The New Math: 1 Investor = 8 Deals
By: Claude W. Diamond J.D.

Tom: "Claude can you help me? I `m trapped !!!! "
Moi: "Trapped in What , Tom ????"
Tom: "I’m caught in the Real Estate Estate Trap !"

"Last week my beeper went off while I was flying a 747 at 35,000 feet. I didn’t recognize the phone number, but I thought it might be important so I called right back."
"Would you believe that it was my annoying tenant who had somehow gotten my pager number. She wanted me to declare an emergency since her toilet was not working and considered it worthy of contacting me over Nova Scotia; even have me turn the plane around! She threatened to hold the rent until the commode was repaired. After my copilot stopped laughing at me, I came to the realization that I was no longer interested in Real Estate and wanted out, out, out !!!!"

"I have eight separate rental properties that include 4 Condos and 4 single family houses. One half are rented and the other half are vacant or for sale and I’m losing money (and my mind) every month. I just can’t stand the Tenants, things breaking and rent collection problems."

Tom, a pilot for a major carrier, is an investor who had unfortunately morphisized (Tom is not a Power Ranger) into a Landlord. He figured that soon he would suffer a tremendous financial setback or at the very least, ruin his excellent personal credit for years to come.

For me, however, Tom’s woes were an excellent opportunity to make some great cash flow and profits and help my airborne friend at the same time. My best deals always seem to come from owners who have problems with their properties. Tom was a great aviator, but just didn’t have the specialized knowledge or support to control his investments. Simply said, if I can offer solutions to Tom that will turn his investments around I can generate some great profits with none of my own money invested. My kind of Creative Real Estate; Control without ownership !!!

The Plan: I wanted to do something as quickly as possible with the vacant homes to offset Tom’s enormous negative cash flow. I wanted to Lease with an Option, all of the vacant homes ASAP. I proposed that we run the following ad in the classified section of Homes & Condos for rent and sale.

RENT TO OWN !!!
50% to 100% Rent credited to purchase
Owner will carry
Condos & Homes available, NOW
Call (619)-421-4121

Note: Tom was able to let me give such generous rent credits (50% to 100%) because:
A. There was NO real estate commission to pay since No Agent or Broker was necessary.
B. There were NO closing costs because that’s the Tenant/Buyers responsibility.
C. There are NO management companies; the properties are self managed by motivated Tenant/Buyers.

The four properties were rented with an option within the next 35 days. I generated $21,400.00 in Non-Refundable Option Consideration with a net positive monthly cash flow of $525.00. I was fortunate that Tom had some investments in fairly good middle to upper class locations with only marginal cosmetics necessary (carpet cleaning & paint touchup). I used none of my own money to make these deals happen except for some minor advertising expenses. I kept $12,000.00 of the option money and split the Positive Cash Flow with Tom. I would also get a percentage of the notes generated at the close.

I then began to work on those properties which Tom had occupied. I offered all of the Tenants a chance to become Homeowners instead of renting, if they would do three things:
1. Commit some upfront Option Consideration.
2. Pay their rent on or before the first of the month inorder to receive the rent credit.
3. Take care of all o the maintenance of the Home.

Two of the four agreed and decided to become Tenant/Buyers immediately, one came on board six months later and the fourth moved out shortly after I took over. I then Lease optioned that unit.

Summary: One year later, three of the units were sold under the terms of the Lease Purchase, three were renewed for another year (with additional option money paid and more positive cash flow) and the remaining two homes were lease optioned all over again with new Tenant/Buyers. Yep, you guessed it, for more non refunable Option Consideration.
Tom is now making money, taking back some good quality notes and is not driven to distraction by the financial loss and management of his investments. I generated some nice upfront profits, monthly positive cash flow and provided a way for the renters to become homeowners.

This IS the way to do Real Estate!