Click Here Note, All questions will remain anonymous and will be placed on the blog!

QUESTION:
Good Day Adam. I want to focus on lease option assignments. Which lease agreement am I supposed to use? There are two of them and that confuses me. I do know that if I was going to do a sandwich lease I would use both of them. I just want to assign it (not sandwich) for the price and terms that I negotiated, no mark up.

Can I just fill out section H. Financing, part b lease purchase with $10 down (cooperative purchase agreement,) then have a tenant buyer fill out the lease option agreement packet (option to purchase T/B, lease agreement, assignment agreement, and assignment addendum?)
ANSWER:
Yes, you could literally just use the Cooperative Option agreement as you stated and assign your interest. But having the other paperwork helps outline the deal to the seller and tenant/buyer and is very important.
Adam
RESPONSE:
Thanks a lot. I’m really starting to realize the power of the Cooperative Option Agreement. I have to fax my paperwork over to my attorney at PPL. He said he may suggest that I use state specific Lease Option agreements. He said he will let me know after he looks over them. I love PPL already. I have an attorney to look over my paperwork for each deal, I feel like I am big time.
ADAM RESPONSE:
Yeah! PPL is awesome that’s for sure!
Don’t feel disappointed if your attorney changes all of the agreements. It’s the system that’s important not just the agreements within the manual. He/She should be able to undoubtedly help you with your state specific agreements and it won’t change the CP system at all!
And finally, pay close attention to the option and/or other agreements when they refer to a state. Just make sure it’s all for GA or whatever state you’re working in. Those are some other good questions to ask your attorney!
Let me know if you need anything else, I’m here all weekend!
Adam
RESPONSE:
So even if they change the Cooperative Option form, it still won’t affect the CP system?
ADAM RESPONSE:
It’s the function of the form that’s important not just the contents. So in some cases yes, the contents could change but the function shouldn’t. Example; the option agreement lays out the time, terms, price etc, which is critical. The non-exclusive clause is also critical, but that’s about it. Section H. shouldn’t be changed much at all if any, but again it’s the “function” of the form that makes it “cooperative”.

Keep things simple, ask your attorney to make sure it’s GA specific, but not to change the “function” of the agreement. As long as it’s legal its function should stay in tact. And yes, I’ve used it in GA with no problems at all. Matter of fact, I’ve used it in probably 20 states and Canada, so that should keep things simple for you.
Hope that helps, but have your attorney make sure you’re not missing anything!
Adam

QUESTION:
Does each party need to have a copy of the assignment transaction?
ANSWER:
In the Cooperative Purchase there is a letter of assignment that takes the place of the actual assignment agreement. In short, it’s an agreement proving that you’re out of the picture and the assignee and other party (whether you assigned to the seller, or tenant/buyer) is now obligated by the terms laid out in the lease and option agreements. This way you don’t need to show your assignment fee to the other party.
Adam

QUESTION:
When I assign a lease option contract, does the tenant buyer have to sign a new lease?
ANSWER:
Sometimes they will because they’ll have to put the water in their name etc. I make sure when there’s an assignment they create a new EVERY time, so in short yes. However, DO NOT be the guy filling it out for them! A licensed attorney must do that, or they must do that on their own. However, it’s usually very easy for them to do as they have your original with the seller and they can just basically copy it and change the names. But again, DO NOT give legal advice and do your very best to make that disclaimer to them that you’re not an attorney, financial advisor etc.
Hope that helps,
Adam

QUESTION:
I’m doing lease option assignments. I have printed out the following agreements.

1. Option To Purchase Real Estate
2. Lease Agreement
3. Assignment Agreement (Lease Option Assignment)
4. Option To Purchase Real Estate (Tenant/Buyer)
5. Lease Agreement (Tenant/Buyer)
6. Assignment Addendum (Assignment of a Lease Purchase For Seller/Optionor )
7. Rental and Credit Application
8. Application Fee Receipt

Am I missing anything? Do I have too many agreements? Do I need the Release of Agreement form for a Lease Option Assignment?
ANSWER:
You may not need the application fee receipt or the rental and credit application if you use a mortgage broker etc. Let them run credit, pre qualify etc. You will however need the deposit receipt form if they put money down.
Other than that, just look on page 48 of the manual for the basic model and realize that if anything comes up that you need, don’t worry about looking dumb. You can always call your attorney etc if you need help. And of course, I’m here as well and usually respond back within a timely manner.
Hope that helps,
Adam

QUESTION:
What happens if the home value drops while the T/B in under a rent to own contract?

Example:
Strike Price – $100,000
2 year lease option
$1000/month

At the end of 2 years the house depreciates from $100,000 to $85,000.
What can the T/B and homeowner do to solve this problem?
ANSWER:

The only thing you can do in a situation like that is drop the sale price, or work something out with the tenant/buyer to carry a second note for the difference. In that case the tenant/buyer probably wouldn’t be happy, but someone would have to make a compromise.
Adam

QUESTION:
Good Day Adam. Can I do my first deal before I form an LLC? I don’t have $125 to form an LLC at this time. I want to have my first deal completed by June.

My strategy starting out is assigning lease options. Where does a mortgage broker come into place with this strategy? What type of questions should I ask a mortgage broker to find out if he is the type of mortgage broker to fit my T/B’s needs?

Or should I just let the mortgage broker select the T/B that has the best chance to get approved for a loan by the end of the lease?

I hope I didn’t confuse you. I have a tendency to over analyze things.
ANSWER:

It’s up to you to start without an LLC. There’s a lot of investors who don’t have the money for an LLC, just like I did when I started. The LLC is for tax advantages and asset protection. Talk with PPL to see if you can do a deal in your name and then later get an LLC and then write the deal off in the with the LLC. In my eyes it’s not a problem, but I’m not an attorney or CPA.

As for a mortgage broker, I have them prequalify all of my tenant/buyers as they call from the marketing. The mortgage broker can tell you if they’ll be able to get mortgage, when and what to do in order to get one. I do this even on assignments to try to protect the seller.

And no problem with the questions, they’re perfectly alright and I’m here to help as much as possible.
Adam

QUESTION:
Good Day Adam. What’s the difference between equitable interest and principle interest?
ANSWER:
For the purpose of the Cooperative Purchase, equitable interest means that you own equity within the property, or that you “own” a portion of the real estate. Such as by having a loan, land contract etc. “Principle” interest means that you have a “self-interest” in the property by controlling it with the option but no equitable interest as you don’t own anything yet.
Does that make sense?
Adam

QUESTION:
Good Evening Adam. First I’d like to thank you for making your course affordable and easy to understand. You did a great job. Lease option assignments is what I will be starting out with. I have a few questions. If I negotiate rent credits with the seller for the T/B, where can I add this on the contracts? After I do the assignment I will no longer be involved in the transaction, How can I make sure that the homeowner is sending payments to the lender and not pocketing the T/B’s rent payment?

Thanks.
____________________________
ANSWER:
One, I put rent credits on the “option agreement tenant/buyer” under “EXTRA PROVISIONS”. It would simply be a line explaining the rent credits and how they’re applied as extra consideration. (Ask your attorney how this can be done as well)
Two, part “G” of the extra provisions expresses what will happen if the seller (new optionor after assignment) can’t convey title or doesn’t close. It says that the TB’s consideration plus $500.00 will be reimbursed as complete and liquidated damages.
Hopefully this helps and yes, I’m here if you have more questions.
Adam

The Art of Strategic Preeminence

You are sitting across from a mother in tears who is trying to sell her house.  She tells you that her son has a drug addiction and they are completely broke because of it.  She has decided to put him into state funded rehab and then go live with her mother.  She doesn’t want the house anymore, she doesn’t want the debt or even the memories.  She just wants a new start.

You have two choices.

One, you follow the step-by-step instructions from your real estate course that shows how to take over the payments.  You present the agreements to her and explain that you will be leasing with the option to buy and possibly sub-leasing the property for a profit.  She glares over the agreements you’re showing her as if her mind is somewhere else.  She half-listens to you as you hand her the pen to sign, but there’s hesitation.  She isn’t sure because “there’s so much going on now in my life” she says.  I’m sorry she says, but I need some time to think about this.  You then part ways uncertain of the outcome.

Or.

Two, you tell her that you can’t imagine the pain she’s going through because you’ve never experienced it for yourself.  You also tell her that you fully understand what her needs are and that you’re there to help make what you can happen.  Then, you tell her that because of her situation with her son, you can help, but you’ll need HER HELP so together you can make the house/terms attractive to an end buyer or tenant. And finally, you sympathetically tell her that she’s been through enough and you’ll do all of the work if the two of you can come to an agreement that can benefit both of you.

The key here is not making it about you.  That, my friend, never works.

This is the difference between good negotiating by using what you’re naturally given, (The ability to emotionally relate) or trying to set up a deal with nothing more than logic in the form of someone else’s materials and/or experiences.  Did the guy/gal who wrote the course ever meet this lady?  No.  Did they ever have a deal similar to this?  Of course.  But the point is that it’s about people, not just numbers and how to set up a deal and you, are always a part of that equation.  This is what no instructor, teacher or guru can ever teach you, it’s something you learn and develop as you go.

This is the first of the 5 Success Variables in Tessera.  It’s a lesson on how we perceive and absorb the message.  It’s the difference between an abstract or concrete way of conveying information emotionally and not just logically.  Our emotions are always in control, not our logic.  And the sooner we all realize that, the sooner our world opens up to incredible opportunity.