All Forum Posts by: Brian Gibbons

Hi Kiran:

Supplementing John Corey's Post:
1) TX has basically not allowed residential lease options.
2) I review most lease option material.
So here's my opinion (REI since 1984):

- Ron LeGrand sells it very well. So does Lou Brown. They have been in the CREI game for 30 years.
- Barney Zick is one of my favorites. I was sad to see him pass away. I love his private money negotiations.
- The Cooperative Assignment is a technique where the REI leases with option from seller, then sells - assigns the contract. Or the REI consults with the seller on placing a Lease Option on their property or a Land Contract. There are challenges to being a Seller Finance Consultant to Sellers but it can be done well. I believe it is hot cash creater in this flat market and we teach it via webinar.
- Anything by Bill Bronchick JD is valuable.
- Anything by Richard Roop is valuable. Best marketer on the planet.
- Claude Diamond like to use huge rent credits to get TBers. 50% to 100% of rent. We oppose that.
- Any book by Wendy Patton, Peter Conti - David Finkel, Bob Meister - Charlie and Randy France, Matthew S. Chan, Jay DeCima, John Schuab, Jack Miller and Mark Warda JD,
- Advanced concepts from Peter Conti- David Finkel, such as Lease Purchase of sophisticated owners (e.g. using Equity Split Addendums) are for people serious about negotiating win win arrangements. We think the Protege' course is the best Purchase Option course there is. Problem with many REIs is it is expensive. I would partner up with 2-4 people and share it.
- Taxation of Lease Purchase is covered by no better teacher than Al Aiello,
- Lastly avoiding equitable interest can be achieved by not delivering an Option to Purchase directly to the Tenant on the Lease Option; rather you can hold an option to purchase in escrow to be delivered to the tenant once say 24 months lease has been completed, then tenant has 90 days to exercise their option (get financing). This is called a Contract for Option to Purchase, similar in effect to a Contract for Deed. See Warda's Lease Option Book

I hope this is helpful.

All the best,

Brian Gibbons

PS Lease Options are only one tool for a REI. You need sub2-land trusts, seller carrying equity in a note, etc. Don't be a one trick pony! :)

My advice is:

* Have you USP (Unique Selling Proposition) to Sellers be: I can close in 5 business days,
* Have PLENTY of Tenant Buyers before you buy the houses
* Get ONE major player for a business partner. Call him SUGAR DADDY.

* Get a sugar daddy that has liquid assets, say $500,000.
* Have a C Corp with the Sugar Daddy.
* $500,000 is placed in a small commercial bank as collateral (CD).
* Business plan states that commercial bank will loan 80% of all purchases LTV (not purchase price). They have collateral of $500K.
* Offer to pay Sugar Daddy 30% apr but on the TIME USED THE MONEY.
* I would go to 50% ARV on Rehabs.

Ideal Candidate
Strong income,
Strong Credit,
Strong Financial Assets
Hands Off

If you have money as collateral in a Commercial bank......
They will work with you.
They will loan 80% of appraisal

It would be helpful if the bank would refinance these loans once the repairs are completed.

Also, it would be helpful if lease options were structured as Fair Market Rent plus more as an option payment.
Example:
Market Rent = $1000 pm
Offer $950 pm plus $200 pm as option payment (subtracted from future purchase price)

Future purchase price can be tied to a future appraisal OR a set figure, whichever is higher.

Ideal location of homes for tenant buyers - STRONG EMPLOYERS in the area that are recession proof.

Consider not giving an option to purchase, but a Contract for Option to Purchase.
The lease is prepared for 24 months.

The option is prepared, but held by fidiciary (attorney).
The Sale and Purchase is prepared.
POSSIBLE Wording of part of Contract for Option to Purchase:
Three months before the scheduled end of the lease, provided the lease is not in default, an option to purchase the property will be granted in writing and delivered to the lessees. The option will be valid for 90 days unless extended by the agent in writing. The agent will provide the payment history and credit references for the lessees in writing to assist in securing a mortgage for the purchase of the property.
(I am not an attorney. Get one please, preferably a smart commercial attorney)

I hope this concept of Sugar Daddy helps you.
In this climate of non-lending to real estate investors, one Sugar Daddy can free up an REI to offer low-ball offers ALL DAY.
Last I heard, Standard Fannie/Freddie Guidelines limit the number of properties finance to 10.

All the best,

Brian

Hi Jeff:

There are state specific contracts, as you alluded to. Residential Leases should always be used as per the local Landlord Association, with Addendums.

There are more reputable REI Sites that are proven as good legal BOILER PLATES.

I would strongly recommend you find a lawyer in Commercial Real Estate that has done Wraps - AITDs, Seller Carry Backs, Commercial Purchase Options and the like. Commercial Attorneys are pretty creative.

You may want to ask this BiggerPackets membership group which REI Guru - Teacher has the best agreements that need the least amount of editing.

My 2 cents are:

Bill Bronchick Esq LegalWhiz - Excellent in everything
Mark Warda Esq - Excellent in Everything
Charlie and Randy France - Sub2 Get The Deed - Excellent

Also, have this commercial attorney refer you to the best residential landlord EVICTION specialist. Rarely are they the same person.

RE: Private Money, a securities Reg D 506 - RE development financing attorney is a must to keep the SEC happy. Alan Cowgil - PrivateLendingMadeEasy has info on that.

Not owning properties in your own name, have the right kind of Insurance, and using Land Trusts for privacy helps you avoid law suits in the first place. Bill Bronchick (LegalWhiz) is hard to beat in Asset Protection. Dyches Boddiford Esq and George Yeiter CPA (REIDepot) are great at both tax-entity planning and asset protection.

I hope this helps.

All the best,

Brian Gibbons