12 Reasons Private Money Will Propel Your Real Estate Investments
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Message #1802
Tuesday, August 08, 2006
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WEALTHY:
Rent to own or rent to rent (William Bronchick)
HEALTHY:
Think zinc
WISE:
Aristotle on the law
ALSO
IN THIS ISSUE:
Financial
independence … my way (John Forde) (Michael
Masterson)
Poor
little rich boys
Add "apposite" to
your vocabulary
No
Plunger? No Problem. Secret To Unplugging Your Toilet
"My
toilet was stopped up. My guests were on their way. And I couldn't
find a plunger!"
Lucky
for me, I'd learned the secret: just squirt some liquid dish
detergent, wait 15 minutes and my home and guests were good
to go.
How
often have you been caught in a situation like this — or any
of thousands of other household mishaps? Spills, breaks, lost
items — family heirlooms nearly ruined. Too often, right?
Joan
and Lydia Wilen, better known to TV viewers as "The Wilen
Sisters" have the secret to saving the day on these and
thousands of other potentially disasterous mishaps. Learn
more…
"The
law is reason, free from passion"
-
Aristotle
Protecting
Yourself in a "Can't-Lose" Investment
By
William Bronchick
Last
week Message
#1798, I explained why you may be better off renting your
next home rather than buying it. By using a lease/purchase agreement,
you can live in your dream home, avoid the risks of home ownership
(especially important to bubble market dwellers), and still
benefit from any appreciation in the market.
With
so many benefits, why would anyone agree to sell you a property
this way? Fact is, you'll find plenty of motivated sellers
who want to unload their properties as quickly as possible.
But once in a while, you'll come across one who realizes too
late how much money his property is worth.
So
what can you do to protect your legal interests?
A
Lease/Purchase Is a Legally Binding Agreement
A
lease/purchase (also known as a lease/option) is really two
things: a lease and an option to buy.
A
lease is a contract for the use and possession of land, creating
a landlord/tenant (or "lessor/lessee") relationship.
A
purchase option is a unilateral agreement wherein the optionor
("seller") agrees to give the optionee ("buyer")
the exclusive right to purchase the leased premises. The
option price (the price the buyer will pay if he chooses
to purchase the property) is generally fixed at the inception
of the lease, although it does not have to be. At any time
during the option period (which generally corresponds to
the lease period), the tenant can exercise his option to
purchase.
An
option is not the same as a regular purchase contract, which
is a bilateral agreement. A bilateral contract legally binds
both parties to the agreement, whereas an option only binds
the seller. An optionee is not bound to buy. It is his option
to buy or not to buy.
A
lease with option arrangement is not a sale, but rather a landlord-tenant
relationship. In rare cases, a court may re-characterize the
transaction as a sale if it looks like a sale. But the IRS
does not classify a lease/option as a sale until the option
is exercised.
In
a typical lease/purchase agreement, a portion of the monthly
rent (about 25 percent) is credited toward the purchase price.
The buyer pays a non-refundable fee for the option, which can
also be credited to the purchase price if he chooses to buy.
3
Ways to Protect Your Option
As
I explained last week, lease/options can help you generate
huge returns and realize the benefits of appreciation without
the risks of depreciation. In fact, lease/options are great
… except when the seller decides not to live up to his end
of the bargain.
Sure,
you can sue the seller to force him to sell you the property,
but this can cost thousands of dollars in legal fees and take
years to accomplish. It's far better to protect yourself at
the beginning.
Here's
how to protect your interest in the property to ensure that
you will profit from any appreciation that occurs:
1.
Record the Option. If your option was notarized,
you can record it in the public real estate records. This
will give notice of your interest. If the option was not
notarized, you can sign an affidavit called a "memorandum
of option" and file it in the real estate records
where the property sits. Keep in mind that this does not
create a lien. It only puts a "cloud" on the
title.
2.
Escrow the Deed. If your seller has died or disappeared,
it won't be possible to get him to sign the deed. Create
an escrow up front in which a title company or attorney
holds an executed deed. When you are ready to exercise
your option, you simply tender the money to the escrow
agent and collect the deed.
3.
Record a Mortgage. Typically, a mortgage is recorded
to secure payments on a promissory note. But a mortgage
can be recorded to secure the performance of any agreement,
even a purchase option. By doing so, you, as the optionee
(buyer), will now be a lien holder, in the same position
as a secured lender. If the seller refuses to sell the
property, you foreclose.
How
to Use This Technique as an Investor
Up
to this point, we've been assuming you are using the lease/purchase
technique to purchase a home that you intend to use as your
primary residence. But
it works just as well on properties you are interested in purely
as an investment.
Let
me give you a quick example.
With
some slight adjustments to your original agreement, you should
be able to turn around and sub-lease the property to another
party who can cover your monthly rental obligation (possibly
with cash income for you, to boot). It may be strictly a rental
agreement, or you may choose to create another lease/purchase,
with your profit built into the new purchase price.
If
your tenant is not purchasing the property, about six months
prior to the end of your option period (which will typically
be anywhere from one to three years), you put the property
up for sale. And if your purchase price was fixed at, say,
$250,000 and the market price is now $285,000, you should be
able to realize the $35,000 in appreciation.
And
the best part? You never need to take ownership of the property.
Instead of selling the property, you sell your option and let
your buyer exercise it directly with the owner.
[Ed.
Note: In an upcoming teleseminar, William Bronchick, a nationally
recognized attorney, best-selling author, and entrepreneur,
will be speaking to a select group of listeners about how to
use a lease/purchase to buy and sell real estate. Sign
up today to receive your ETR reader discount.]
By
John Forde
I
had a nice visit with Michael Masterson and his wife yesterday.
Before we said adieu, he asked me if I had some advice for
fledgling copywriters who might want to enjoy my admittedly
enviable lifestyle. If you're one of them, here's what I can
tell you:
1.
Learn From the Masters
I
started at the bottom, working as an editorial intern and making
$15 a day. (This, while I was in graduate school.) And I studied.
I read every copywriting book I could find, I played marketing
tapes most waking hours, and I read other people's promos.
Many nights, I was the last guy in the building. And I still
work hard, not just at writing copy but to stay educated in
new techniques while reviewing those too easily forgotten.
But meeting and working closely with some of the greats in this
business has had an impact I can't even begin to measure. Not
everyone is going to be able to do that, sure. But the next best
thing is studying everything the majors have had their hands
in. It's better than a Harvard education, in my opinion.
I
genuinely think the AWAI
copywriting program is an exceptional way to learn. Everything
that helped me, you'll find inside. Then start reading the
promos in the niche that interests you most. Are you a subscriber
to any publications you love? A loyal customer of any business
that sells through the mail? Or maybe the company you work
for does direct-response marketing or sells online. Get on
these mailing lists and study the promos you see most often,
because they're the ones that are working. Copy them out by
hand. You'll be stunned by the techniques you pick up.
2.
Find Your First Copywriting Assignment
Soon
after you get started – and sooner than you think you're ready
– take on one assignment. Do it on spec, if you have to. ("On
spec" means you'll be paid only if your sales letter
pulls results.) Let them know your experience level up front.
But then pour yourself into the job and, as much as possible,
knock the cover off the ball. Dig heart and soul into the research,
write and rewrite while nobody is looking, and come across
as professional, efficient, and quick.
Maybe that first promo will work, maybe it won't. But move on
to another assignment immediately. And you do all this while
you're still working at your "day job." You're building
the base you'll need.
3.
Build Your Client List … and Leave the Cubicle
The
more projects you do, the more you'll learn. Even from the
flops. But with enough successes, you'll also build a loyal
following of clients who start to identify their success with
you. This is where you get the leverage you need to move out
of the cubicle and start doing this on your own, from wherever
and whenever you like. In your home office, on a beach, in
your underwear (if that's what floats your boat).
Once you've reached this level, with at least a few clients who
like your work and want to use you again, line up three or four
projects while letting them know where they fall on the timeline.
Make sure they pay well enough to sustain your lifestyle and
that they're big enough to put a manageable demand on your time.
And then …
Take the leap.
I happen to have the best of both worlds. I have all the work
I need within a single group of more than a dozen different products.
Yet, if I ever wanted to shift gears, I have plenty of other
marketers eager for an opening in my calendar. It's simply a
by-product of 14 years in the business.
I work hard, but I set my own pace and make my own day-to-day
schedule. And I've got enough leverage now that I can cut deals
on royalties and upfront fees. The only downside, as far as I
can see, is that I have to turn down great projects because I
can only fit so much into my schedule. These days, at the drop
of a hat, I could book out a year's worth of work if I wanted
to.
The key is to get good first, line up the assignments second,
and then simply do as good a job as you can. Once you build your
reputation – which snowballs, by the way, once you bang out your
first successful promo – the work will come to find you. No matter
where you happen to live or work at the time.
4. Forge Strong Relationships
After
you're liberated from the cubicle and your commute, make sure
you never cut yourself off entirely. You're still working with
people. Building and maintaining relationships with those people
remains essential. Keep in touch via e-mail. Make phone calls
or even face-to-face meetings a regular part of each assignment
cycle.
Focus
on building a small cluster of repeat clients who love your
work, rather than spreading yourself thin across the industry.
[Ed.
Note: John Forde, a top-rated speaker at AWAI's copywriting
conferences, is the author of AWAI's Secrets
of Writing for the Internet program Sign up for his Copywriter's
Roundtable e-zine at www.JackForde.com .]
$245
per month Cash Flow plus $25,000 Instant Equity…
…the
results from your techniques have produced an immediate profit.
In less than 60 days, we put this deal together from a motivated
seller using a technique recommended in your course.
-Anargyros
Economou, Colorado Springs
If
you could use the extra income real estate investing provides,
but you don t have the credit or job history to secure financing,
you can still make it happen.
In
less than 60 days, you can realize the financial boost you
need using the secrets of Lease/Options to gain control of
a property s profits, without the pitfalls of financing and
ownership. Learn
More…
Zinc
Helps Your Kids Stay Sharp
By
Jon Herring
I
have written frequently about the profound effects that zinc
can have on your immune system. Now, there is evidence that
zinc can help children perform better in school.
Researchers
at the U.S. Department of Agriculture (USDA) asked 209 boys
and girls to drink a 4-ounce glass of juice before school for
12 weeks. One group drank plain juice, a second group drank
juice with 10 mg of zinc, and a third group drank juice with
20 mg of zinc.
The
children who received 20 mg of zinc improved their performance
on tests that challenged their memory of abstract images by
a factor of two times greater than those who received no zinc
supplementation. They also outperformed other children on hand-eye
coordination tests and memorizing word lists.
The
best natural sources of zinc are meat, nuts, and seeds. But
in today's mineral-poor food supply, natural sources may not
be enough. To ensure that your kids get enough of the right
minerals, give them a multi-vitamin. Make sure the vitamin
also has at least 1.5 mg of copper, as zinc can deplete copper
in the body.
(Reference:
Nutrition & Healing)
Notes
From Paris: Who Can Afford These Places?
By
Michael Masterson
A
friend of mine just bought a "modest," three-bedroom
apartment in Paris. The price? About two million dollars.
"Did
you look at the Ile Saint Louis?" I asked him. (K and
I had walked around there and talked about how nice it would
be to have a pied-a-terre in that part of town.)
"Sure.
We looked," he said. "But the prices are way out
of our league."
My
friend is – by any normal measurement – a wealthy man. His
income and his net worth must certainly be in the top tenth
of the top one percent of the population. I know a handful
of people who are richer … but only a handful. So if anybody
should be able to buy a nice apartment in the Ile Saint Louis,
it would be him.
"What's
going on?" I wondered. I mean, who lives in these places?
Most
of the great city apartments in the world – in New York, London,
Tokyo, and Paris – are occupied by people who either inherited
or bought them decades ago. Real estate prices in all the major
metropolises (with the possible exception of Tokyo) have been
escalating on a steady basis for 50 years.
It
doesn't take too many decades at an annual 8 or 10 percent
inflation rate before prices skyrocket out of control. But
many of the prime properties are not sold off. (Because where
would those people go?) And so it is the secondary and tertiary
neighborhoods that become the boom areas for the nouveau riche.
People
who can afford a $2 million apartment have no right to complain
about anything. Still, when $2 million buys you only a modest
place in a secondary neighborhood, you can't help but wonder
if things are really getting better.
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Something
that is "apposite" (AP-uh-zit) – from the Latin for "to
set or put near" – is strikingly appropriate and relevant.
Example
(as used by Jane S. Gerber, editor of The
Illustrated History of the Jewish People: "As we survey
Jewish history as a whole from the vantage point of the late
twentieth century, Judah Halevi's phrase 'prisoner of hope'
seems entirely apposite. The prisoner of hope is sustained
and encouraged by his hope, even as he is confined by it."
Michael
Masterson
Copyright ETR, LLC, 2006
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