How to Make Money With Real Estate Options E-Book

Thomas Lucier

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 393

Veröffentlichungsjahr: 2012

Beschreibung

Spend like a miser, profit like a mogul Who says you have to spend money to make money?Savvy real estate investors follow the examples of Donald Trump and Walt Disney, turning substantial profits on properties without incurring the debt, risk, and maintenance costs of ownership--and now, so can you! In How to Make Money with Real Estate Options, real estate expert Thomas Lucier introduces you to the low-risk, high-yield investment vehicle that can earn big bucks even for small investors. Lucier explains what real estate options are, how they work, and why they are the tools of choice for thousands of successful investors. Step by step, he shows you how to: * Locate potential option properties using the Internet, want ads, and "bird-dogs" * Contact and negotiate with property owners * Perform due diligence and avoid options pitfalls * Prepare an option agreement that protects you * Insure real estate options with title insurance * Package and sell optioned properties for optimum profits Packed with no-nonsense advice on how to identify the most profitable properties and manage every step of the option process, How to Make Money with Real Estate Options is a practical guide to one of the secret weapons of savvy investors.

Leseprobe

CONTENTS

Title

Copyright

Dedication

List of Downloadable Forms

Introduction: Real Estate Options: What They Are, How They Work, and Why You Should Use Them

Part I: How You Can Make Money in Real Estate Today without Ever Buying Any Property

Chapter 1: Why Real Estate Options Are Less Risky, More Profitable, and Easier to Use Than Most Property-Flipping Strategies Being Taught Today

The Definition of Property Flipping

The HUD Rule Prohibiting Predatory Property Flipping with FHA Loans

Why Most Property-Flipping Transactions Are under Intense Scrutiny

Five Obstacles That Investors Must Overcome When Flipping Properties

Six Costs That Eat Up Profits When Flipping Properties

Why the Concurrent Closing Strategy is Usually Extremely Hard to Implement

Why It Makes More Financial Sense to Flip Options instead of Properties

Savvy Investors Can Use Real Estate Options to Provide Just-in-Time Property

Chapter 2: The Most Profitable Types of Properties to Buy Real Estate Options On

Not All Properties Are Option Properties

Best to Include a Worst-Case Scenario in Your Option Buying Decision Process

You Must Be Able to Visualize a Property Being Put to a Variety of Uses

Read Various Trade Publications to Help Find Deals

Your Option Buying Decisions Should Include Local Property Supply and Demand

Why It’s Best to Specialize in at Least Two Different Types of Option Properties

The Seven Most Profitable Types of Properties to Buy Options On

Chapter 3: What It Takes to Be a Profitable Real Estate Option Investor

A Positive Mental Attitude is the Most Essential Element in Achieving Success

Don’t Let Your Fear of Failure Stop You from Being a Profitable Option Investor

Avoid Listening to the Naysayers Who Tell You That It Can’t Be Done

Twenty Reasons Most People Fail to Make It as Real Estate Investors

Real Estate Options Are Not for Dummies

Don’t Give Up and Quit before You Achieve Your Objective

You Do Not Need a Big Checkbook to Become an Option Investor

Use Fixed-Rate, Low-Interest Lines of Unsecured Credit to Buy Options

Why You Must Use Today’s Technology in Your Option Investment Business

How to Set Up a Home Office for Your Option Investment Business

Maintain a Separate Checking Account for Your Real Estate Investment Business

Internal Revenue Service Publications Available Online

Don’t Run Out and Form a Separate Business Entity before You Do Any Deals

Use the Thomaslucier.com Web Site as the Companion Resource for This Book

Part II: Five Realistic Strategies That You Can Use to Make Money with Real Estate Options Today

Chapter 4: How You Can Use Options to Make Money from Obsolescent Properties That Can Be Put to More Profitable Uses

Definition of an Undervalued Property with Immediate Resale Profit Potential

Why Properties with Curable Obsolescent Flaws Make Ideal Option Properties

Obsolescent Flaws That Cause Properties to Lose Value

How Commercial Buildings Are Classified

How Obsolescent Properties Can Be Put to Their Most Profitable Use

Why Option Investors Are Usually Buyers of Last Resort for Obsolescent Property

Option Investors Should Focus on Finding New Owners for Obsolescent Properties

What You Should Check for When Looking Over an Obsolescent Property

Why You Must Be Able to Think Outside Your Local Real Estate Market

Chapter 5: How to Use the Lease and Option Strategy to Make Money with Single-Family Houses

Why the Risk versus Reward Ratio for Sublease-Options is Way Out of Whack

The Sublease-Option Strategy Requires the Lessee to Become a Landlord

Why the Sublease-Option Strategy Isn’t Financially Feasible

Most Investors Don’t Have the Cash Reserves to Subsidize Sublease-Options

Sublease-Options Appeal Mostly to Credit-Challenged Would-Be Homebuyers

The Standard Lease-Option Agreement Violates the Due-on-Sale Clause in Loans

Many Equity-Skimming Scams Involve the Use of Lease-Options

Most Lease-Option Transactions Are Really Installment Sales

A Low-Cost, Low-Risk Lease and Option Strategy That Makes Financial Sense

The Lease and Option Strategy Involves Two Separate Transactions

Why You Must Always Use Separate Lease and Real Estate Option Agreements

Record Separate Memorandums of Option and Lease in the Public Records

How a Lease and Option Transaction Works

Six Key Terms That Must Be Negotiated in All Lease and Option Agreements

Insure Your Personal Property with a Renters’ Insurance Policy

Require All Lease Payments Be Made to a Licensed Loan-Servicing Company

The Best Type of House to Use the Lease and Option Strategy On

The Property Owners Who Are Most Likely to Agree to a Lease and Option Deal

Lease and Option Properties Are Relatively Easy to Market to Potential Buyers

Chapter 6: How You Can Use Options to Profit from Properties with Correctable Problems

How You Should Use the Problem Property Option Strategy

Government Agencies Can Be an Excellent Source of Problem Property Leads

Three Types of Problem Properties That Scare Off Most Conventional Investors

Why Properties with Problems Don’t Scare Me

How to Buy Options on Properties with Clouded Titles

How to Have a Cloud Removed from a Property’s Title

How to Buy Options on Properties Destroyed by Natural and Man-Made Disasters

Chapter 7: How to Use Options to Control Properties That Can Be Rezoned for More Profitable Uses

The Definition of Rezoning

How the Rezoning Process Works in Most Jurisdictions

What You Must Include in Your Rezoning Application Package

Why You Must Know Who the Anti-Rezoning Zealots Are in Your Area

Best to Take the Path of Least Resistance When Applying for Rezoning Approval

How to Quickly Determine if a Potential Option Property Can Be Rezoned

What You Need to Do When Buying an Option on a Property You Want Rezoned

Chapter 8: How You Can Use the LASH Strategy to Profit from Long-Term, Flat-Rate Master Leases and Real Estate Options

How the LASH Strategy Works

Where to Find Valid Lease Agreements

Twenty Key Provisions That Must Be Included in Your Master Lease Agreement

Thirty Key Provisions to Include in Your Sublease Agreements

Three Ways to Best Protect Your Position as Master Lessee

Four Key Points That Must Be Negotiated in a Master Lease

Best to Use the LASH Strategy on Small Mismanaged Rental Properties

The Five Main Reasons Many Rental Properties Become Mismanaged

The Four Types of Property Mismanagement That Affect Small Rental Properties

Six Telltale Signs of a Grossly Mismanaged Rental Property

My Favorite Type of LASH Property

The Four Key Functions of Property Management

Six Steps You Must Follow to Avoid Renting to the Proverbial Tenant from Hell

Tenant Selection is the Most Important Aspect of the Rental Property Business

Thoroughly Screen All Tenant Applicants

You Must Base Your Denial to Rent on Legitimate Business Reasons

Part III: A 12-Step Process for Buying and Reselling Real Estate Options

Chapter 9: How to Use the Internet, Property Wanted Ads, Bird Dogs, Finder’s Fees, and Direct Mail to Locate Properties to Put under Option

My Real Estate Option Investment Business Modus Operandi

The Most Important Advice in This Entire Chapter

Develop an Aggressive Five-Pronged Property Search Plan

How to Locate All of the Out-of-Town Property Owners in Your County

How to Use a Property Wanted Web Page to Search for Properties Online

Link Your Property Wanted Web Page to Other Web Sites

How to Use Classified Property Wanted Ads to Find Potential Option Properties

The Best Place to List Your Property Wanted Ad

When to Run Your Property Wanted Ad

Fourteen Questions to Ask Owners Calling about Your Property Wanted Ads

How to Use Bird Dogs to Find Potential Option Properties That Are Not Advertised

How to Recruit Bird Dogs into Your Network of Paid Informants

Pay a Finder’s Fee for Information That Results in the Purchase of an Option

Use the Internet to Advertise Your Finder’s Fee Online

Use Direct Mail to Contact Potential Option Property Owners

What You Should Say in Your Letter to Potential Option Property Owners

Always Be on the Lookout for Vacant Properties

Chapter 10: How to Perform Due Diligence on a Potential Option Property

The Definition of Due Diligence

How to Use the Internet to Perform Due Diligence Research on Properties

Be Sure to Check Out the Owner When Performing Due Diligence on the Property

Why You Should Do a Google Search of the Property Owner’s Name

Best to Use the Checklist Method When Performing Property Due Diligence Research

Environmental Hazardous Waste Search Online

Demographic Information Online

Crime Statistics Online

Where to Find the Names of All the Property Owners in Your County

Where to Search for Property Records Online

Where to Search for People Online

What to Do When Your County’s Property Records Are Not Available Online

How Parcels of Land Are Identified for Property Tax Purposes

How You Can Use Grantor and Grantee Indexes to Find Property Owners

How to Locate the Owners of Vacant Properties

The Two Types of Real Property Liens

A Lien’s Priority is Determined by the Date of Recordation and Type of Lien

Check the Public Records to Verify That All Recorded Liens Are Uncovered

Sixteen Liens to Check for When Researching Titles to Real Property

Common Abbreviations Used in Property Title Documents

The Two Most Common Types of Property Title Searches

Best to Hire an Experienced Title Abstractor to Perform Your Title Searches

What You Must Double-Check on Every Potential Option Property

Verify the Property’s Insurance Claims History before You Buy an Option

Ten Questions You Must Ask Owners before You Ever Buy a Real Estate Option

Best to Avoid Properties in Areas Perceived by the Public as Being Bad Locations

Eight Factors to Consider When Performing Due Diligence on Areas to Invest In

Chapter 11: How to Thoroughly Inspect a Property before You Buy an Option to Purchase

How to Locate a Competent Building Inspector

How to Conduct a Property Inspection

Be on the Lookout for Indoor Mold When Inspecting Properties

Indoor Mold Information Available Online

EPA Guide on How to Prevent and Clean Up Indoor Mold Growth

How to Inspect Suspicious Properties for Environmental Contamination

Environmental Hazardous Waste Search Online

Housing Built Before 1978 May Pose Potential Lead-Based Paint Hazards

Lead-Based Paint Hazard Information Online

Use My Inspection Checklists to Conduct Your Pre-Buy Property Inspections

Chapter 12: How to Accurately Estimate a Property’s Current Market Value

Definition of Current Market Value

The Definition of Market Value

The Difference between Assessed Value and Appraised Value

The Definition of a Property Appraisal Report

The Three Common Methods Used by Appraisers to Estimate Property Values

The Comparison Sales Method of Estimating a Property’s Value

Online Sources of Comparable Residential Property Sales

Online Sources of Comparable Commercial Property Sale and Income Data

The Income Method of Estimating a Property’s Value

How to Calculate a Property’s Capitalization Rate

How to Use Gross Rent Multipliers to Estimate an Income Property’s Value

Watch Out for Owners Using Fuzzy Math on Income and Expense Statements

Require Owners to Provide Verifiable Documentation to Support Their Tax Returns

Reconcile the Rent Roll against the Rental Rates Listed in Rental Agreements

The Replacement Cost Method of Estimating a Property’s Value

Deduct the Total Fix-Up Cost When Calculating the Property’s Current Value

Always Verify Loan Information Directly with Lenders

Use My Eight-Step Approach to Estimating a Property’s Current Market Value

Chapter 13: How to Negotiate Low-Cost Options and Below-Market Purchase Prices with Property Owners

Most Americans Don’t Like to Negotiate

Some Property Owners View Negotiations as a Sort of Cat and Mouse Game

Many Property Owners Are Fervent Believers in the Greater Fool Theory

Always Verify the Identity of the Property Owner before You Begin Negotiations

Six Basic Rules to Follow When Negotiating with Property Owners

Know What You Want before Negotiations Ever Begin

Thirteen Crucial Terms That Must Be Negotiated in Every Option Agreement

Five Negotiating Tools You Can Use to Obtain Lower Prices and Better Terms

Use the Property’s Physical and Financial Condition as Negotiating Tools

Negotiate a Cleaning Credit to Help Defray Your Property Cleanup Costs

Five FAQs Property Owners Often Pose When Negotiating Real Estate Options

Buy Real Estate Options at Prices 5 Percent or Less of the Property’s Value

Strive to Buy Properties at Prices 20 Percent or More below Market Value

Why You Must Negotiate a Fixed Purchase Price at the Time You Buy the Option

Determine How the Owner Came Up with the Asking Price for the Property

Don’t Be Bashful about Asking Property Owners to Help Finance the Purchase

What to Do When a Property Owner Rejects Your Initial Offer to Buy an Option

Chapter 14: How to Prepare Your Option Agreement So That You Are Fully Protected during the Option Period

Nineteen Clauses That Must Be Included in Your Option Agreement

The Definition of a Real Estate Option Agreement

Essential Elements of a Real Estate Option Agreement

Your Option Agreement Must Comply with Your State’s Real Property Statutes

Hire an Experienced, Board-Certified Real Estate Attorney in Good Standing

The Standard Qualifications for an Attorney to Be Certified in Real Estate Law

How to Find a Board-Certified Real Estate Attorney in Your Area

Use the Option Agreement That Your Attorney Prepared as Your Master Copy

Make Certain That All Your Real Estate Agreements Are Properly Witnessed

All Sample Agreements Are for Informational and Instructional Purposes Only

Chapter 15: How to Use Title Insurance to Insure Real Estate Options

Why Most Title Insurers Consider Real Estate Options to Be Risky

What a Standard Real Estate Option Endorsement Doesn’t Insure

What Title Insurers Look for in a Real Estate Option Agreement

Always Obtain Title Insurance Coverage from a Reputable National Underwriter

Get a Title Insurance Policy Commitment before Buying a Real Estate Option

Three Factors to Always Consider before Insuring an Option

Title Insurance Underwriting Information Available Online

Chapter 16: Why All Property Title Transfer Documents Must Be Held in Escrow during the Option Period

The Four Documents That Must Be Signed and Held in Escrow

Why a Signed Warranty or Grant Deed is Better Than a Performance Mortgage

Why You Should Record a Memorandum of Real Estate Option Agreement

Chapter 17: How to Close on the Purchase of a Real Estate Option

What to Do If the Optionor Refuses to Sign All of the Documents at the Closing

All Signatures on Real Estate Transaction Documents Must Be Properly Witnessed

Why It’s Best to Use a Board-Certified Real Estate Attorney to Close Transactions

Provide Joint Escrow Instructions to the Third Party Holding the Documents

Why You Should Record a Memorandum of Real Estate Option Agreement

Chapter 18: How to Clean Up a Property under Option to Maximize Its Curb Appeal and Resale Value

Don’t Confuse an Industrial Cleaning with an Extreme Property Makeover

How to Complete a Fast Property Cleanup on Schedule and within Budget

How to Clean Up and Secure a Vacant Property under Option

How to Find Competent Professionals to Clean Up Your Properties

How to Avoid Being Ripped Off by Unscrupulous Cleaning Contractors

What You Need to Know about Your State’s Construction Lien Law

Best to Rent a Dumpster for Large Cleanups

Pressure Washing Pays the Highest Return of Any Type of Cleaning

Make the Property Secure from Vandals, Arsonists, and Homeless Squatters

Always Conduct a Walk-Through Inspection before Making Final Payments

Best to Keep Track of Your Property Cleanup Expenses on a Daily Basis

Chapter 19: How to Package, Market, and Resell Your Real Estate Options for Maximum Profit

How to Calculate the Resale Price for a Real Estate Option

Package Properties to Fully Highlight Their Best Features and Future Potential

How to Overcome the “Fear Factor” That Some Prospective Buyers May Have

Five Best Methods to Market Properties That You Own Real Estate Options On

How to Use the Internet to Market Your Properties Globally

Create a Property for Sale Web Page to Advertise Your Properties Online

Use URL Forwarding for Property for Sale Domain Names

Sources of Online Mapping Services

Advertise Your Properties for Sale Online

Always Place a Professional-Looking “For Sale” Sign on the Property

Place Classified Ads in Local Newspapers

How to Sell Your Real Estate Option Agreements

Notify the Optionor That You Have Assigned Your Real Estate Option Agreement

How Income from the Sale of Real Estate Options is Treated for Tax Purposes

Internal Revenue Service Publications Are Available Online

Use the U.S. Master Tax Guide as Your Tax Reference Guide

Best to Hire a Properly Licensed Professional to Prepare Your Tax Returns

Chapter 20: How to Exercise Your Option and Buy the Property

How to Exercise Your Real Estate Option

How to Purchase a Property under Option

Fourteen Key Provisions That Must Be Included in Your Purchase Agreement

Three Contingency Clauses That Must Be Included in Your Purchase Agreement

What You Need to Know about the Real Estate Settlement Procedures Act

Four Things That Must Be Done in Conjunction with the Closing

Best to Use a Closing Checklist to Catch Potential Problems before the Sale Closes

Review Your HUD 1 Settlement Statement on the Day before the Closing

Resources

About the Author

Index

Copyright © 2005 by Thomas J. Lucier. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone].

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. The publisher is not engaged in rendering professional services, and you should consult a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Lucier, Thomas J.

How to make money with real estate options : low-cost, low-risk, high-profit strategies for controlling undervalued property . . . without the burdens of ownership! / Thomas J. Lucier.

p. cm.

ISBN 0-471-69276-X (paper)

1. Real estate investment—United States. 2. Option (Contract)—United

States. 3. House buying—United States. I. Title.

HD255.L827 2005

332.63′24—dc22

2004021919

To my grandson, Zachary W. Johnson, Poppy’s boy

LIST OF DOWNLOADABLE FORMS

Form 4.1: Sample Vacant Property Checklist

Form 5.1: Sample Memorandum of Lease Agreement

Form 9.1: Sample Letter of Proposal to Purchase a Real Estate Option

Form 9.2: Sample Letter to Vacant Property Owners

Forms 11.1–11.13: Thirteen Property Inspection Checklists

Form 12.1: Sample Property Appraisal Report Checklist

Form 12.2: Sample Monthly Income and Expense Analysis Worksheet

Form 12.3: Sample Property Fix-Up Cost Estimate Worksheet

Form 12.4: Sample Estoppel Letter to Lenders

Form 12.5: Sample Current Market Value Worksheet

Form 14.1: Sample Real Estate Option Agreement

Form 15.1: Sample Letter to Title Insurers

Form 17.1: Sample Joint Escrow Instructions

Form 17.2: Sample Memorandum of Real Estate Option Agreement

Form 18.1: Sample Daily Cleanup Cost Worksheet

Form 19.1: Sample Assignment of Real Estate Option Agreement

Form 19.2: Sample Notice of Assignment of Real Estate Option Agreement

Form 20.1: Sample Exercise of Real Estate Option Notification Letter

Form 20.2: Sample Real Estate Purchase Agreement

Form 20.3: Sample Buyer’s Closing Checklist

Introduction

Real Estate Options: What They Are, How They Work, and Why You Should Use Them

I first want to thank you for investing your money in a copy of How to Make Money with Real Estate Options. This one-of-a-kind book was written for serious, rational, reasonable, intelligent, reality-based, goal-driven, and action-oriented adults who are willing to take calculated risks in order to profit from the many money-making opportunities that real estate options provide today. I am a firm believer that a real how-to book should tell its readers precisely what to do while providing detailed instructions on exactly how to do it. I also believe that a how-to book should live up to its title. And I am very confident that this unique book will exceed your expectations on both counts! As you will soon find out, it is packed with step-by-step instructions, ready-to-use worksheets, checklists, letters and agreements, and practical, no-nonsense advice on how to use real estate options to control undervalued properties with immediate resale profit potential.