords you great profit potential. You can collect money up front as option consideration, you receive the positive cash flow and you can make additional money at the end if the option is exercised. For those of you not familiar with the term positive cash flow, this is the difference between what the tenant/buyer pays you and what you pay to the original seller. In a sandwich deal you are dealing directly with the seller. The contract is between you and the seller. So in this case you want to get the best deal you can for yourself, as little money down as possible, covering his/her payments only, using a third party payee, and a good price on the property over a minimum of a 2 year or more period before having to purchase the home. This allows you to give your tenant/buyer a one year or two year term, rent credit, and for you to make money on the back end (if the tenant/buyer exercises the option). With the next strategy, the straight assignment, you can obligate yourself for the monthly payments or you may negotiate no payments until the contract is assigned. This will

depend, in part, upon your skill as a negotiator, and on the seller's needs. You will put down more option money with this method than you would in a co-operative, however, you will recover it when you assign the contract. We still would not put down much option money. We try for $100-$200; or at the most one month's payment (mortgage). You are looking for favorable terms in this strategy because you want to move the contract quickly. With this strategy we look for a strike price a bit below market, monthly payments very close to or exactly what the seller is paying and we want a multiple year term. In the straight assignment you contract for the property and assign or sell that contract to a tenant/buyer. This does not require the seller's approval. In the straight assignment you make your money in assigning the contract to a tenant/buyer. So again you want to negotiate good terms with the seller, so you can make money with the assignment fee. Remember too, you can sell a straight assignment to an investor. The pure option. The pure option on a property allows you to purchase the home at a future date. The terms also are set. You can take the pure option and sell it to another investor. Again you want to negotiate good terms for yourself, so you can make money when you flip this to an investor. Here, you are typically looking for property valued under the current market. So while The Anatomy Of The Deal concentrates on using the co-operative strategy, where the seller has a say in who goes into his/her property (although, the way we do it, it is a non-questioning one), be aware that there are other strategies in lease purchasing that you can use. Again, the co-operative is chosen since it presents the least amount of monetary outlay, and the least amount of risk, since once the paperwork is signed over to the tenant/buyer you are out of the deal. _______________________________________________________________________ ______ Chapter 3 Breaking Down the Anatomy The Parts of the Deal The Basics of the Lease Purchase Deal The basics of a lease purchase deal encompass the following: using the newspaper and the Internet to find your properties; the telephone and cold calling to obtain a property; negotiating with the seller and getting the contract signed; placing your ads for the property; finding and dealing with the tenant/buyers; moving the property and finishing the lease purchase deal. For example, let's say you contracted for a property and expect to receive a $5000 assignment fee. This fee is not being split with the homeowner. This is your gross profit from the deal. The expenses you subtract from this are the cost of advertising and/or marketing the property (newspaper, Internet, signs, credit checks). However, for credit checks, you can make money on them also if you charge more than what you are charged.

For example, we charge $35 for an individual and $50 for a couple, we are charged $15 per report, this will vary however, so make the appropriate adjustments if you need to. Other expenses you might incur are travel expenses (gas, maintenance on car, insurance, etc.); copy expenses for flyers and any other miscellaneous expenses. On average your expenses should run less than 10% of the assignment fee. In fact, our rule of thumb is if a property costs us more than 10% we drop the property. We make an estimate of the expenses before we take on a property and if it is more than 10%, we will pass on the property. Remember, your time is money, so if you have to run back and forth too many times, especially with today's gas prices, you can rack up costs very quickly. However, overall, you will have a hard time finding another business that yields a 90% net return of a transaction. Don't get so worked up trying to estimate costs that you lose out on a property. What Do I Need To Start? To start, you need the following: a telephone, a computer (if you're going to utilize the Internet), a newspaper(s), along with some drive, ambition and perseverance. Your basic steps for the deal are as follows: Go through your newspaper for FSBOs (For Sale By Owner) properties. Get on-line and get a list of FSBOs in your area. Start calling. Start by calling from the newspaper, the houses for sale, then the townhouses, condos, and finish with the rentals. Get a deal from your calls. Be sure you get as much information as possible by telephone, the only reason you want to leave your office is to get the seller to sign your contract. Place your ads, flyers and signs. Screen your tenant/buyers calls. Do your credit checks. Inform seller of finding a tenant/buyer. Meet with tenant/buyer to sign paperwork and get moneys. Send out final letters to seller and tenant/buyer. Go out for a nice dinner with your new found wealth. The upcoming chapters will deal with the steps listed above. _________________________________________ Chapter 4 Selecting Property And Getting To Know The Tenant/Buyer Before we get started with the actual mechanics of using the lease purchase advantage, there are a number of factors you should look at first. Remember, when you are looking at prospective investment property, you will be wearing two hats, your buyer hat and your seller hat. Why, because you need to think like a buyer when acquiring the property and then think like a seller when looking for the tenant/buyer.

You need to be able to select good property with appeal so that you can move it in the fastest time possible. In order to accomplish this, the home must be in the best condition, both physically and visually, to attract the greatest number of tenant/buyers. The following hints and ideas will help you get this done in the least amount of time. What To Look For When Examining A Property One of the first things we do when we get to a property is walk around and look at the room size. We try to picture our furniture in each room. Would it fit? Can you place a king size bed in the bedroom, with dressers and still have space to walk around comfortably? Will the living room or family room hold a wide screen television without having to sit on top of it to view the picture? Is there space for a surround sound system, entertainment set, wall unit, etc.? Can two people work comfortably in the kitchen? Are the counter tops large enough to hold a coffee machine, microwave oven, toaster oven, etc. and still have space for actual cooking? Is there ample cabinet space for dishes, glasses, pots, etc.? Is the sink a double or single? Can you fit a table in the kitchen for quick meals? How about the dining room, will it hold a table and hutch? Can you fit six chairs at the table? Does this still leave serving room around the table? Is the garage a two or three car one? Does it have room for storage? Can shelves be put up in the garage? Is the garage attached or stand alone? How about the yard, is it landscaped, grass or desert look? Can you fit an out door table and chairs, BBQ grill, etc. in it? Does it have a patio? Is it fenced? If fenced is there outside access to the yard from a gate or is entry to the yard through the house or garage. Are the secondary bedrooms large enough? Remember, some folks use other bedrooms as offices, exercise rooms, libraries, etc. This is especially true with baby boomers whose children may be grown and out of the house. The best way to start to learn what to look for in property, is to visit as many open houses as you can. Walk around with the above in mind. Pretty soon, looking at houses this way will become second nature. Why have you go through this, because your tenant/buyers will be doing this. If the house is not appealing to you, odds are it won't be to a tenant/buyer. The following sections will point out some other areas you should be aware of from both the standpoint of the seller and the buyer. Various Factors That Can Affect Home Sale Prices Figures published in a study by the National Association of Home Builders (NAHB) estimate the value of various factors that will add to or detract from the price of a house. For its study, the NAHB assumed that the typical house would have about 2,000 square

feet of floor space, a basement, a garage, three bedrooms, and two baths plus three other rooms. We can apply the NAHB figures to our own local conditions to make the percentages shown more relevant. The listed percentages can serve as guidelines only, because national averages may not fit regional factors. For example, the NAHB study assigns a penalty of -3.1 percent for houses having no basements, but in cold climates a house with no basement would have a price penalty greater than -3.1 percent. The figures reinforce Realtors' claims that house location is of prime importance. The NAHB study shows that being within 300 feet of a body of water (lake, river, or pond) can add 27.8 percent or more to the value of a house. On the other hand, for a house in a neighborhood that has some abandoned buildings, house values may be reduced by 30.7 percent. A neighborhood that has falling real estate values because of past deterioration may see dramatic price rebounds if remodeling crews move in. Any rehabilitation or remodeling activity that reflects renewed interest in an area can quickly drive up house values. In many busy households there are two or more breadwinners trying to get off to work in the morning, so having two bathrooms is a prime selling point. Having no second bathroom may reduce the value of a house by 18.5 percent, while having a third bathroom can add 17.5 percent - about $25,000 - to the house value, far beyond the actual cost of the bathroom. A fireplace is a desirable feature in most climates, and by NAHB figures having a fireplace can add 10.8 percent to house value. For a house having no garage the NAHB subtracts 14.6 percent; in cold-winter climates the garage is more important than it is in warmer climes, so the penalty for having no garage in northern states may be greater than in the NAHB average. Adding a fourth bedroom may increase the house value by 5.2 percent. Adding a room other than a bathroom or bedroom, such as a family room, bumps the value up by 5.9 percent. Adding 500 square feet of floor space is worth a 9.4 percent bonus. For today's working couples the emphasis is on home comfort. A house that lacks central air conditioning may have a price penalty of as much as -12.8 percent. If one subtracts that percentage from average selling prices the penalty will exceed the cost of the air conditioning. Location factors that can detract from the value of a house include neighborhood streets that are in poor condition, which may reduce the house value by 6.5 percent, a significant pothole penalty. Visible trash or other signs of neglect around nearby houses can reduce not only the value of the offending neighbors' homes but can reduce the value of all houses in the area by 14.5 percent. Sellers: It Pays to Prepare

Want to get the highest price possible for your home? Of course you do! A little time and effort before you put out a "For Sale" sign can make a big difference in the dollars you get. Here are some proven tips for increasing the value and desirability of your property by experts in the field. Most experts agree: buying or selling a home ranks among the most stressful experiences of adult life. It can get to the point of being an emotional battle of wills between buyers, sellers and real estate agents all wanting the best deal for the house. By the time a home inspection is arranged, the buyer is convinced he's paying too much for the house, the seller swears he's giving the house away, and the real estate agents are hoping to keep the deal alive. In spite of all this, the home inspection is a critical process. Nobody wants to buy a "bad" house. The inspector's job is to carefully check the home's structural and mechanical systems for problems that can lead to big repair bills later. However, there are many things you can do to get the home ready for an inspection and ready to bring in the highest price possible. Create Space Most people buy homes because they've outgrown their existing house or apartment and need more space for a growing family. As a home seller, your product is that space - the more space you have to sell them the higher the price you're likely to get. Here's how you can create more space, even in smaller houses: eliminate excess furniture move storage clean out your garage take every opportunity to create a wide-open look. Neutralize to Maximize After cleaning the place up, it's time to paint. Relocation firms, which help big companies move employees across the state or across the country, often wind up having to sell the employee's former house as quickly as possible. Their trick? They immediately paint the inside of the house, top to bottom, with an off-white paint and then follow up by installing a low-grade, tan wall-to-wall carpet. All Systems Go Next, get all of your mechanical systems serviced by qualified contractors. It is generally not expensive and is extremely important in presenting your property as well cared for. Outside Check Once you're finished inside the house, do a little work to freshen up the exterior. Replace broken windows, repair rotted trim, cut back trees that are too close to the house, and invest in some new landscaping.

Inspection Plus Even before you put your house on the market, a professional home inspection is a valuable way to get expert help in the pre-sale process. While buyers will often want their own inspection, you will be far ahead of the game if you have an impartial expert check your house. Show and Tell There may be things that you don't want to or can't fix. If that's the case, you should be ready to tell potential buyers about problems: with mechanical systems, structure, and grounds. The days of "Caveat emptor" ("Buyer beware") are over. Vacancy Protection Real estate experts know that vacant houses are hard to sell. That's why many recommend having relatives, friends, or well-screened tenants move in on a month-tomonth basis, just so the home is lived in. However, if you must leave your house empty before it sells, make sure you protect yourself by maintaining insurance. Hot Topics There are many things that can turn a dream house into a money pit. Whether they're in the house you're trying to sell or one you'd like to buy, here are some of today's hottest concerns: • Underground Oil Tanks • Wet Basements • Good Gutters • Soil Slope • Hungry Bugs • Minimize Moisture • Distance Wood • Cut Ground Contact • Rotting Roofs • Ventilate • Fix Flashing • Timely Repairs Invisible Hazards You can't see or smell these invisible hazards, but they can be deadly. • Carbon Monoxide • Radon • Lead Buying An Older Home: Special Problems Let's face it, today's cookie-cutter houses just don't have the architectural charm of yesteryear's homes. Nor are they usually built with the same fine craftsmanship. That's why older neighborhoods - with homes built from the late 1800s through the 1940s - are so hot these days. It seems everybody wants an old-fashioned house like Grandma used to live in.

As charming as they are, however, older homes can be a real challenge to own and maintain. If you're in the market for a "venerable" house, here are some things to keep in mind. Lead Paint Almost all older homes have lead paint. Lead was a common paint ingredient until the mid-1970s when it was banned by the Environmental Protection Agency. Lead paint dust, if ingested or inhaled, is toxic and can cause cognitive and neurological problems, especially in children. Lead and/or Galvanized Pipes Really old houses may have lead water pipes, which can adversely affect drinking-water quality. These were often replaced many years ago with galvanized pipes or, more recently, with copper piping. That took care of the lead problem, but galvanized pipes are prone to corrosion, as are the fittings that connect galvanized or lead piping to copper piping. Deteriorating Foundations Any home may have a foundation problem, but homes 50 years old or older may well have more serious problems. Badly cracked or sagging walls, crumbling mortar, or deteriorating concrete are all conditions that may be found in the older house. Insect And Water Damage Having been around for such a long time, old homes have had ample opportunity to suffer an infestation of termites, carpenter bees, carpenter ants, or other wood-boring insects. Such insects can cause considerable damage to support beams, posts, and other wooden portions of the structure. Likewise, water can damage wood when, over many years, it gets into places it isn't supposed to. Little Or No Insulation Insulating was not a priority when energy was cheap. Hence, many older homes have no insulation in the exterior walls and little or none in the attic. Single-Pane Windows Those great-looking divided-light wooden windows are likely to be made of single-pane glass - offering little protection from the elements. Quite often, storm windows were added somewhere along the way, but they're no match for today's energy-efficient thermal windows. Outdated Climate Control Those old oil-fired, hot-water (or steam) heating systems can last darn near forever if maintained properly, and radiators do provide a nice, cozy heat. But an old oil burner can be pretty energy-inefficient - and with no heating ducts throughout the house, there probably is no central air conditioning.

Outmoded Wiring If a home is old enough - from the turn of the century, let's say - it might actually have old-style knob-and-tube wiring. By now, it's probably worn out and a real fire hazard. A more recently built home may have more modern wiring, but it still could have an old fuse-box-style electrical panel, which is probably overloaded and inadequate for today's modern (appliance-loving) family. Remodeling Probably the worst thing that can happen to a great old home is an ill-conceived remodeling job. Too often, big additions are just stuck on the back or side with little respect for the architectural integrity of the entire structure. They Don't Make `em Like They Used To In some respects, maybe it's a good thing they don't make `em like they used to. Today's homes are safer, more comfortable, and more energy-efficient than their older siblings ever were. But those old Victorians, cottages, and bungalows are light-years ahead when it comes to charm. Take care to identify and correct the special problems of your older home, and you'll have the best of both worlds. Also be aware that many of the people in older homes have already made some of the above improvements already. So take a list with you when you visit an older home and ask the seller if the above things have been updated. -------------------------------------------------------------------------------Some Thoughts On Tenant/Buyers You never get involved in the financing for a tenant/buyer, however, there are some things you should know which will help you in speaking with a prospective tenant/buyer. Time for Your First Home? When is the right time to buy your first home? Not only are there a number of factors to consider, but it's also the biggest financial decision you'll face. First, let's collect a little background information. For that we go to the 1997 US Statistical Abstract. The average amount of debt for a family under 35 years old is about $10,000 for credit cards, installment debt, and lines of credit combined. But there can be more. When many students graduate they get not only a degree, but also a bill for all their college loans. Add a car payment or two and it adds up pretty quickly. Next for some housing info. About one third of families in the 25-29 age bracket own their own residences. And the cost of those homes keeps going up. We found that the median price for a home was $118,000. Naturally, there's a big difference depending on where you live and the size of the home.

A Scenario To Save By Now let's take a look at a hypothetical situation. Say your household income is about $60,000 per year. You currently have $55,000 in debt from credit cards, school loans, and car loans. You live in a one-bedroom apartment ($690 per month) and have a nine-month old son. Your landlord says your child can be up to three years old in the one-bedroom with you, and then you have to move to a two-bedroom, which would be about $900 per month. Are you better off to try to get a mortgage on a house and also reap the benefits of taxes? Or should you just get the two-bedroom apartment for awhile and pay off debt? Your plan would be to save up 10 percent for the down payment on a $100,000 house. The first consideration is monthly expenses. We'll assume that the apartment will stay at $900 per month. Compare that to owning a home. There will be a mortgage to pay. Suppose you save a $5,000 down payment on a $100,000 house. A 30-year, 7 percent mortgage will cost you $632 per month. To that we'll need to add property taxes, maintenance, insurance, and utilities - say another $3,000 per year or $250 per month. You will save a little in income taxes, about $1,200. So your monthly expenses will be about $782 ($632 + $250 - $100). It's important to look at the specific house you're considering when you do this exercise. In some areas, the property taxes alone are more than $3,000 yearly. Other older homes may require costly repairs that could consume big bucks in a heartbeat. Each house will be different, so do your homework. This is one of the reasons so many individuals opt for lease purchasing their home. They get all the perks of having a home, but none of the headaches. --------------------------------------------------------------------------------

How To Get There From Here So far in our scenario, it looks like you should consider buying. The next question is whether you can you get there from here. You have about two years to get ready for that house. During that time you'll need to get your debt down, save a down payment for the house, and also put aside some money for emergencies. With lease purchasing, you don't have a waiting period. You can lease purchase now. Remember, for the length of your lease purchase term your payments remain the same. We'll start with the debt. If you're paying $2,000 each month and don't add anything to the existing account, you'll have it paid off in 34 months. Two years from now when you want to buy the house you'll still have a balance of $18,500. Lenders won't like that balance, but the fact that you've been reducing it should help. There's also still the matter of a down payment. If you can save an additional $200 per month and earn 4 percent on the money, you'll be right at the $5,000 target in two years. To be safe it would be a good idea to have some emergency money available. If you could increase the monthly savings to $300 there would be a total of $7,500 available. The extra could come in handy if the furnace or some other major appliance breaks. Cash will be a real issue in this scenario. That $60,000 annual income looks big, but let's take a look at where it goes. Taxes take about 20 percent or $10,000. Debt repayment takes another $24,000. Housing consumes about $10,000 (including utilities). We're down to $16,000 and still haven't considered food, medical, child care, transportation, other miscellaneous expenses, or the down payment for the new home. We're talking about a very tight budget here. Whether you buy or rent in two years, you still need to get out from under that debt as soon as possible. Once the debt is paid, that money can be redirected to saving for a down payment or prepaying a mortgage. It Helps To Have Cash One final thought. You'll have friends tell you that by buying a home you're saving on income taxes and building equity. And it's true - up to a point. But for every dollar that you save in taxes you'll pay three or four in interest charges. And without prepayments, you'll build very little equity in the first few years of home ownership unless inflation returns. With lease purchase, you structure it so you get a generous rent credit, which is applied to the purchase price of the home. Remember that owning a home opens you to unexpected big expenses. Building equity is fine, but it won't help if the refrigerator dies and your budget is so tight that you don't have the money to replace it. The True Cost of Buying a House

When shopping for a house you will be told what the monthly house payment will be. The payment will include the principal and interest, plus an escrow amount to pay for property taxes and insurance. If you can qualify for the mortgage payment you may decide that you can afford the house, and make an offer. Sound reasonable? Think again. The true cost of owning a house depends on two factors: the cost of the house, including principal, interest, taxes, and insurance; and the cost of living in the house. The cost of living in the house includes utility payments plus maintenance and repair costs. These maintenance costs must be calculated not only for the house itself, but for all other structures on the property, such as a deck, fences, and storage buildings. Add to these the cost of maintenance for appliances and equipment and you may realize that the cost of living in the house may make unexpected budget demands. For an accurate budget picture you should estimate the total cost of owning and operating the home. When you lease purchase your home you are responsible for minor maintenance, any major structural repairs are the seller's responsibility. The age of the house can affect the cost of living in it. Houses that are less than 10 years old are built to meet modern energy efficiency standards. Not only are the houses better insulated, but the heating and cooling equipment also is more efficient and uses less fuel. When house shopping, look for the energy efficiency rating (EER) labels on the appliances. If the appliances lack EER labels, assume that the equipment is more than 10 years old, and both is less efficient and needs more frequent repairs than newer equipment. Always ask the owner for annual heating and cooling bills so you will know these costs. Repair Costs Now consider the maintenance and repair costs for the house itself. For example, asphalt shingles have an average warranty of 25 years, with a maximum warranty of up to 35 years. If the house you are considering is 10 years old, the roof should last at least 15 years before replacement. Next, consider the type of exterior siding. Brick or stone get the highest marks for permanence and low maintenance. But many siding materials, including vinyl, aluminum, and steel, have warranties of 25 years or more. Cleaners are available for these materials, so you should enjoy a period of 25 years of freedom from exterior maintenance. If the house siding must be painted, figure on having to repaint every five to seven years. Estimate the cost of having the painting professionally done. For example, a $2,000 painting estimate divided by five years will add about $35 to the monthly cost of living in the house. When house hunting, you may be impressed by such amenities as a deck or privacy fencing. Each additional structure contributes to the annual maintenance cost. Even maintenance-free deck materials will periodically need a coat of water repellent; like houses, fences must be stained or painted every five to seven years.

Consider the cost of living in the house. Shop for a quality house that offers low maintenance. A proverb says that quality will be remembered after the price is forgotten, and that is especially true when buying a house. You should make a list of all the things you will need to consider when buying a home, so that when you find your dream home you will be able to determine exactly what it's true cost will be to you. How Much House Can You Afford? In recent years, the ease of obtaining a mortgage has produced a potentially serious delinquency rate in mortgage repayments. Serious delinquency refers to mortgages that are at least 90 days in arrears or are in foreclosure. The delinquency rate varies by loan type, loan-to-value ratios, and geographic areas. However, it can be a financial tragedy for those home buyers who cannot meet their mortgage payments. Experts were asked how both the lender and the buyer can avoid the danger of a mortgage default. Bankers agree that in general the smaller the down payment, the greater the risk of delinquency. Industry figures show that in 1993 only 20 percent of all new home loans had down payments of less than 20 percent, compared to the 41 percent of home loans with less than 20 percent down payments in 1995. But many bankers believe that the buyer should buy as much house as they can comfortably afford. According to one mortgage banker, both the mortgage amount and long-term debt are considered when qualifying a buyer. Long-term debt may include auto or installment loans, or revolving charge cards with ongoing balances. New financing falls within three main categories: FHA, VA, and conventional loans. For conventional loans the rule of thumb is that the projected mortgage payment should equal not more than 28 percent, and the mortgage payment plus long-term debt payments should not exceed 36 percent of one's gross monthly income. For FHA mortgages, the rule is that the mortgage payment should not exceed 29 percent, and that the mortgage payment plus long-term debt payments should not total more than 41 percent of gross monthly income. Lenders first review the income and debt numbers and tell the buyer the on-paper qualification amount. Then they ask the buyer how comfortable they are with the maximum payment amount. The mortgage market has changed: for example, in the past the husband was the sole breadwinner, but the family with two incomes may feel more secure about their ability to make the payments if one or the other should lose a job. Things change. The person who is a first-time buyer, or one who has not bought or sold a home in the past few years, should sit down with a loan officer and learn the real estate terminology and look at the actual numbers. Avoiding credit problems depends on how well the buyer is controlling their credit. The mortgage payment may be the largest single monthly payment, but all the consumer's spending decisions can contribute to their becoming financially overextended. If monthly payments for the mortgage plus long-term

debt approaches 40 percent of gross monthly income, the person should be cautious and avoid taking on additional debt. With all the rules, regulations, and qualifications you have to meet, lenders make it difficult. However, don't despair, this is where the Lease Purchase Advantage comes to the rescue! The Best Buying Advice One young couple who was thrilled when they found a house in their price range five blocks from the ocean. When the moving men arrived with the furniture, they were horrified to find that their beautiful oak set was too big for the master bedroom. While struggling to fit things in, they told themselves that summertime strolls on the boardwalk would more than make up for the cramped space. But instead of relaxing moonlit walks, they got rowdy summer tourists and broken beer bottles on their lawn. To make matters worse, they discovered that their roof leaked - badly. Unfortunately, nightmares like this occur more than you'd care to know. Here's some tips to keep them from happening to you. Make A Wish List Before you even begin to look, make some lists. First write down what you need and want in a house: how many bedrooms (including the minimum sizes to fit your furniture) and bathrooms. Do you need a large dining room for entertaining? A garage for storage? A den or office? Is a fireplace a must? Do you want a big yard? Do you feel strongly about oil or gas heat? How about well water vs. city water? Next think about the location. Is it important to be near public transit or major highways, recreation, shopping? Do you want to live in a town with a "Main Street"? Are schools a consideration? List everything you can think of. You won't get it all, but at least you'll be able to get as close as you can to your ideal house. Look, Look, Look The more homes you look at, the better the chance you will find what you want. This is why so many people love lease purchase. It allows you to find out all the problems with a property before you buy.

Aging Choices Two out of ten buyers choose new homes. New houses usually have more efficient heating systems and better insulation and may be cheaper to maintain than older homes. But you may get more space for the money and much more "character" with older homes, which also are often made with better quality materials. However, some older homes may have "knob and tube" wiring for electricity, which can be unsafe and should be replaced. Older homes also may have galvanized pipes for plumbing, which can rust and clog, and should also be updated. Along with new heating systems, it is often wise to replace the drafty windows usually found in older homes. Many older homes also have asbestos insulation around pipes, lead paint, and other hazardous materials that should be removed. An experienced home inspector can help determine the age of a home and tell you the pluses and minuses involved. New Doesn't Mean Perfect Contrary to popular belief, new homes are not supposed to be perfect. It is normal for them to have growing and settling pains. But unprepared homeowners can become frustrated when problems occur and they discover their builders and new home warranties don't cover the repairs. On the other hand, some new home defects are a result of substandard construction or materials, which can quickly turn a dream house into a nightmare. Again, an experienced home inspector can save you a lot of headaches down the road. Put Yourself There Many people buy a house based on two or three looks, then are surprised to hear a nearby First Aid alarm go off a week after they move in. Visit the home and drive around the neighborhood during different times of the day - early morning, commuter crunch time, late at night. Ask to see the house during and after a heavy rain. Ask, Ask, Ask While some states require sellers to disclose particular information about a house, an anxious seller may not always offer lots of information about the home or neighborhood. But most will answer when asked a direct question. Find out what happens in the summer in a beach town. How is the snow removal in the winter? Does the nearby lake flood in heavy rains? Again, lease purchasing is a great way to find these type of things out before buying. Be Sure Before It's Too Late Whether you're buying a new home or existing one, protect yourself with a professional home inspection. Your contract should be contingent upon a satisfactory report by a home inspector. Let an objective, experienced professional check the structure and all mechanical systems. If the inspection reveals problems you may decide to cancel the contract, request the owner fix the problems, or negotiate a lower price.

Conclusion Wow, you say there is certainly a lot to be aware of. Yes there is, but it is much better to know all of this ahead of time than after the fact. Don't worry, you'll find good investment property that you can move to a tenant/buyer and do so quickly by following some of the above hints. It is for many of these reasons that lease purchasing is so appealing. Imagine being able to discover hidden problems with a home or neighborhood before you purchase. Now that's what we call peace of mind! Now on to how to use lease purchasing. -------------------------------------------------------------------------------Chapter 5 Finding the Property Using the Newspaper and the Internet - Our Two Favorite Methods The newspaper is your best tool for finding property. However, you also have additional resources, such as the Internet. Also don't discount the small local papers, like the Pennysaver, Real Estate Mart, etc. There may be many supplemental publications in your area that you should look into for properties. You want to start collecting newspapers. What we mean by this is to keep the Real Estate sections of your newspaper. For most areas, the Sunday paper has the most extensive listings. If this occurs during another day in your area, hold on to that day's newspaper. We usually hold back newspapers that are 6 to 8 weeks old. Why, you ask? Well, if the property is still available after that period of time, the seller is just a bit more motivated, then if we call the day after it is listed. The Internet is a great tool. It allows you to find properties in your local and surrounding areas, and also around the country. For now, we will concentrate on your local and surrounding areas. However, this same method will work for outside areas, if you do consulting. Check Yahoo, Google, Excite, and other search engines for their Real Estate sections. Since these sites vary on how their Real Estate sections are presented, and they also make frequent changes to these sections, what you want to look for is the following. You want to concentrate on Real Estate in your area, for example; Fresno, CA; Porterville, CA; Clovis, CA; then you want to look at properties that are For Sale By Owner (FSBO's). (Be aware that many Real Estate Agents will also post in the FSBO section). You want to look for houses up to the $200,000 range (this may be higher in some areas, for instance in some areas of CA bread and butter properties (3bd, 2ba) are priced in the $250,000 range), preferably 3bd 2 ba with at least 1 garage.

To save time, what we do is just write down the telephone number of the properties that meet our parameters. You do want to skim the advertisement for any restrictions, or items that might red flag the property to you as one you would not want to call on. For example, we would not call a property that had only 1 bath, had a lot of homeowner association restrictions, was in litigation with the association, had age limitations; or was under 5 years old. When looking through your newspaper advertisements, you would start with the homes for sale section. Look for words such as owner motivated, willing to use creative financing, OWC (owner will carry), foreclosure imminent, desperate, any terms, no or low down, vacant, Lease Option, Lease Purchase, Rent To Own. Also, the longer the ad, the better. Individuals who list everything about their home are a lot more amenable, at least that is what we have found. These words indicate very motivated people. They have a problem, and you have a solution for them if they are willing to be flexible and creative with you. Always start with the homes for sales section first (FSBOs), then the remaining ads, such as townhouses, condos, or mobile homes. In particular, don't forget to call the "for rent" section of the paper. Many times sellers will have ads in the for sale section and the for rent section, since if it doesn't sell, rental is the next option so be sure to cross check. Here, pay particular attention to long rental ads. Why? These are usually placed by individuals who have a problem property. Professionals rarely use more than 2 or 3 lines in their ads. Other Publications As mentioned earlier, don't forget to check out other publications in your area. Your local Pennysaver, or small local papers in the surrounding communities, for sale by owner type of magazines or newspapers, rental hotsheets, Help U Sell publications, or specialty papers (churches, senior groups, etc.). Another avenue to pursue is the Multiple Listing Service. In some areas you can become an affiliate member of a Real Estate group and have access to the multiple listings. You can also try working with a Real Estate agent and see if you can get access that way, or just work with agents. Real Estate agents are invaluable for finding potential properties that will go as a Lease Purchase. A good agent who understands the potential profits of Lease Purchasing can really help in finding you motivated sellers. Be sure to pay generous finders fees to real estate agents. If you use the MLS, you may want to concentrate on expired or expiring listings. Two other avenues are to drive your area or have friends and family on the look out for vacant properties; and/or place an ad of your own in the local paper. For example: (I Lease Purchase homes Quickly, call me anytime at 333-4444. Or, I can sell your home in 30 days or less with the Lease Purchase solution, 333-4444.)

Other ways to find properties are through public information, such as evictions, absentee owners, homes with liens, homes with judgments, properties in default or pre-foreclosure, homes behind in property taxes, etc. Once you have gone through all of the options above you should have a number of different ways to contact owners/sellers. Be sure to keep this information organized. You will start with the newspaper, then proceed with the Internet information you have gathered, from there you work down the line of options we have outlined. Remember you want to have various marketing strategies for obtaining lease purchase properties. By putting all these feelers out there and working diligently on a daily basis in all areas, deals will start to come to you. The Anatomy Of The Deal will strictly focus on the deal, not on the business end of Lease Purchasing. For a more in-depth treatise on how to do this, check out our website and our "Lease Purchasing As a Home-Based Business Manual" ( http://www.homebusinesssoluti/products/products.htm ), which will show you how to get deals to come to you. Now that you have gone through your newspapers and the Internet for your local area, you are ready to start calling. Chapter 6 Calling On The Properties Calling on properties seems to be the hardest thing for most investors to do. It is also the one area that many of our students try to short cut. Let us repeat, there is no short cut for this area. Follow the script. If you do not follow the script you will lengthen the time frame it takes for you to get the deal. And, you will not have all the information you need before you go and see the property, which in some instances will be a waste of time. It can also put you at risk. Remember you need this information to do your research before you leave your office. In doing your research you might find this deal is not for you. However, if you don't have your questions answered, you can't do your due diligence, hence, no deal, no money, a waste of time. Don't waste your time, do it right the first time. Get Ready to Call Have your newspapers ready, your Internet list ready, the script with your list of questions we are going to go over below, and a yellow legal pad with the following across the top: telephone number, house/condo/townhouse; price; and a notes section (in this section, we put down if we left a message and the date; a yes or no if they are interested in Lease Purchasing; their address for sending information, a follow-up time to call or meet), basically any notes we want to remember.

This information will be transferred into your appropriate database. Again, for a full treatise on the Lease Purchase business, please see our "Lease Purchasing As a HomeBased Business Manual" ( http://www.homebusinesssoluti/products/products.htm ). Get a cup of your favorite beverage and start calling. If someone answers, you say hello, my name is _____________, could you tell me if the property is still available, if yes, continue, if no hang up. If yes, who am I speaking with (if they have not identified themselves). Are you the person I would speak to regarding the property? Can you tell me a bit about the property? Then let them speak. While they are talking, fill in the following on your pre-qualifying sheet. Home Information Size and square footage of the home? What is the layout (split, 2-story, ranch, etc.)? How old is the home? What about the lot size? Does it have a garage? How many rooms? How many baths? Are there any features that you consider special? Are any furniture or appliances included? Has anything recently been replaced? It sounds like you have a nice home. I was wondering why you are selling? While they are telling you about their home you should be filling in the information above. You might have to ask specifically, how many square feet, the layout. One of the best questions, AFTER THEY STOP SPEAKING, "Are there any features that you consider special?". Another is, "Has anything recently been replaced?" "Wow, it sounds like a beautiful home, why are you selling?" Again, let them talk. This question gives you a lot of information about their motivation, time frame, sincerity and flexibility. If, for example, they are moving into a larger home, we might say, Wow, that's great; or if they are divorcing, I am sorry to hear that (sometimes they are not) we go with the feelings we get from them, REMEMBER LET THEM TALK AND BE A GOOD LISTENER. You will be surprised what you can pick up. In any case, back to pre-qualifying. Wow, that's great, have you owned the property long?

Pricing Information Have you owned this property long? What price are you asking for your home? By the way, how did you arrive at that price? Did you do comps for the area? About how long has your home been for sale? Have you had any offers on the property? Why do you think the property hasn't sold? Are you negotiable on the price? We do not hesitate in this section. We ask them how long they have owned the property, what price they are asking, how they came up with that price, did anyone do comps, how long it has been for sale? And are they negotiable on the price? After we get this information we ask them, why do you think it hasn't sold. This usually gives us a good indication of those things that sellers don't like to talk about, electrical codes, additions they made that are not approved, smaller than average bedrooms, older bathrooms and kitchens, landscaping oddities, etc. Next, we ask about Financing Information Can you tell me about the existing financing? What existing mortgages or financing is on the property now? Are there any second mortgages or home equity loans on the property? What are the terms: interest rate, monthly payments? Is it assumable? What did you originally pay for the house? If you don't mind my asking, are the payments current? Is there any pending or existing litigation on the property? Are there any specific CC&Rs (covenants, conditions and rules), on the property? We don't mess around in this area. We come right to the point. What kind of financing is on the property, what are the mortgage payments, second mortgage, home equity loans, terms, monthly payments, is it assumable? Remember, this area is very important to you. It will be the deciding factor on whether there is a deal here for you or not. Tell the seller that you are an lp consultant and that you are looking for the best way to buy their home at the asking price.

We also ask what they originally paid for the house? We have only had a couple of owners say it is none of our business, and we've said, "Well yes, it is. We can find out on the Internet when we check to see if you are the owner of record." People who don't like to answer financing questions or start playing games are very abruptly cut off. This is an important area. We want to be sure we are speaking with the owner of record, that the home is what they say, that they are not behind in payments, and that everything is on the up and up. After we have all this information, we then ask the seller if they would be interested in doing a Lease Purchase. We tell them we can get them the top price for their property. That we can save them on closing costs, and place someone in their home that will pay them non-refundable option money. This individual is responsible for all maintenance and repairs, will pay them on or before the 1st of the month, and that we can do this in 30 days or less. After we have said this, we pause and wait for their answer. We sometimes get a No, I need to sell it. At that point we say OK, why don't we send you some information on lease purchasing so you have another option available, just in case you need it. If we get a Yes, tell me more. We explain the lease purchase advantages for the seller and the tenant/buyer. The advantages mentioned earlier are important. Be sure you know them by heart. After explaining the advantages we tell he/she how the co-operative strategy works. What we mean is, we explain to the seller this is how we work with you. You receive the positive cash flow and we keep the assignment fee. If they do need some money up front, which they usually have told you already, we then say, we will split the assignment fee, and we will split the positive cash flow. There are three ways we work with sellers: 1) The seller receives the positive cash flow and we get the assignment fee; 2) We split the cash flow and the assignment fee; or 3) The seller pays us a $500 non-refundable consultation fee, and they receive all the positive cash flow and we split the assignment fee. We explain the third option by telling the seller, since we will have time and effort into the property and you want to keep all the positive cash flow and you want half of the assignment fee, we want to be compensated for our time, knowledge and energy we will have put into the property. We will credit it to the assignment fee when we assign the property. This is for our protection. Since we are making less profit, with the same risk, we want to be sure our expenses are covered in case the property doesn't move or the seller turns out to be unreasonable. We then tell the seller, we need to check out the property, comps in the area, and to put together the Lease Purchase numbers, for example (what you would ask for the house, the positive cash flow the seller would receive, whether you will receive a percentage of the cash flow, how you will work with the seller.) After we have done this, we will call you with the particulars. This is the time you want to outline how much assignment fee you

will ask for, if you need to split it with the seller, and what terms you need. Then you call to set up a time to meet, and to see the property. We will bring a contract with us so we can get started. Also, be sure at this time to have all parties there that are on the mortgage. Is that agreeable with you? Set up your appointment and you are on your way. Remember, check out the property on the Internet or at the county clerks' office, if your county is not on line yet. Be sure they are the owner of record, that they are current with payments, and there is no litigation involved. You can find this out by checking the county records. Do your homework, check out what rentals are going for in that area. Have all your figures done, before you meet, don't do them on the fly with the seller sitting there. You want to be sure the assignment fee and rent credit are accounted for. What we mean is be sure you can put them in the price of the property without making the price too high. It has to be win-win for all parties. If not, the deal is not for you. You can have another set of options available if the owner doesn't like the original offer, but usually, we find, they accept the numbers we give them. However, we make sure they receive good positive cash flow and a good price for their home. For most co-operative strategies we ball park the sales price by checking what similar properties in the area are listed for. Most buyers are used to looking in the paper, so if the price is comparable, they are more comfortable. Keep in mind, if the seller's price is out of line, you can use other methods to price the property such as comparable sales, square footage, etc. Now you are ready to meet with the seller. ______________ Chapter 7 Meeting With The Seller Remember to go over your negotiating skills and strategies. We cover this area more fully in our manual and tape sets. Click For additional information on Lease Purchasing (http://www.homebusinesssoluti/products/products.htm) and/or Home Based Businesses (http://www.homebusinesssoluti/products/products.htm). Know what you want. You can't get what you want from others if you don't know what you want for yourself. Establish a specific goal for negotiation. Consider what it will take to satisfy your interests, needs and objectives. For example, I need a $5000 assignment fee. Develop a plan. Once you know what you want, establish a negotiating strategy to achieve your objectives. Before presenting your first offer, consider where you want to start and where you want to finish. Give yourself some room in which to move. Tell the seller the ways in which you can work with him. Know what the other party needs. It takes two to negotiate. To reach an agreement, all parties must feel that some, if not all, of their interests have been satisfied. The person you are negotiating with has motivations and concerns. Remember to ask open-ended

questions to gather information and understand their position. You are getting this information when you are asking the seller questions about his home, and building a rapport with him. Be an empathic listener. Again, attentive listening is a powerful negotiating tool, which enables us to understand the motivations of others. Listening carefully when the seller is talking about his property is critical. Attack the problem, not the people. Focus on finding solutions to your shared problems. Screaming at someone may let off steam, but isn't conducive to effective joint problem solving. Be courteous and tactful. Give the seller various options of how to work with you, and remember, if lease purchasing is not an option now, it might be later. Treat the other side as your ally, not your enemy. Your negotiating partner may have to persuade others to agree to your deal. As your friend, this person can sell your deal. As your enemy, he/she can sink it. Remember, whether your seller is a husband or a wife, they might have to explain this strategy to their spouse or significant other. Be clear as to how your process works. Educate, don't intimidate. Be prepared to explain, document and justify to your negotiating partners why they would be well-advised to accept your proposal. Help them understand your position. Explain how the lease purchase advantage works for the seller, how it allows you to move the property quickly, gets a qualified tenant/buyer in his home rather than a renter, and how you will be there for them throughout the process. Be patient. Don't be angry or insulted if the first offer you receive is not what you hoped it would be. Treat the proposal as the first of several in the negotiating process. Slow but steady movement creates momentum, which can lead to agreement. While a seller who has just put his property up for sale might not be interested in a lease purchase, that same seller might be very interested two months down the road, either in doing a lease purchase with you or consulting with you. We can't count the number of times this has happened to us. We have contacted a seller, he/she is adamant about selling and in three to six months we get a call from them for help. Consider the consequences of no agreement. Think about what could happen both good and bad if you are unable to agree. Can you afford to "walk away" from the table, or are you desperate to make a deal now? Rather than work with a seller who is going to give you problems throughout the process, better that you found this out now. Don't waste any more time, walk away and move on to the next deal. Be flexible and creative. Always have a fall back position - some alternative that satisfies you and the other party which allows you to make a deal. Again, in lease purchasing the more time that passes where a seller can't move their property, the better for you. You have time, lease purchase strategies, and consultations on your side.

Face To Face When you meet with the seller, be sure to have your notes, your contracts (two copies); addendum's (2 copies); assignment forms (2 copies); brochure and business cards. The seller signs the contracts, the assignment forms and any addendum's during this meeting. Again, make sure everyone who needs to sign is at the meeting. Be sure to be prompt. Before you sit down to go over the contract, you want to take a look at the home. You want to be sure that it is exactly what the owner said. If there is one thing you will learn about people and their homes, is that is blind... people see their home in the best possible light. They never see the bad points, only potential buyers do. What this means to you is that you have to be able to nicely, and I mean nicely, point out some of the problems if you need to. Don't make a list of all the bad points and start telling the homeowner all that is wrong. For example, if a 3 bedroom 2 bath home has limited closet space, I will say, oh, good this bedroom allows for a storage cabinet, if they need additional closet space. Another example, if a bedroom is very small or awkward for furniture arrangement, I would say, this might make a good office, since it would be difficult to get a full bedroom set in this room with the window and wall placement. All of these things are going to effect how long it takes to move the property, so you have to be able to discuss these things with the seller, but in a positive way. Be sure to check out the home thoroughly and if things need to be fixed, cleaned, painted, put these items in an addendum to be performed by seller before the tenant/buyer moves in. Also be sure to get the key so that you can show the property. If the owner is still in the property, still get a key, so that you can show the property when the owner is working, or not available. In fact, we much rather show a property when the seller is not there. Sometimes, after looking at a home you find that it is no where near what the owner said it was and you know in your heart that this place is not going to move in thirty days, with the numbers you figured, or your profit will be next to nil. In that case, tell the owner, again politely, that based on what he/she told you, the figures you came up with are not going to work, you need to re-work the figures and that you will have to get back to him/her. Leave your card and brochure and tell them you will call them later in the day or the next (whatever your schedule will allow). When you do call, tell them that with the new numbers you worked out it would be in their best interests if you consulted with them. If they say no, say fine, you have my card and brochure, if I can help you at a later date, please contact me. Then be sure to send a nice letter following up on your visit and phone call regarding the consultation. If the property is all that the owner said, sit down with them and go over the paperwork, your contract, your assignment form, make any changes to the contract on the addendum, and have them sign all of these forms at this time. Be sure they understand how you are going to split the moneys. If you are keeping the full assignment fee, and they are getting

the positive cash flow, say so. If you are splitting the assignment fee, and the positive cash flow, say so. In essence, be sure they understand how the moneys will be split. Tell them you will begin your unique marketing strategy to move their property. One thing you want to do before you leave is to put up your Rent To Own sign on the garage door, or on a tree in the yard if there is one, or on a wooden stick that you can place in the ground. Be sure to also place these signs on major cross streets around the neighborhood. Do this and you might find, like we did, by the time you get back to your office, you already have messages on your machine. Your Rent To Own signs can be purchased at any hardware store, or Target, or K-Mart. They say House for Rent, you just add on in black magic marker Lease Purchase, or Rent To Own, 3 bd 2 ba (whatever the size of the property is), with your telephone number. By putting up the signs before you leave you give yourself a jump start in addition to saving yourself another trip back to the area to put up signs. Remember, time management is an important concept in running your business and getting all that needs to be done completed. Again, The Anatomy of the Deal concentrates on the deal process, for time management and organizational strategies, please refer to our manual "Lease Purchasing As A Home-Based Business" (http://www.homebusinesssoluti/products/products.htm). Next up is using your unique marketing strategies. _______________________________________________________________ Chapter 8 Advertising the Property Once you get back to the office you will make the appropriate changes to the contract and addendum and send them to the seller. (A sample of this letter, and verbiage is contained in our "Lease Purchasing As A Home-Based Business Manual"( http://www.homebusinesssoluti/products/products.htm). You will now begin your marketing strategies. Your signs are up, make up your flyer and get those posted in the surrounding apartments, major cross streets, Laundromats, supermarkets, etc. Call your local newspaper and place your ad in both the Houses for Sale and Houses for Rent sections. Your ad should read, Rent to Own (try to get this bolded) 3bd 2 ba, pool, spa, $1000 mo., Generous Rent Credit (or you can put 50% rent credit). However, we have found that some people think the rent is only half of $1000, and we have had various other questions come up that did not apply. So we have found over time, that to make the screening easier, and to avoid callers that don't have any interest in Lease Purchasing or Renting to Own, that putting "generous rent credit" allows us to explain very clearly what it is and what is involved.

Depending upon the circulation of your local paper, and how quickly you want to move the property, you might also want to place ads in supplemental publications. Next, you want to have extra flyers handy for the property to give to prospective tenant/buyers when you show them the property. It also helps to refer to your flyer when you get a call on the property, especially if you are working multiple properties at the same time. Remember, you don't just want to do one property at a time. Again, by keeping your information organized, you will save yourself a lot of time and energy, plus avoid costly mistakes. Dealing With Tenant/Buyers and Credit Checks When you do get a call, ask which property they are calling on, where did they see the ad, the flyer or the sign. We get the following preliminary tenant/buyer information: name, address, city, state, zip; home telephone; what they are looking for; area; time frame; monthly payment; available down; employment; work telephone; (# of) adults, children, and pets; and a notes section (for example, what their credit is, reason for late pays or bad credit, any bankruptcies, etc.). Qualify your tenant/buyer. Are they able to pay the rent on or before the first of the month. This is a stringent requirement. If you pay on time, you get the rent credit. Is this a problem for you? If they answer anything but no, stop and tell them sorry, but you cannot help them. And no, I don't even want to try for a consult with this type of person, because they are Trouble with a capital T, take our word for it. Next qualifier is that they must be able to do minor repairs, structural problems are the home owners responsibility. Third requirement is option consideration. What would their budget allow them to put down as option money towards this home. If they play games with you, tell them it is 21/2% to 5% as a minimum on the property, be sure to cover all your out of pocket expenses and add a profit. Or many times we just say, "the option money for this property is $5000, or $3000", whatever we are asking for that particular property. Obviously, we can work with them by taking back a note, however, they would have to have a minimum of half the option money. Next, send them to look at the property. Tell them if they like it they will have to fill out a credit application and what the cost is for that. If you accept credit cards, tell them they can do it by telephone or by fax. Let's say they drive out to the property, love it, call you and ask to see the inside. We try to get the credit application done before we drive out to show the property. Although sometimes, we have shown the property without first having it completed, however, in that case, we have scheduled multiple people to view the property. We tell all callers, if they like the property, they should have a check or cash on hand to complete the credit application, and if they want to hold the property they must leave a deposit.

For a deposit we ask for 10% to 20% of the assignment fee, and this is non-refundable. The reason it is non-refundable is because once we receive a deposit, the property goes off the market. Obviously, if they are turned down for the property, they get their deposit back. If someone does give us a deposit we complete a Finance Summary form (a receipt for the deposit). The finance summary form has the property address, the individual(s) name and phone; what the deposit is for (consultation, option money, first month's rent, credit check, etc.) our verbiage that certain deposits are non-refundable, and signature lines. You want to be sure you get the following information for the credit check. Social Security Number, Date of Birth, Driver's License Number, present address, city, state, zip, telephone numbers (home, work, cellular, pager) and the best time to call. You also need employer/name of company, position, date of employment, annual income, spouse's name, spouse's social security number, spouse's date of birth, spouse's employer and annual income. How long at the present address?, landlord's name, landlord's telephone, previous address and how long there, again the landlord there and the landlord's telephone number. We also have a section on here for Type of Home/Features Desired: Single Family, Townhouse, Condo, Bedrooms, Bathrooms and Square footage. (This is for your database information) Next we have Preferred Areas (List In Order of Your Preference) (This is for your database information) Date Able to Move In; How Long Have You Been Looking; Number of Adults, Number of Children; and Pet & Type. What is the maximum monthly rent you could pay, while still remaining in your comfort zone?; What is your present monthly rent? What is the most option consideration you are prepared to pay? (This is for your database information) Additional Amenities: Pool, spa, air conditioning, yard, number of car garage, storage, central location, tennis, golf, other. (This is for your database information) Next section is for Financial Information Do you have any credit problems? Have You Ever Filed a Petition for Bankruptcy? If so, when? Have You Ever Been Evicted From A Tenancy? If so, when? Have You Ever Willfully and Intentionally Refused to Pay Any Rent When Due? If so, when? What is your present credit rating? Excellent; Good; Fair; Poor; Unsure Credit References; Limit; Balance Monthly Obligations

Auto Payments; Rent; Utilities; Telephone; Insurance, Credit Cards; Child Support; Alimony; Mortgages; Loans; Other Additional Notes At the end put in the following disclaimer: "I declare that the foregoing information is true and correct. I authorize its verification and the obtaining of consumer credit report. All information contained is strictly confidential and is for the sole purpose of determining how our program would best be suited for your present financial needs and future goals." Next, the signature of applicant(s) and the date. As you will notice some information is for your database only, it is not needed for a credit check. Remember you want to get as much information as you can from your tenant/buyers, since you can only put one couple or individual in a home. The more information you have on prospective tenant/buyers the better able you are to help them find a property. You might receive 20 to 30 calls from people interested in the same type of property you are working with. You want to be able to contact these people to see if they are interested in subsequent properties you obtain. The preliminary tenant/buyer form and the credit check form and all of the other forms we use on a daily basis in our business are in our "Lease Purchasing As A Home-Based Business Manual" (http://www.homebusinesssoluti/products/products.htm). This gives you the information you need to process a credit report and a good basis to compare what a caller told you by telephone and what they say on their application. When the telephone information and the written application differs it should set off alarms for you. Check this person out very carefully. We are very up front with our tenant/buyers. Don't lie to us, because we will find out and if we do, we will not do business with you - ever! We will delete you from our database. Once you have the application completed, call for the credit check. You will need to give the credit checking company the full name, current address, social security number and date of birth. You can find companies that do credit checks in your local telephone book. You need to be sure to call the last two landlords and check on their payment record. Be aware you may have to fax this signed form to a landlord or employer to indicate you have authorization to receive this information. Next call for employment verification. If the credit check meets with your approval, landlord and employment are verified to your satisfaction, call the seller and tell them you have a tenant/buyer for their property. If they want to see the credit check we send it to them, however, we deal with the seller

as if it is a foregone conclusion that this tenant/buyer is fine, and we are going to call the tenant/buyer and set up a time for them to sign off on the contracts. Be sure to tell the tenant/buyer to bring certified funds for the assignment fee and for the first month's rent. When we meet with the tenant/buyer we provide the tenant/buyer with the original of the contracts. We keep the copy of the contract. They also receive a copy of the assignment form, we keep the original. If there is an addendum, they get the original, we keep the copy. Using Third Party Payees We always use a third party payee when we are getting a portion of the positive cash flow. This is usually done by an escrow company, although there are independent businesses that offer this service. These are sometimes called collection accounts. This type of account will cost you a set up fee and a small monthly payment. We believe it is a very small expense for a lot of peace of mind. The tenant/buyer mails the monthly payment to the third party, they in turn pay the mortgage, taxes, etc. and forward any balance to the seller and you. We always use a third party payee in any sandwich deals we do. In addition, we recommend a third party payee to the seller and tenant/buyer even when we are not getting a portion of the positive cash flow. It is an added protection for all parties. _________________________________________________ Chapter 9 Finalizing The Deal You've received the credit check back on your tenant/buyer. His/her employment checks out, past two landlord's check out. Credit history is fair. Next you want to call the seller and tell him/her that you have a tenant/buyer for their property. You are going to schedule a time to meet with them to sign over the paperwork, and get the assignment fee and first months rent. You tell the seller once that is done you will mail his/her portion of the assignment fee, if applicable, and first months rent to him along with his final letter that contains all the pertinent information on the tenant/buyer. Wait you say, the seller starts to ask about the credit check, employment and past rent payment history. Fine, tell the seller what he/she wants to know. If they insist on a copy of the report, send it, either by fax or mail. However, reinforce the positives of the tenant/buyer with the seller, that you feel these individuals are perfect for your home, and they are ready to go. That you want to set up a time to meet with them so you can assign the property, and they can inform their current landlord of their move, etc. So as soon as you can please get back to me with your decision. Honestly, we have only had a couple of sellers want to see the credit report, and only one went so far as to wanting written confirmation (in addition to verbal) for payment record. In most cases, the seller is relying on your judgment for the tenant/buyer. If he/she didn't trust your judgment, why are they doing business with you. Adopt this type of attitude and you'll have few problems with sellers.

Next, set up a time to meet with the tenant/buyer(s). Bring the contract, assignment form, any addendum(s), and the key if the property is vacant. Be sure to inform the tenant/buyer to have certified funds for the assignment fee and the first months rent. If the tenant/buyer does not bring certified funds, they do not receive the key until we cash the assignment fee at their bank. If the seller is still in the property, the tenant/buyer gets the key from the seller upon departure from the premises. The tenant/buyer receives a copy of the assignment fee, the original of the contract, and a copy of any addendum(s). If certified funds are not used, all paperwork (contracts, addendum's, assignment form) are held until the check is cashed. The tenant/buyer receives a copy of the Finance Summary Form for their records, and is told the other paperwork will be mailed. The final item is to mail out final letters to the tenant/buyer and the seller. The final letter to the seller includes the completed assignment form, any addendum(s), his/her first months rent along with tenant/buyer's name, address, phone. If the assignment fee is being split, a check for their portion of the assignment fee. The final letter to the tenant/buyer should include a copy of the assignment form, where the rent check should be mailed to (if not delineated in the contract), seller name, address and telephone. Be sure your final letter to the buyer and seller asks for a testimonial. You're done, you're out of the deal with a nice assignment fee in your bank account, and if you negotiated it, some positive cash flow coming to you each month. Some Deal Numbers The following are some deal numbers we have negotiated using the co-operative strategy. For some we split the assignment fee, for others we did not. For some we received half of the positive cash flow, for others we did not. However, all of the following deal numbers are using the co-operative strategy only. For the majority, the rent credit and assignment fee were added to the price of the property. This helps a great deal when negotiating with the seller. However, as mentioned earlier, be sure this does not make the price too high. It has to be win-win for all parties. The property was a single family, with 4 bedrooms, a loft, 3 bathrooms. It was 2400 square feet. Some of the amenities were a pool, spa and a good sized yard. The rent was $1550 per month. We offered a rent credit of $400 per month for the first year only. The owner received positive cash flow of $75 per month (This is low positive cash flow. However, this seller was making two payments. This property was vacant. He had it with a Realtor for over 6 months and was also trying to sell it on his own. He knew the payment was high, and was ecstatic to get even $75). We negotiated for a $5000 assignment fee, no split. The term was 3 years, and the strike price for the property was $189,000. The property was a single family, with 3 bedrooms, and 2 bathrooms. It was 1650 square feet, and had a small yard. The rent was $1225 per month. We offered a rent credit of $500 per month for the first year only. The owner received positive cash flow of $225 per month.

We negotiated for a $6000 assignment fee with a note taken back for $3000. The term was 2 years, and the strike price for the property was $167,000. The property was a townhouse, with 3 bedrooms, and 2 bathrooms. It was 1100 square feet with no yard. The rent was $950 per month. We offered a rent credit of $600 per month for the first year only. The owner received positive cash flow of $175 per month. We negotiated for a $2500 assignment fee. The term was 2 years, and the strike price for the property was $108,000. The property was a single family, with 3 bedrooms, 2 bathrooms. It was 1460 square feet, with a medium-sized yard. The rent was $1150 per month. We offered a rent credit of $600 per month for the first year only. The owner received positive cash flow of $300 per month, and we received $300 per month. We negotiated for a $5000 assignment fee, which was split. The term was 2 years, and the strike price for the property was $134,000. No, the tenant/buyer was not taken for a rental ride. The owner had a small mortgage and the rent was at market for this type of property. Sometimes you just get lucky. The property was a single family, with 3 bedrooms, 2 bathrooms. It was 1500 square feet, with a great back yard. The rent was $1175 per month. We offered a rent credit of $500 per month for the first year only. The owner received positive cash flow of $275 per month. We negotiated for a $5000 assignment fee. The term was 2 years, with a right to renew for $1500 per renewal, and the strike price for the property was $167,500. The property was a single family, with 5 bedrooms, 4 bathrooms. It was 2800 square feet. Some of the amenities were a pool, spa, landscaped yard. The rent was $1875 per month. We offered a rent credit of $800 per month for the first year only. The owner received positive cash flow of $187.50 per month, and we received $187.50 per month We negotiated for a $6000 assignment fee, which was split. The term was 2 years, and the strike price for the property was $224,000. ______________________________________________ Chapter 10 The Proper Contract Having The Proper Contract In a lease purchase transaction, it is imperative that you use a contract strictly for that purpose. Avoid the use of those standard or stationery store type generic contracts. A generic contract is just that generic. By its very definition, a generic contract tries to be all things to all situations and that is not possible. Using a generic contract is like going into a clothing store and buying a one size fits all dress, suit, bathing suit, etc. Unless you're very, very lucky, it's not going to fit in all the right places. When this happens, you usually end up with your assets hanging out. A good contract should cover the basics such as: the parties involved; the street and legal address of the property; the terms of the agreement; rent; rent credit; sales price; length of

agreement, etc. A good lease purchase contracts goes a lot further. It will offer protections for both the tenant/buyer and the seller. A good lease purchase contract will offer protections to all parties involved in the transaction. Some of the items that should be included are: a property inspection clause; how serious building problems should be handled; rights to access and insurance consideration. Additionally, a good contract should cover all the option to purchase requirements. It should have an assignment clause and a right to cancel option clause. The contract should cover how defaults are to be handled and have a section (addendum) for adding anything else that the parties feel are important. As you can see a good Lease Purchase contract covers a lot of ground. Generic contracts rarely go into such specific areas. All of our copyrighted contracts come with our lease purchase manuals. You also want to Negotiate A Right of Assignment. This allows you or the tenant/buyer to transfer interest in the lease purchase contract to another. There are any number of reasons why you want to have the ability to transfer your contract or position in that contract to another. Let's say part way through the contract term you need to get out of the contract. If you just walk away, you could lose your option money and any rent credits. Don't you think that these items have a monetary value. Wouldn't it be nice to assign or sell your position in that contract and get your money back. Or possibly even make a profit if the housing market has been strong and appreciation has occurred. None of us have a crystal ball. We can't foretell the future. Circumstances change, financial situations arise, personal problems occur, wouldn't it be nice to be able to protect your investment by selling or assigning your contract. These are just some of the reasons why it's important to have the Right of Assignment in your agreement. In fact, we'd almost go as far as saying no Right of Assignment, no deal. You, of course, have to make that determination yourself. The contracts we use contain a built in Right of Assignment. Additional ways to protect yourself in a transaction are: A Memorandum of Option. This is a form filed with the County that shows your interest in the property. It will typically show up in a Title search, thus putting a cloud on the title. You can also file your entire agreement, but that is usually not necessary. Using a third party payee. We discussed this earlier. You want to be sure the mortgage and taxes are kept current. By using a third party payee you will receive an accounting

from the service or escrow company, so you can be on top of what is going on. It also allows you to be aware of any problems and to handle them immediately. Getting a title check performed on a property would not hurt. You want to be sure the person selling has the right to do so and that there are no current liens on the property. You may also want to see if the seller would be willing to split the cost with you or provide a title insurance policy. It is in the best interest of all parties to have the seller place the deed in escrow as quickly as possible. This way if anything happens to the seller, you are protected in the transaction. You want to establish a paper trail demonstrating the intent of all the parties in the transaction if at all possible. So try to have escrow instructions done at the beginning of the transaction. If possible, have the seller add you to his insurance policy as a loss payee. Be sure the tenant/buyer has renter's insurance. The aforementioned are just some of the ways to protect your interest in the transaction. It is important that you take all reasonable precautions to insure clean transfer of the property when you decide to exercise your option to purchase. The Pitfalls The following are some of the obstacles or problems that came up in some of the initial co-operative strategies we did, how we handled them and how we modified our approach to the deal. One of the deals we worked on, we thought we had 40 days to move the property. Well, about 2-1/2 weeks into the deal the seller informed us that she was moving out early, and she might have to rent the property if we don't move it within the next week. Well, needless to say we were not happy. We already had ad expenses and time showing the property into the deal. The deal went through, but we cut it close. We made sure thereafter, that in our contract, if a seller rents or sells the property, we are compensated. In fact, it is something we put not only in our contract, but in our Letter of Intent. In this same deal, we took a post-dated check for a week later. Unfortunately, due to the tenant/buyer having to deal with a securities firm, the check was not cashable for two weeks. The lesson we learned is we should have asked how much can you give me today, in addition to taking the post-dated check. Don't let yourself get rushed. One of our deals moved so quickly, we felt rushed. The tenant/buyer ran their own business, and every time we meet with them, there were interruptions and we did not have their undivided attention. We made sure thereafter that we set the pace, not the tenant/buyer or the seller. You need time to go through the contract with the tenant/buyer, without interruptions. Now this deal worked out fine, but we don't want a tenant/buyer coming back to us saying you didn't explain this well enough. Well, we would have if we weren't interrupted every five minutes and had to do

it at your business. So now we meet at a quiet location and go over the contract with the tenant/buyer. We don't have this problem with the seller as we usually meet at their home and go through each item with them. In one of our early deals we took back a note. Short term, 90 days. We did not have a lot of knowledge about taking back notes, and none of the experts mention you should get some money each week, bi-weekly, or monthly even on a short term note. So when payment time came, the tenant/buyer informed us they couldn't pay the note on time, and needed another month. Well, we did work it out. We got paid each week for three weeks, then a balloon payment. The lesson here is no matter how short term the note, get paid weekly, bi-weekly or monthly, but don't just balloon it a couple of months out. Another thing that cropped up in this deal with the note, when the tenant/buyer signed the contract and paid half of the assignment fee, they expected to get the key two weeks before their lease period started. Now we know we told them a couple of times while they were looking at the house and deciding, that they would get the key when their lease period started or maybe a couple of days earlier from the owner. However, they expected to get the key when they signed the contract. The lesson here is be sure to reiterate the procedure when they say they would like the property and again when they sign the contract. This early deal is the one that made us re-think positive cash flow. We split the option money and the seller got positive cash flow of $300 per month. We have since changed our policies of working with sellers. The seller gets all of the positive cash flow and we get all the assignment fee. Or the seller gets half of the positive cash flow and we get half of the positive cash flow and we also split the assignment fee. Getting half of the positive cash flow is another steady cash stream for you. One thing that cropped up over time is we found we were getting way too accommodating to both the tenant/buyer and seller. Yes, we want to help people, however, you need to stick to your guns - or business policy. If you start trying to accommodate every wish of a buyer or seller you will go nuts, trust us - we know. In addition, you lose some of your credibility. They start to think they can walk all over you. So make up your policies of working with sellers and buyers and don't deviate, you can bend a bit but don't stretch it so much it won't spring back. One of our most enlightening deals was a condo we handled. It was early on and money was still an issue with us. We found we were still so worried about money ourselves, we let the tenant/buyer and seller get away with things we would not even contemplate now. So, big lesson, better you go out and work a part time job for a bit, then take on a problem property. You need to know when to say no and/or fold your tent and walk away. One thing you never want to do is let the tenant/buyer and seller meet before the contracts are all signed and you have your assignment fee. Remember, you are contracting with the seller and then assigning the contract. There is no reason for these two parties to meet early on. This only happened to us once. It has never again, and never will. If the tenant/buyer and seller want to meet after all the paperwork is completed, fine. Many of our sellers want to turn over the key and meet with the tenant/buyer then. That is fine,

since everything is signed, and we have been compensated. Many deals have been lost by investors when tenant/buyers and sellers have met before the deal with the investor was completed; and the investor was out of the deal because the tenant/buyer and seller made one of their own. In one deal we did, we were ready to meet with the tenant/buyer to get the contracts signed and the balance of the assignment fee, when the sellers changed their mind, the deal was off. As a consequence, we changed a variety of things. One, we added a clause to our contract, that if they change their mind, sell, or rent, the contract reverts to a consultation and our consultation fee of $1,000.00 is due and payable immediately. In one of the early deals we did we had a tenant/buyer whose father was an attorney. This was during our accommodating period, and the first time it had come up, so we gave him the 10 days he wanted to have his father review the contract. In addition, we told him we would refund the deposit if they found the contract objectionable. Stupid, stupid! We would never do this today, and don't you. If someone wants an attorney to look at the contract, fine. They have until the credit check is done, 2-3 days maximum to have it looked at, and their deposit is not refundable since they are asking you to take this property off the market to others who might come in and take it. So, yes, they can have an attorney look at the contract, in fact, the contract states they should. They are just not getting all the time in the world to do so. If that is not good enough, go on to the next tenant/buyer. We took on a deal where the seller's friend was a Realtor, and she had the house listed with him. Well, since we already dealt with this before we had a weekly fee to be reimbursed in our Letter of Intent, and our contract if the house was sold before we lease purchased it. We had a tenant/buyer for the property. This seller however, was madly in love with her home, so she wanted not only verbal verification of rental payments but written also. We usually only have to do verbal verification. We got a written one done and faxed them to her. She verbally agreed to the tenant/buyers. We tried to set up a time for all of us to meet, which was a chore in itself. The tenant/buyer's job took him in and out of town. We finally set a meeting time up for all of us to meet and sign all the paperwork. Well needless to say, the day before we were to meet, the seller sold the property for all cash. Did she have a moral and ethical obligation to our deal, we think so, but she didn't. So remember, its not a deal until everything is signed, sealed and delivered. We did get reimbursed because of the clause in our contract. However, the tenant/buyer was livid. This tenant/buyer also had a lawyer for a father. Part of the delay in moving along with the process was due to the time frame he needed to have the contract looked at by his father. He wasn't angry at us, but the seller. Of course, in this situation his deposit was refunded. However, we tell tenant/buyers don't give notice until we sign all the paperwork. Lesson learned, don't take a seller's verbal agreement to heart.

Lease Purchasing is a great business, however, like any business where you are dealing with people, you have to stick to your policies, adjust them when necessary and realize anything that involves big bucks has its pitfalls. Just be careful, and if necessary, take some additional time to think through the entire deal, better to walk away then get stuck. ________________________________________________ Chapter 11 Conclusions In The Anatomy Of The Deal we broke down the co-operative deal for you step by step. The following quick check list recaps the steps. Cold call on properties. Find property, do a drive by. Pre-qualify interested seller, tell him/her the various ways you can work with them. Negotiate terms of Lease Purchase - length of lease purchase, price of home, monthly payment, rent credit, etc. Meet with the seller to see inside, sign contract, sign assignment form, and get key. Be sure to check out home thoroughly and if things need to be fixed, cleaned, painted, put these items in an addendum to be performed by seller before tenant/buyer moves in. Mail copy of contract to seller, along with any addendum's. Place signs on cross streets. Place flyers in apartment complexes, Laundromats, bus stops, employee bulletin boards. Place ads in local paper in homes for sale and rent sections. Place ads on Internet. Get tenant/buyer preliminary information. Have them do drive by. If interested have them call back and you will do a credit check. Do a credit check, if OK, set up time to show tenant/buyer inside of property. Tell tenant/buyer if he/she wants the property you will require a deposit (10% - 20% of assignment fee). Do up Finance Summary Form. Give to tenant/buyer to sign and tell them upon seller approval you will need to set up appointment for them to sign contract, assignment form, and pay assignment fee and 1st month's rent. OR Show the tenant/buyer the property and have them fill out the credit check form at same time, get money for credit check and deposit if they want you to hold the property, deposit is non-refundable unless seller disapproves them. Use the Finance Summary Form, so they know exactly what's owed upon approval and how the funds need to paid. Get seller approval. Set up time with tenant/buyers to have them sign contract, assignment form and pay assignment fee and first months rent. These should be certified funds. Give the tenant/buyer the original of the contract. If property is vacant, turn over the key (unless otherwise instructed by seller that he/she wants to do this) or if funds are not certified, the key is not given until you get the

checked cashed. If seller is still in property, the tenant/buyer gets the key from the seller upon departure from the premises. Mail final letters to seller and tenant/buyer. There it is, the co-operative strategy of Lease Purchasing. It is a wonderful way to make money. Lease purchasing is a wonderful way to become involved in Real Estate investing or running your own lease purchasing business. If you follow our examples, it is a win-win strategy for all parties concerned. We can't emphasize enough the various income streams lease purchasing can provide you. The Anatomy Of The Deal concentrates on the co-operative strategy, but as we discussed, you have numerous ways to provide yourself with multiple income streams. Look for our upcoming book on sandwich lease purchasing as part of our The Anatomy Of The Deal series. Another great lease purchase technique is consulting. This strategy allows you to work with both sellers and tenant/buyers around the country. We cover this topic in our Anatomy Of The Deal: Consulting Your Way To A Six Figure Income In Creative Real Estate. For more information visit our web site at: http://www.homebusinesssoluti/products/anatomy_book_2.htm __________________________________________________________ Chapter 12 Final Thoughts On Lease Purchasing As A Business In retrospect, Lease Purchasing has allowed us to live the life we have always wanted to. It has allowed us to live our vacations, rather than taking them. Creative Real Estate has always been acknowledged as the World's Greatest Wealth Builder. How much wealth you build is dependent upon your motivation and what you want out of life. The niche of Lease Purchasing gives you the opportunity to control your life, and allows you to live the life you want. Your needs are different from everyone else. Maybe you just need an extra $10,000-$20,000 a year, so you only want to work in your spare time or part time. Or maybe you want to make $50,000 to $75,000, or more per year. In that case you can work Lease Purchasing on a full time basis. As we said, Lease Purchasing allows you to meet your time and monetary needs. You just have to decide how you want to use it.

The following articles will give you an idea of what kind of deals you can do, what you can earn, and how you can help others while making a profit for yourself (one of the best feelings in the world). Enjoy them, and once you are finished, get ready and start on that first deal! Don't procrastinate, get out and do the deal. You can do it. If you have any questions or need help contact us. And remember, Who Makes It Happen, You Do! We wish you the best, Chuck & Sue DeFiore ___________________________________ How Do You Want To Spend The Rest Of Your Life? Those who have the desire to work for themselves, or in effect run their own business, go through numerous stages. There's the "Do I want to lose the security of my job" stage. So many people still think that their job is secure. Well — newsflash — no job is secure. You can be terminated at any time. So working for someone else only gives you a "false sense of security," no real security. The only real security you have for you and your family, if you have one, is what you do. Owning your own business is one way of creating a secure future, for yourself, and your family. This is the time to start thinking about running your own business, when you are working, not when you've been fired. The next stage after a job is lost is "Should I look for another job or try to start my own business, and if I start my own business, what do I do". Again, it would have been better to start your business while working, so that you had time to build your business and then move out of your job into your own business. But, if you lose your job before that happens, you can try and start your own business. However, I would suggest having some kind of job, if only part-time, that you can put more hours in, if you have to. The hardest part at this stage is the realization that no one but you cares about your job loss and your financial problems. People might say they are sorry, but life goes on. In fact, during this time, you often find out who your real friends are. You need to take a long, critical look at yourself, decide where your strong and weak points are, what are your interests, and what type of business do you want to operate. Some steps that might help are:

1. Get an idea - assess your skills, interests, and experience. Is something missing in your town? What products or services would make your life, and that of your friends', family's and neighbors' easier? 2. Assess your needs - How much money do you want to make? What type of work do you want to do? What type of lifestyle do you want? 3. Pick part-time or full-time. Do you have enough money to start full time? Could your business work part time, or would it require your full time presence? 4. Define your niche, the narrower the better. Write a brief mission statement that explains your niche. For example - co-operative lease purchasing for homeowners with expired listings. 5. Do market research to make sure there's a need for your service/product. The next stage is "There's so much to learn and do." Yes, there is, if you do something you don't know about. However, why not start with something you are familiar with and interested in. If you don't, be prepared for a lot of learning and research. However, whether it is an area you are familiar with or new, education is crucial and ongoing. This is what successful business people do. "The day you stop learning, is the first day you start going out of business". You have to make a commitment. If you can't do this, then stay in that 9 to 5 rut. Harsh, I know, but true. Think about where you want to be in a year, five years, or ten years from now. Were the choices you made the right ones? Don't be someone who says, twenty years from now, "If only I had". As Apollo said in Rocky III, "There is no tomorrow". However, this requires that you take responsibility for your situation, rather than blaming everyone and everything else, and keep hoping that "something will happen" or "things will change", they won't! You need to be the one who changes and accepts responsibility for yourself and your family. You want you and your family to be happy. Think of what is best for you and your family. With your own business, you are in control, not someone else. To create this security and real worth, you have to do it yourself. You need to educate yourself. You have to take hold of an opportunity when it presents itself. You have to force yourself to change. You need... "The ability to focus on a dream...and the determination to make it real." Real Estate is acknowledged as the World's Greatest Wealth Builder. It is a fact that more fortunes have been made through Real Estate investing then any other means. The truth is, you can do this in your spare time, part time or full time. You don't need a lot of money or good credit to accomplish your dream of a better life for you and your family. The Creative Real Estate niche of Lease Purchasing can allow you to live your Dreams. Don't short change yourself. Take charge of your life now! Make a commitment to earn additional income through real estate - The World's Greatest Wealth Builder.

The last stage is to start today - since there is no tomorrow on your path to success. Good luck and Remember, Who Makes It Happen, You Do! _______________________________________________________________________ __________________ How To Give Yourself A $20,000/Year Raise Without Asking Your Boss Why without asking your boss? Two reasons, one, he or she will most likely say no; and second, he or she will probably have you committed for asking. So what do you do. Give the raise to yourself. Impossible you say. Chuck and Sue are crazy. Not at all. Here's how. You know we love the Creative Real Estate niche of Lease Purchasing and you know we believe it to be the perfect home-based business. But, did you know you can use these same methods in your spare time to give yourself that big raise. Ask yourself, "What would I be willing to do to earn an extra $20,000 in a year". The answer may surprise you. And no, you don't have to become a hit man (or woman) to earn this. You just have to be willing to take a look at Lease Purchasing. Some background before you think we've completely lost it. For every 100 calls Sue makes on For Sale By Owner property, she either speaks with or leaves messages for about 60%. That's about 60 people she puts the concept of Lease Purchasing in front of. Out of that 60, approximately 10 will develop into true prospects. From these 10, 2 or 3 will develop into property we are willing to take on. The others may become consultations or manual sales. (Please keep in mind, these numbers will vary a bit depending upon your particular area and current market conditions). Gee, you say, that sounds like a lot of work. Not really.

Consider making those calls over a 3 month period. That's the equivalent of a call per day. Why a 3 month period. Because you're only looking to do one deal a quarter. Next question. How does this translate into a $20,000/yr. raise? Simple. On a typical single family house, we look for a $5000 assignment fee on average. Well, let's do the math. 4 x $5,000 = $20,000. Yup, a $20,000 raise on 4 deals per year. Is this realistic? Absolutely. In fact, we may be conservative on that raise for you. You may well decide to do five or six or more deals in a year. All it takes is knowing how to structure your deals, having the proper contracts and a willingness to want to give yourself a raise. You're right. Chuck and Sue are crazy. Crazy like a fox. ________________________________________ What Can I Realistically Earn In A Lease Purchase Business? If you're looking at Lease Purchasing as a business, you'll obviously want to earn much more than the $20,000 per year in our "How To Give Yourself A $20,000/Year Raise Without Asking Your Boss" article. Let's review the numbers from that article: For every 100 calls Sue makes on For Sale By Owner property, she either speaks with or leaves messages for about 60%. That's about 60 people she puts the concept of Lease Purchasing in front of. Out of that 60, approximately 10 will develop into true prospects. From these 10, 2 or 3 will develop into property we are willing to take on. The others may become consultations or manual sales. (Please keep in mind, these numbers will vary a bit depending upon your particular area and current market conditions). Now let's condense these numbers for calls into a one month time frame.

What do you get? The probability of two or three properties per month that you could do deals on. That equates to $10,000 to $15,000 per month. But let's be more conservative. Let's say you do one deal per month for a $5,000 assignment fee (which is what we look for in a typical single family home). Now you're looking at an income of $60,000 per year ($5,000 multiplied by 12 months). Right there, you've built a very good income. But now factor in the additional income stream from consultations you can do on property out of your area, and you can significantly add to that yearly total. Keep in mind, we're only talking about one strategy here. Lease purchasing offers multiple strategies for doing business. Bottom line, very conservatively, a realistic first year income for those working their business full time, is $50,000 to $75,000. Your second year, as your referrals increase and you continue to grow your business, has the potential to see you well into six figures. Now do you understand why we say Lease Purchasing is the best business we have ever owned and why we believe that it is the Perfect Home Based Business. Oh yes, full time for us on deals and consulting is about 20 hours per week. _____________________________________________________ Time, Knowledge And Energy; What They Should Mean To You Our time, knowledge and energy are our most valuable resources. We do not let anyone waste them. Time. You only have so much time in a day to earn money. Learn to put a dollar value on that time. Don't let anyone squander your valuable time. We all meet people who love to talk, we're guilty of this ourselves upon occasion. However, our time, and yours also, is valuable, after a polite or not so polite period, inquire as to how this person is going to compensate you for your time. If they don't want to or can't, cut the conversation off. We know this sounds harsh, but this person is taking money out of your pocket. That said, we don't mean you shouldn't donate your time to worthwhile charities or causes, we do. Just be careful where you spend your time resource. Knowledge. If you're like us, you've spent money and effort to acquire the knowledge you're using in business. Don't give it away. Our knowledge has a specific dollar value. Like us, you'll meet people who will want to pick your brains for free. Don't let them.

In our Lease Purchasing business, we are constantly talking with people who just have one quick question. Right! We all know where that leads. Or someone will want one of our contracts to use. Sorry, our knowledge was hard won, and it will cost you to get it. Again, the question, how do you plan on compensating us for our knowledge. Energy. We only have so much energy to use in a day. We try to schedule our high energy activities for the morning, for us this works best. You may find you work better in the afternoon. Our typical day starts about 6-6:30 a.m. and we end up usually about 9 p.m. No, we are not working all this time. We always try to have some down time during the day. We truly love what we're doing, so honestly, the day still doesn't seen long enough at times. We'll schedule consultations for the morning when we're fresh. We may prospect or visit potential houses in the afternoon; and after dinner, we'll do letters, get mailings ready, bookkeeping or paper work. There's a reason for this schedule, our energy is highest in the morning, lowest in late afternoon. We look at our evening time as something we can do without a lot of thought being necessary. Whatever we do, we guard our energy very carefully. TKE. Your three most valuable resources. Use them wisely. ______________________________ A Five Thousand Dollar Christmas Present On December 18, we contacted a homeowner with a problem. The homeowner had been trying to move his house for over eight months. They had been with a Realtor for six months, however, they had only spoken to the Realtor twice. Once when they signed the listing agreement and again one week before the listing ran out. Can you believe the nerve of the Realtor, he did not show the house once in six months and wanted to know if the homeowner wanted to re-sign with him. The unfortunate homeowner then tried to sell it himself for two months with no luck. By this time he was getting very desperate. His new home was finished, the old place was vacant and he was making double payments. Folks, this was a homeowner with a problem in capital letters. We explained how we could solve his problem using the Lease Purchase Advantage. Mind you, we're not talking a slum house here. This place was awesome; four bedrooms plus loft area, three baths, 2400 square feet, upgrades, pool, spa and gazebo, and a decent amount of land. This house was in a very desirable area of town and less than five years old. Well, I guess we were convincing, because he faxed back our contract the night of the 18th. Keep in mind, we were very up front with the homeowner. We told him that in all likelihood, nothing would happen until January.

We started utilizing our unique marketing methods immediately. We ran one of our special rent to own ads. These ads are designed to elicit a quick response. Always give good to exceptional value and you'll have more calls then you can handle. However, since this was the holiday season, the telephone didn't quite ring off the hook. We did receive enough qualified callers to be encouraged. Then we got lucky. The first couple to look at the house on December 22nd loved it. We did the credit check on them (always do a credit check) and signed over the paperwork on December 24. The homeowner was astounded. We had solved his problem in six days, and gotten him some positive cash flow also. We were heroes to him. We weren't really heroes, what we did can be done by anyone with the proper training in the unique niche of Lease Purchasing. Lease Purchasing allows you to control good property in good areas without the hassles of mortgages, taxes and maintenance. We utilized a co-operative strategy for this property. A co-operative agreement is one where the homeowner wants some say as to who goes into his home. This is just one of many strategies available to us as Lease Purchase consultants. For six days of our time, we made a five thousand dollar assignment fee for this property. Not a bad hourly rate was it? __________________________________________ Sometimes Dreams Do Come True We had originally contacted this seller from an ad she had run for a townhouse. It turned out that she was a Realtor. Before we could come to terms on the townhouse, she rented it. We figured no great loss, townhouses and condos are difficult to move in Las Vegas. About two months later, we received a call from her. She had kept the information we had mailed to her and had remembered our conversations. Hint, always follow up a telephone conversation with a letter, brochure or business card. You'll be surprised how often you will get a call from someone you've spoken to months or years earlier. It turned out that she was getting married and moving out of state. She wanted us to handle the lease purchasing of her current house. Before committing ourselves, we went to look at the property. The neighborhood was blue collar and the curb appeal of the house was OK, not great. Inside the layout was very nice with a good sized yard. This type of property is not our first choice, but we felt we could move it in 30 days or less. We started running our special lease purchase ads, along with our other unique marketing methods. These got the phone ringing off the hook from interested tenant/buyers. We had those interested do a drive by and showed the inside to a number of people with no

success. Other than the type of property, we also knew we were trying to move a house that was a bit over market for the area. We compensated for that by getting a three year period for the option to be exercised and giving a very generous rent credit. Then the fun really started. Her moving date was advanced, so we had less time to work with the property than we had planned on. We knew she may have to rent the house if a tenant/buyer could not be found. One nice thing though, she was willing to compensate us for our time, knowledge and energy if this fell through. We might not profit as much as we would have, but we wouldn't be losing either. However, our goal was to get a good tenant/buyer into the home, not break even. We take very seriously our obligation when we contract for a property, had we not found a tenant/buyer we would have been disappointed. The moving truck was coming on Tuesday, the previous Sunday we ran what was to be our last ad. We received three very positive telephone calls from the ad. A gentlemen arranged to see the inside and liked it. We were going to meet on the Saturday before the move. He had to go out of town, so we rescheduled the appointment for Monday, the day before the truck was to arrive. However, Sunday the seller called to tell us the truck was coming a day early, you guessed it, the day of the meeting. Well, we did meet with the tenant/buyer on Monday, as the moving company was loading the truck. Talk about cutting it close. While we were there a young lady also arrived to see the house, she really loved it. It would have been perfect for her and her disabled husband. We felt bad, we would have liked to have seen her get it, especially after she said it would be like a dream for her to own a house like this. The original tenant/buyer gave us a substantial non-refundable deposit, with the balance due in four days, Friday. Considering we didn't have a strong feeling for this person, we weren't surprised when Friday came and went without any word from him. We left several messages for him without a return call. The following Tuesday we called the young woman back to see if she was still interested. You could hear her yell with joy. Obviously she was still interested. We made arrangements for both she and her husband to see the house. They were in agreement about loving it. We redid the paperwork and picked up the whole assignment fee while we were there. We did have to take a post-dated check, but sometimes you have to follow your gut. We had a very good feel about this couple. From start to finish, it took us about five weeks to move this property, perhaps 15 hours of our time totally. This is about three weeks longer than our average. We were compensated to the tune of a $2500 assignment fee. However, keep in mind, this business is not just about money. It's about helping people. Nothing can replace the feeling of knowing you helped someone get into a home today that they can buy tomorrow. Like all people who deal with the public, sometimes you have folks that you like more than others. This couple was one of our favorites. By the way, it seems as if the renter in the townhouse we had originally contacted the

seller about flaked out and disappeared. So it appears as if we will lease purchase the townhouse after all. It's funny how things work out. ____________________________________ How To Make Everybody Happy And Earn $250 Per Hour Doing It One of the things we like best about being Lease Purchase consultants is that we get to help people. It's a wonderful feeling being able to provide a win-win solution to people's housing problems. This deal is a perfect example of how the Lease Purchase Advantage can benefit both the tenant/buyer and the landlord/seller. This was a wonderful 3 bedroom, 2 bath house in a good area. It had been vacant for about three months while the owner had it listed for sale. The Realtor had shown it a few times, with no serious offers. We contacted the seller using one of our many specialized prospecting methods and she agreed to meet with us. We knew from the preliminary information we took, that she needed some up-front money, so we brought a co-operative strategy contract to the meeting with us. After discussing how the Lease Purchase Advantage could solve her problem, we agreed to a split of the assignment fee and had the paperwork signed. While this house was beautiful inside, the outside or curb appeal was ordinary. We tailored our unique marketing methods towards getting people to want to see the inside. We knew if we could them get through the front door they'd love it. To this end, we used newspaper ads, signs, flyers and phone calls to our tenant/buyer database. We had a number of people do drive bys, but no one wanted to see the inside. This happens at times, so you just keep marketing and don't get discouraged. As we tell the sellers, our goal is to assign the contract within 30 days. As we headed into week two, we received a call from a nice couple. They had been looking to buy for awhile, but they needed time to reduce their debt to income ratio. Since we had negotiated a two year term with the seller, this house was ideal for them. As we knew would happen, once they saw the inside, they loved it. They gave us a deposit and filled out the credit application on the spot. The only catch was the amount of money they had to work with initially. We had been looking for $6,000 assignment fee, but they only had $3,000 immediately. They would have the balance in 90 days. We agreed to take back a note for the balance at zero percent interest if paid within 90 days.

This points out another wonderful aspect of this business. You can create wonderful cash flow streams by taking back notes. As these streams build, you even out your own income. It is very nice receiving checks in the mail each week. While there wasn't a lot of money to be made on this deal up front, we received a good note and had less than 10 hours of our time invested. Do the math, this works out to better than $250 per hour. Not bad pay, and everybody wins. The Lease Purchase Advantage is a wonderful home-based business that anyone can do with the proper training, contracts and support. ________________________________ How To Earn $2,500 In Two Hours If all deals were this easy, everybody and we mean everybody would be trying to earn a living in creative real estate. This transaction literally took two hours from start to finish. Only through the specialized niche of Lease Purchasing can you earn this type of living while having so much fun. This was a seller who needed to move because of health problems. As such, they had to have some up front money. We met with them for about an hour. While there, we suggested that we just consult with them as this would give them more money than if we did a co-operative split. They were reluctant, even though we told them that they didn't need us in the middle of the deal. Consulting is when we show a homeowner how to put together a lease purchase deal, provide the proper forms, contracts and marketing methods. We have learned that not every seller wants Chuck and Sue in the middle of the deal. Consulting is a wonderful way to increase our cash flow and business in certain situations. We consult with sellers all over the country. Getting back to this deal, the house was a former award winning model. This place could have moved itself. It was spectacular. This is why we said these folks could do it themselves. We knew this would go quickly. Even we didn't guess just how quickly. We ran one of our special ads. These ads are designed to draw a quick response. As it turned out, the first call we received was from a nice, young couple with children. We gave them the directions to the house with instructions to do a drive by. If they liked the outside, arrangements would be made for them to see the inside. Since this house was about a 40 minute drive one-way for us, we had arranged with the homeowner for them to show the inside. You can do this if you're comfortable that the seller will not try to cut a deal behind your back. We weren't worried about that in this case.

In doing the drive by, this couple had stopped in front of the house to admire it. As is happened the seller came out, saw them and invited them in to see the rest of the house. They liked it so much, they called us while they were looking at it. We agreed to meet the following day to fill out the paperwork. We received a substantial deposit, with the balance due one week before they moved in. The homeowner was thrilled that their problem was solved. They have since referred two of their friends to us. That's one of the nice aspects of Lease Purchasing as a business, you not only get to earn a good living, but you get to help homeowners with problems and tenant/buyers build dreams. If you provide good value to the various parties to the transaction, you can end up with more referrals then you can handle. Now we are the first to admit, we got lucky with this one. It's not everyday that you move a property with only two hours of your time invested. However, we were not about to turn down the $2500 we earned from the assignment fee. We'll take $1250 an hour any day. ____________________________________________________ Being A Tenant/Buyer Means You Never Have To Say You've Wasted Your Money Lease Purchasing affords the tenant/buyer a wonderful opportunity to get into a home today, that he or she can buy tomorrow. But what options are available at the end of the contract? Fortunately, Lease Purchasing provides multiple options here also. Imagine having lived in a nice house in a good neighborhood for a number of years. Now comes decision time. Let's examine the options you have. First, you can exercise the option and buy the house. You've already negotiated the terms of the sale, so you know what you'll be paying for the property. But, you may also have an option within this option. Let's say the housing market in your area has softened and the home is worth less than when you contracted for it. Don't you think the seller may be willing to re-negotiate the terms of the deal rather than get the house back. There's a good chance he will. To re-cap, you can exercise the option or re-negotiate. Your second choice is to not exercise the option. In this case, you've rented a nice house for a number of years and had great terms for that length of time. Here comes another big but, if you've had a good record of payments with the seller, and you would like to stay in the house, possibly the seller would consider turning your contract into a straight rental. A third option has the potential to be a profit maker for you, the tenant/buyer. The end of the contract period is approaching and for whatever reason, you don't want to buy the house. What do you do? Well, if the real estate market in your area has been strong, why not sell the house and make a profit on the deal.

What you say, how can I sell a house I don't own? It's simple. You exercise what is called a simultaneous close. Remember, you have an option to buy this house at a set price, if it has appreciated over the length of the contract, you can sell it to a third party for a price greater than your option price. You pocket the difference. Instant profit! Well, there you have it. Options, options, and options within options. As you can see, Lease Purchasing provides the tenant/buyer with the flexibility to be a "smart renter". No longer do you have to throw your monthly payment down a black hole. Make the best use of your money, rather than letting your landlord use it for his new car payment. Only the wonderful niche of Lease Purchasing can give you so many choices. Don't ya just love it! ___________________________________ A Few More Examples Of Lease Purchase Property We hope the photos throughout the book have given you a good idea of the type of property you can look for to do Lease Purchase deals. As you can see, Lease Purchasing can work with all types of property. Just keep your eyes open, and get that deal going. Good Luck, Chuck & Sue _____________________________________________________ The Anatomy Of The Deal Series: The Co-Operative Strategy - How You Can Generate Quick Cash Flow In The Creative Real Estate Niche Of Lease Purchasing We'd Like Your Opinion We truly hope this book has met your needs and that it rewards your efforts greatly! Everyone of our books, manuals and tapes sets must deliver outstanding Content-PerDollar Value. Please help us make the next edition of "The Anatomy Of The Deal Series: The CoOperative Strategy - How You Can Generate Quick Cash Flow In The Creative Real Estate Niche Of Lease Purchasing", even better! If you feel that it has excelled in certain areas, we'd love to hear about it. If you feel it needs improvement in others, we'd really love to hear about it. To thank you for your help, you'll receive a Free electronic version of the next edition of "The Anatomy Of The Deal Series: The Co-Operative Strategy - How You Can Generate Quick Cash Flow In The Creative Real Estate Niche Of Lease Purchasing". Just visit the link below to fire us an e-mail with your opinions. As always, Sue and I wish you the best!

Here's My Opinion ( mailto:coaches@homebusinesssoluti) and put Anatomy 1 Opinion in the subject line. _____________________________________________ Quick Reference Flow Charts, Sign And Flyer Examples Network Partners Flow Chart Network Partners • • • • • • • • • • • Mortgage Brokers Accountants Financial Planners Real Estate Attorneys Real Estate Investors Family and Friends Local Store Owners Local Store Employees Insurance Agents Associations You Belong To On Line Networking

Lease Purchase Deal Steps Flow Chart Basic Steps For A Lease Purchase Deal • • • • • • • • • • • Find FSBOs On and Off Line Make Prospecting Calls Contract For Property Meet With Seller Market Property Find Tenant/Buyer Perform Credit Checks Inform Seller Deal Finished Assign Paperwork Mail Out Final Letters Deposit Your Profits

Finding Lease Purchase Property Flow Chart

Finding The Tenant/Buyer Flow Chart

Rent To Own Sign Example To Own 3 BD, 2 BA Call 123-1234

Flyer Example

Rent To Own Northwest Summerlin Area Award Winning Former Model 3 Bedrooms, 2.5 Baths, 1,450 square feet, 2 Car Garage, Landscaped Backyard with Malibu Lighting & Spa, Alarm & Intercom Systems Complete with AM/FM Cassette, Appliances Included, Fully Upgraded, Community Pool and RV Parking Great Terms! Take 2 Years To Buy! $500.00 Rent Credit Per Month For 1st Year! Rent $1,180.00 Per Month! No Rent Increases For 2 Years! Option Money Down $5,000.00, Credited To Purchase Price! Price Fixed For 2 Years Only $147,500! For Details Call 111-222-3333

Lease Purchase Contracts And Forms

Telephone Prospecting Outline
1. Hello, may name is __________. Could you tell me if the property is still available? HOME INFORMATION 2. Please tell me about the property. A) Size and square footage of the home? B) What is the layout (split, 2-story, ranch, etc.)? C) How old is the home? D) What about the lot size? E) Does it have a garage? F) How many rooms? G) How many baths? H) Are there any features that you consider special?

I) Are any furniture or appliances included? J) Has anything recently been replaced? K) It sounds like you have a nice home. I was wondering why you are selling? PRICING INFORMATION 3. Have you owned the property long? A) What price are you asking for your home? B) Would you mind telling me how you arrived at that price? C) Do you know what the comps in the area are? D) About how long has your home been for sale? E) Have you had any offers on the property? F) Why do you think the property hasn't sold? FINANCING INFORMATION 4. Can you tell me about the existing financing. A) What existing mortgages or financing is on the property now? B) What are the terms: interest rate, monthly payments? C) Is it assumable? D) What did you originally pay for the house? E) If you don't mind my asking, are the payments current? F) Is there any pending or existing litigation on the property? G) Are there any specific CC&Rs (covenants, conditions and rules), on the property? (If the homeowner is hesitant to talk about the financing, tell him/her you are an investor and that you are looking for the best way to buy his/her home at the asking price) 7. Would you be interested if I told you there was a way you could get the top sales price in your market area, not have to pay realtor commissions, save on the closing costs, and get a tenant who not only gives you a percentage of the purchase price up front in nonrefundable option money, but pays on time and takes care of the maintenance, and do all this in possibly 30 days or less? 8. If yes, explain lease purchase programs: assignment, co-op, consulting, etc. 9. Go into lease purchase benefits (see benefit sheet). 10. Start exploring lease purchase terms the homeowner would be agreeable to. 11. (IF YES) Then if we can do all this for you, can we do business? 12. (IF YES) Set Appointment and say "I'll bring a contract with me so we can get started, Is that agreeable with you?"

Lease Purchase Property Research Form Contact Information Name _______________________________________________________________________ _____ Home Phone ________________________________ Work Phone __________________________

Property Address __________________________________________________________________ City _____________________________________ State ___________________ Zip ____________ Owner's Address if different _________________________________________________________ _______________________________________________________________________ ________________________________ Location/Directions ________________________________________________________________ _______________________________________________________________________ ________________________________ HOME INFORMATION A) Size and square footage of the home? ______________________________________________ B) What is the layout (split, 2-story, ranch, etc.)? _______________________________________ C) How old is the home? ____________________________________________________________ D) What about the lot size? __________________________________________________________ E) Does it have a garage? ___________________________________________________________ F) How many rooms? _______________________________________________________________ G) How many baths? _______________________________________________________________ H) Are there any features that you consider special? ____________________________________ I) Are any furniture or appliances included? ___________________________________________ J) Has anything recently been replaced? ______________________________________________ K) It sounds like you have a nice home. I was wondering why you are selling? _____________ _______________________________________________________________________ ________________________________ PRICING INFORMATION Have you owned the property long? __________________________________________________ A) What price are you asking for your home? __________________________________________ B) Would you mind telling me how you arrived at that price? ____________________________ C) Do you know what the comps in the area are? _______________________________________

D) About how long has your home been for sale? _______________________________________ E) Have you had any offers on the property? ___________________________________________ F) Why do you think the property hasn't sold? _________________________________________ G) Are you negotiable on the price? __________________________________________________ FINANCING INFORMATION A) What existing mortgages or financing is on the property now? _________________________ _______________________________________________________________________ ________________________________ B) Are there any second mortgages or home equity loans on the property? _________________ _______________________________________________________________________ ________________________________ C) What are the terms: interest rate, monthly payments? _______________________________ _______________________________________________________________________ _________________________________ D) Is it assumable? _________________________________________________________________ E) What did you originally pay for the house? __________________________________________ F) If you don't mind my asking, are the payments current? ______________________________ G) Is there any pending or existing litigation on the property? ___________________________ _______________________________________________________________________ ________________________________ Good Follow-up Rejected H) Are there any specific CC&Rs (covenants, conditions and rules), on the property? ________ _______________________________________________________________________ ________________________________ TERMS Terms Seller is Offering ____________________________________________________________ Monthly Payment Needed _________________________ Amount Down Needed _____________ Monthly Amount Credited to Purchase ________________ Length of LP Term _____________

Notes _______________________________________________________________________ _____ _______________________________________________________________________ ___________

Tenant/Buyer Evaluation Form
Application Fee __________ Date __________ SS# _______________ DOB __________ Driver's Lic # ____________ Name __________________________________________________________________ Present Address ________________________________________________________ City ___________________________ State ________________ Zip ________ Telephone Numbers: Home _______________ Work ______________ Best Time To Call __________ Cellular ______________ Fax ________________ Pager __________________ Employer/Name Of Company ____________________________________________ Position _____________________ Date Of Employment ________________ Annual Income _____________________ Spouse's Name _________________________________________________________ Spouse's SS# ______________________________ DOB ___________________ Spouse's Employer ________________________________________________ Annual Income ___________ How Long At Present Address? _________ Landlord ___________________ Telephone _______________ Previous Address? ______________________________________________________ How Long? ________ Landlord ________________ Telephone _________________ Type Of Home / Features Desired: Single Family __________ Townhouse __________ Condo __________ Bedrooms __________ Bathrooms __________ Square Footage __________ Preferred Areas (List In Order Of Your Preference) _______________ _______________ _______________ _______________ Date You Are Able To Move In _______________ How Long Have You Been Looking __________________ Number Of Adults __________ Number Of Children __________ Pets & Type ___________________ What Is The Maximum Monthly Rent You Could Pay, While Still Remaining In Your Comfort Zone? _____________ What Is Your Present Monthly Rent? __________________________ What Is The Most Option Consideration You Are Prepared To Pay?

___________________________________ Additional Amenities: Pool _____ Spa _____ Air Conditioning _____ Yard _____ Number Of Car Garage _____ Storage _____ Central Location _____ Tennis _____ Golf _____ Other _________________________ Financial Information: Do You Have Any Credit Problems? ______________________________________ _______________________________________________________________________ ___________________ Have You Ever Filed A Petition For Bankruptcy? ____________________ If So, When _____________ Have You Ever Been Evicted From An Tenancy? ____________________ If So, When _____________ Have You Ever Willfully And Intentionally Refused To Pay Any Rent When Due? If So, When _____________ What Is Your Present Credit Rating? Excellent _____ Good _____ Fair _____ Poor _____ Unsure _____ Credit References Limit Balance _______________________________ _______________ __________________ _______________________________ _______________ __________________ _______________________________ _______________ __________________ _______________________________ _______________ __________________ Monthly Obligations: Auto Payments __________ Rent __________ Utilities _________ Telephone __________ Insurance __________ Credit Cards __________ Child Support __________ Alimony __________ Mortgages __________ Loans __________ Other __________________________________________

Additional Notes: I declare that the foregoing information is true and correct. I authorize its verification and the obtaining of consumer credit report. All information contained is strictly confidential, and is for the sole purpose of determining how our program would best be suited for your present financial needs and future goals. Signature of applicant ____________________________________________ Date ___________________ Signature of spouse _____________________________________________ Date ___________________ Finance Summary PROPERTY ADDRESS:_________________________________________________ TENANT(S)/OPTIONEE(S):_____________________________________________

PHONE:_________________________________________ The following is a breakdown of money necessary to be paid by CASH, MONEY ORDER, OR CERTIFIED BANK CHECK on the premises before taking occupancy: CONSULTATION FEE $______________ FIRST MONTH'S RENT $______________ OPTION MONEY $______________ DEPOSIT $______________ CREDIT CHECK $______________ TOTAL MOVE-IN COST $______________ PAID TO DATE $______________ BALANCE DUE BEFORE MOVE-IN ====> ____________________________ THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT THIS DEPOSIT AND ALL MONEY PAID HEREUNDER IS NON REFUNDABLE AND SHALL BE KEPT AS LIQUIDATED DAMAGES TO COVER PROCESSING CHARGES, ADDITIONAL ADVERTISING AND LOST OPPORTUNITIES IN TENANT'S FAILURE TO TENDER ALL FUNDS NECESSARY TO LEASE PURCHASE THE PREMISES NO LATER THAN ___________________, 20 ____, FOR ANY REASON OTHER THAN THE REJECTION OF THE TENANT'S APPLICATION BY LESSOR. ____________________________________ ______________________________ TENANT/OPTIONEE/ASSIGNEE DATE ____________________________________ ______________________________ TENANT/OPTIONEE/ASSIGNEE DATE ___________________________________ ______________________________ LESSOR/ASSIGNOR DATE

Assignment of Agreement ___________________________________ (hereinafter "Assignor"), the Buyer/Tenant under an agreement dated ___________, 20___ (hereinafter "Agreement") by and between Assignor and _______________________________________ (hereinafter "Landlord/Seller"), hereby assigns all right, title and interest in said agreement to________________________________________ (hereinafter "Assignee") for the sum and consideration of $__________________ received by Assignor. Consideration to be credited to purchase price upon exercise of option. Assignee agrees to perform all covenants, conditions and obligations required by Assignor under said Agreement and agrees to defend, indemnify and hold Assignor harmless from any liability or obligation under said Agreement. Assignee further agrees to hold Assignor harmless from any deficiency or defect in the legality or enforceability of the terms of said agreement. Dated this _____ day of _____________, 20_____ ____________________________________ ______________________________ Assignor Assignee

____________________________________ ______________________________ Assignor Assignee I hereby accept and approve the terms of this assignment and agree to hold Assignor harmless from any further liability or obligation under our Agreement. _______________________________________ _____________________________ Landlord/Seller Date _______________________________________ ______________________________ Landlord/Seller Date

Residential Lease Purchase Agreement
This agreement dated ____________________________________________________ is by and between LANDLORD/SELLER ___________________________________ AND TENANT/BUYER __________________________________________________ for the dwelling located at ________________________________________________ _______________________________________________________________________ _____________ under the following terms and conditions: 1. Term: Tenant/Buyer agrees to lease this dwelling for a fixed term of _____________ months, beginning _____________________ and ending _________________. Thereafter, this agreement shall become a month to month agreement ONLY if Landlord/Seller accepts rent from Tenant/Buyer. 2. Rent: Rent for the premises is payable in monthly installments of $_________________, to be paid on or before the first of the month for which rent is due. Rent must be received on or before the first of the month to receive rent credit. There is no grace period. 3. Late Fees: Rent may be mailed through the United States Postal Service at Tenant/Buyer's risk. Any rents late or lost in the mail will be treated as if unpaid until received by the Landlord/Seller. Tenant/Buyer further agrees to pay a late charge of $___________, plus $__________ per day for each day the entire rent is not received by the Landlord/Seller by the first of the month regardless of cause, including dishonored checks, time being of the essence. 4. Returned Checks: An additional service charge of $___________ will be paid to the Landlord/Seller for all dishonored checks, in such case, Landlord/Seller shall have the right to demand cash or money orders on all future payments. 5. Deposits: Landlord/Seller acknowledges receipt of $____________________ as a deposit to indemnify Landlord/Seller against damage to the property and for Tenant/Buyer's fulfillment of the conditions of this agreement. Landlord/Seller may withhold from these deposit(s) any reasonable sum necessary to cover Tenant/Buyer defaults and/or damage. 6. Utilities/Services: Tenant/Buyer will be responsible for payment of all utilities, garbage, water and sewerage charges, telephone, gas, association fees or other bills incurred during the term of this lease. 7. Occupants and Use: Tenant/Buyer agrees to use said dwelling as living quarters only for _____ adults and _______ children, namely:

_________________________________________. The property shall be used and is designated as a residential dwelling. Initials __________ 8. Peace and Quiet and Lawful Use: All radios, television sets, phonographs, stereos, etc., must be kept to a level of sound that does not annoy, or interfere with neighbors. Tenant/Buyer shall be responsible and liable for the conduct of his or her guests. Tenant/Buyer agrees they will not engage in any illegal activities on the property, and will try to keep their guests from doing so. 9. Pets: Tenant/Buyer May ____ May Not ____ house any commonly considered domestic pet without first obtaining the Landlord/Seller's written permission. 10. Liquid-Filled Furniture: Tenant/Buyer may not keep any liquid-filled furniture in this dwelling without Landlord/Seller's written permission. 11. Appliances: The appliances in the dwelling such as a stove, refrigerator, dishwasher, clothes washer/dryer, microwave, garbage compactor or disposal, or water softener are the Tenant/Buyer's responsibility. If Tenant/Buyer wishes to use these appliances he/she agree to assume all responsibility for repair and maintenance. 12. Pest Control: Pest control is the responsibility of the Tenant/Buyer. 13. Locks/Lockouts: Tenant/Buyer agrees that they will not change the locks on any door or mailbox without first obtaining written permission from the Landlord/Seller. In the event of a lockout or lost keys Tenant/Buyer is responsible for all costs incurred. 14. Tenant/Buyer Inspection: Tenant/Buyer has inspected the dwelling and its contents and agree that they are in satisfactory order, and accept the premises in as is condition. 15. Notification of Serious Building Problems: Tenant/Buyer agrees to notify the Landlord/Seller upon first discovery of any serious building problems. 16. Repairs: Tenant/Buyer shall be responsible for all repairs, maintenance, costs, service charges, not considered capital repairs. Tenant/Buyer shall take an active role to insure that the property stays in excellent condition. 17. Damage: Tenant/Buyer agrees to pay for repairs of all damage which they or their guests have caused to the dwelling. 18. Maintenance/Repairs: Tenant/Buyer shall maintain the property in a clean and sanitary manner, including all equipment, appliances, furniture and furnishings, if provided, and shall surrender the same at the termination of the lease period in as good as condition as received normal wear and tear accepted. Tenant/Buyer shall be responsible for any and all damages caused by his/her negligence and that of his/her family, or invitees or guests. Tenant/Buyer shall maintain any surrounding grounds including lawns, and shrubbery, and keep the same clear of rubbish and weeds, if such grounds are part of the property and are exclusively for the Tenant/Buyer's use. Tenant/Buyer shall also be responsible for the maintenance of any pool and/or spa including all equipment and water condition. Tenant/Buyer may at his/her option and expense contract these services out.Initials __________ 19. Alterations: Tenant/Buyer has the right to paint and decorate the property at his/her discretion within tasteful guidelines. Any CC&R's take precedence. Tenant/Buyer will not

make any major and/or structural alterations to the property without prior written consent of the Landlord/Seller. Tenant/Buyer is required to obtain all necessary permits, required by law, before commencing improvements. Any work performed on the property, whether by Tenant/Buyer or other parties shall be as an independent contractor or agent of the Tenant/Buyer and not an employee or agent of the Landlord/Seller. 20. Improvements: Landlord/Seller further reserves the right to construct property improvements above or below the ground anywhere on the premises, so long as they conform to all building codes. 21. Emergency Access: Landlord/Seller has the right of emergency access to the property at any time and access during reasonable hours to inspect the property or, at reasonable times, to show the property to prospective tenants. 22. Vacating The Premises: The Tenant/Buyer will give Landlord/Seller written notice of their intentions at least thirty (30) days prior to their vacating the premises, and an exact date when they expect to be moved out completely. 23. Holding Over: Any holding over after the expiration of the term of this agreement, with consent of the Landlord/Seller shall be construed as a month to month tenancy in accordance with the terms hereof, as applicable. 24. Tenant's Purchase Option: In consideration of the Tenant/Buyer meeting all obligations as stated herein, the Landlord/Seller hereby grants the Tenant/Buyer an option to purchase under the following terms: a) Commencing on ______________________________, the Tenant/Buyer shall have an option to purchase the property located at ___________________________ _______________________________________________________________________ _____________ This option will expire without notice and shall be of no further effect if not exercised on or before _________________________________. b) The option price shall be $__________________________. c) The Tenant/Buyer has paid the sum of $_________________ as non-refundable option consideration which will be applied towards the purchase price of the property if, and only if, the Tenant/Buyer exercises this option to purchase. In the event, the Tenant/Buyer fails to exercise the option or defaults under any terms of this agreement this option will be void and all monies will be retained by Landlord/Seller as liquidated damages and not as a penalty. d) At the time of exercise of this option, $________________________________ of each monthly rent payment received on or before the first of the month will be applied as additional option consideration to the purchase price if, and only if, the Tenant/Buyer exercises the option to purchase. In the event that the Tenant/Buyer substantially defaults on any payments or other obligations required under this Agreement, the purchase option will be automatically void and any monies paid for rent or as option consideration will be retained by the Landlord/Seller as liquidated damages and not as a penalty. Initials __________ e) The Tenant/Buyer will surrender and deliver the property at the end of the term of this option in the event the option is not exercised. The property should be delivered in as

good condition as when received except for reasonable wear and tear. 25. Exercise of Option: Notice must be delivered to the Landlord/Seller in writing of Tenant/Buyer's intention to exercise this option at least Sixty (60) days prior to exercise. Notice if mailed, shall be by certified mail, postage prepaid, to the Landlord/Seller's address of record, and shall be deemed to have been given upon the day shown on the postmark of the envelope in which such notice is mailed. IF THE TENANT/BUYER DOES NOT EXERCISE THE OPTION, THERE WILL BE NO REFUND OR CREDIT OF ANY MONTHLY RENTAL PAYMENTS OR OPTION CONSIDERATION. Initial ________________________ 26. Closing Costs: (a) Real property taxes on the property and general and special assessments if any, for the current fiscal year shall be prorated to the close of escrow and paid by the Landlord/Seller. (b) The "closing costs" shall be those costs incurred in conjunction with closing escrow and shall be paid at the close of escrow as follows: (1) All closing costs shall be paid by Tenant/Buyer. 27. Assignment: The original Tenant/Buyer may have the right to assign this Residential Lease Purchase Agreement subject to the owners permission. Any other person(s)/assignee wishing to assign this agreement must have the express written permission of the owner. An assignment fee received by the original Tenant/Buyer May _____ May Not _____ be credited to the Option Consideration. 28. Heirs, Assigns and Successors: This agreement shall include and insure to and bind the heirs, executors, administrators, successors, and assigns of the respective parties hereto. 29. Encumbrances: (a) The parties agree that neither will cause or permit any lien to attach to or exist on or against the subject property, which shall or may be superior to the rights of either party or to encumber the property in any manner without having obtained the written consent of the other. (b) Prior to the exercise of the option, Landlord/Seller reserves the right to change existing encumbrances on the property through refinance, early payoff of the loan(s), or modification of existing loan(s) so long as said change would not create an encumbrance exceeding the agreed upon value of the property; (c) The Landlord/Seller upon payment of said purchase money, shall convey said property by General Warranty Deed, free from all encumbrances except: ________________________________________ _______________________________________________________________________ _____________ and shall furnish a policy of title from a reputable title insurance company at his expense so showing. Initials __________ 30. Insurance: Landlord/Seller have obtained insurance to cover fire damage to the building itself and liability insurance to cover certain personal injuries occurring as a result of property defect, or Landlord/Seller negligence. Landlord/Seller's insurance does NOT cover Tenant/Buyer's possessions or Tenant/Buyer's negligence. Tenant/Buyer shall obtain a renter's insurance policy to cover damage to or loss of their own possessions, as

well as losses resulting from their negligence. Tenant/Buyer agrees to show Landlord/Sellers evidence of such policy within (1) month of this Agreement. 31. Damage by Fire: In the event that the property is damaged by fire and through no fault of the Tenant/Buyer, and cannot be restored within a reasonable time in the opinion of the Landlord/Seller, this agreement shall terminate with no further liability of any party. Should fire or casualty damage have been caused by Tenant/Buyer's own action or neglect, they shall not be relieved of the responsibility for payment of rent, and they shall also bear the full responsibility for repair of the damage. 32. CC&R's: Tenant/Buyer acknowledges receipt of all pertinent rules and regulations and CC&R's concerning this property. 33. Possession: Landlord/Seller shall endeavor to deliver possession to Tenant/Buyer by the commencement date of this Agreement. 34. Default: The occurrence of the following shall constitute a material default and Breach of Contract by Tenant/Buyer: Any failure by Tenant/Buyer to pay rent on time or perform any provisions of this lease to be performed by Tenant/Buyer where such a failure continues fifteen (15) days after written notice thereof by Landlord/Seller will constitute a material breach of this contract and forfeit the option to purchase. In addition, the term of this contract will immediately become month to month. In the event of any such default by Tenant/Buyer, then in addition to any other remedies available to Landlord/Seller at law or in equity, Landlord/Seller shall have the option to terminate this lease and all rights hereunder by giving written notice of intention to terminate. 35. Process Serving: Every Tenant/Buyer who signs this Agreement agrees to be the agent for any other Tenant/Buyers and occupants of this dwelling and is both authorized and required to accept, on behalf of the other Tenant/Buyers and occupants, service of summons and other notices relative to the tenancy. 36. Enforceability: Should any provision of this Agreement be found to be invalid or unenforceable, the remainder of the Agreement shall not be affected thereby and each term and provision herein shall be valid and enforceable to the fullest extent permitted by law. 37. No Waiver: All rights given to Landlord/Seller by this agreement shall be cumulative to any other laws which might exist or come into being. Any exercise or failure to exercise by Landlord/Seller of any right shall not act as a waiver of any other rights. No statement or promise of Landlord/Seller or his agent as to tenancy, repairs, alterations, or other terms and conditions shall be binding unless reduced to writing and signed by Landlord/Seller. Should either Landlord/Seller or Tenant/Buyer waive their rights to enforce any breach of this agreement said waiver shall be considered temporary and not a continuing waiver of any later breach. Initials __________ 38. Indemnification: Landlord/Seller shall not be liable for any damage or injury to Tenant/Buyer or any other person, or to any property, occurring on the premises, or any part thereof, or in common areas thereof, unless such damage is the approximate result of the negligence or unlawful act of Landlord/Seller. Tenant/Buyer and Landlord/Seller shall further indemnify and hold the preparer of this contract harmless from any and all claims arising from this transaction.

39. Time: Time is of the essence in this Residential Lease Purchase Agreement. 40. References in Wording: Plural references made to the parties involved in this Agreement may also be singular, and single references may be plural. These references may also apply to Landlord/Seller's and Tenant/Buyer's heirs, executors, administrators, or successors, as the case may be. 41. Attorney's Fees: The prevailing party shall be entitled to all costs incurred in connection with any legal action brought by either party to enforce the terms hereof, including reasonable attorney's fees. 42. Entire Agreement: This Agreement and any attached addendum constitute the entire agreement between the parties and no oral statements shall be binding. It is the intention of the parties herein that if any part of this Agreement is invalid for any reason such invalidity shall not void the remainder of the agreement. 43. Preparer's Disclaimer: All of the undersigned parties or their assigns in this agreement agree not to hold the preparer of this document liable for any errors, omissions, mistakes or negligence. 44. Modification: Any modification of any portion of this agreement must be made in writing and signed by both parties. 45. Financial Disclaimer: The purchase option is not contingent upon the Tenant/Buyer's ability to obtain financing from a lender or any other reason, and the Landlord/Seller has not made any representation or warranties as to financing. The Tenant/Buyer understands that time is of the essence for this Agreement and that his/her failure to purchase the property before the expiration of the option, for any reason, all monies paid by the Tenant/Buyer will be retained by the Landlord/Seller. It is further agreed that this Agreement is not an installment land contract, contract for deed, or equitable mortgage. Initial _______________ 46. Acknowledgment: The Tenant/Buyer hereby acknowledges that they have read this Agreement, understand it, agree to it and have been given a copy. They further have been advised to seek legal, tax and technical counsel concerning this contract prior to signing. 47. Breach Of Contract: If Landlord/Seller shall rent, accept an offer for sale or purchase, cancel or in any way breach this agreement before the expiration of said agreement with the original Tenant/Buyer, this contract shall revert to a consultation and a consultation fee of $1,000.00 shall be immediately due and payable. Landlord/Seller also agrees that Landlord/Seller is responsible for the reimbursement of any deposits or other monies accepted from any prospective assignee. Additionally, the Landlord/Seller agrees to hold the original Tenant/Buyer harmless from any further liability or obligation under this agreement or from any cause of action brought by any party caused by the Landlord/Sellers breach. 48. Misc.: This agreement shall become void after 60 days if the original Tenant/Buyer has not assigned this Agreement. The original Tenant/Buyer shall have the right to renew this Agreement for an additional sixty (60) days if original Tenant/Buyer so chooses. ______________________________ ______________________________ Landlord/Seller Tenant/Buyer ______________________________ ______________________________ Landlord/Seller Tenant/Buyer Date _________________________ Date _________________________


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