Copyright © 2008 Ralph Marcus Maupin, Jr. (Mark)

Understanding real estate agreements requires a basic knowledge of what rights or interest to property that are affected by a specific agreement or contract. The following is a basic listing of rights that are commonly dealt with and general descriptions. The following listing does not represent a complete list of the various rights that can be held in and to real estate, nor does it give a thorough and full description of the rights covered, but it is sufficient for practical purposes.

A bundle of rights to real estate could include:
a. All the rights, fee simple
b. Mineral rights
c. Air rights
d. Water rights
e. Life estate
f. Remainder interest
g. Equitable rights
1. Land contract
2. Leasehold
3. Option
4. Pending purchase contract

OWNERSHIP- Fee Simple Ownership – This is the highest form of ownership to property. Generally if you have real estate that you have received a warranty deed for, this is what you have.

EQUITABLE INTERESTS- These is rights that are acquired by agreement of the owner, without transferring ownership. In other words, if you have an equitable interest in real estate, you may have the right to acquire title and ownership, but you don’t have it yet. Typical examples of equitable interests are the rights of the purchaser under a full accepted purchase agreement, the rights of an optionee under an option agreement and the rights of the purchaser (vendee) under a land contract.

LEASEHOLD INTEREST- These is the rights to property for duration of time with no promise to transfer ownership. Rental/leasing applies here as well as use licensing.

OWNERSHIP INTERESTS- Ownership to property is a combination of things and rights, and you can own property and not have all parts of ownership and vice versa. These are the basic parts or types of the ownership of real estate: Legal, Equitable, Possession and Use. Legal interest is normally evidenced by having title to the property. Equitable interest is described above. Possession is simply having possession or control of the property. For example, a “squatter” is a person who has possession, but no other rights to the property. “Squatters,” simply by virtue of being in possession of the property have certain rights. Use, is simply the right to use the property. A typical example of this is a letter of permission to hunt on land.

Places you can go to better find out how you can use this bundle of interest and learn more at a very low cost are as follows: Local real estate licensing schools in your area, entrepreneurial resource centers at local colleges, Real Estate Investing Clubs, Real Estate Investment Association, REIAs, Real Estate Investing Classes at high school, Real Estate Investing Groups, Landlord Club, Real Estate Training Classes, Real Estate Seminars, Real Estate Courses, Real Estate Investing Network, and Real Estate Forums. Use Google.com to find locations in your area.

A Real Estate Investing Club’s mission is to provide an entrepreneurial atmosphere for real estate investors to learn, and network with new and experienced investors. Real Estate Investors Clubs have been formed for real estate entrepreneurs and professionals with one of their goals to bring like minded individuals together, to achieve greater real estate goals. REIA members come from many walks of life: first time buyers, new investors, licensed agents and mortgage brokers, commercial investors, attorneys, CPAs, and first time landlords.

Mark Maupin has purchased and sold over 3,500 single-family homes and many multi family properties. Ralph Marcus Maupin, Jr. Nick Name ‘Mark’ is one of founders of National Real Estate Network LLC. He teaches real estate investing and Internet Marketing for a local Michigan College. You will find many free resources such as: Free Real Estate Forms, Terms, Articles and Real Estate Investor Clubs Locations at: http://MegaEveningEvent.com. For low cost Michigan Real Estate Investing CDs, DVDs, forms and E-books go to http://stores.ebay.com/Real-Estate-Investing-Guide

Copyright © 2008 Ralph Marcus Maupin, Jr. (Mark)

Single-family homeownership in America is approaching 70%. These homes sell quicker than other type of property and they are the highest in demand. There are several categories of real estate available for an investor. Prospective purchasers have the widest range of financing programs available to them, making the property easier to purchase. If the property does not sell in a reasonable amount of time, it can be rented. For these reasons, single family homes are the easiest for a beginning investor to understand and participate in.

Ugly properties are the best property to buy because it will be for sale at a low price and in most cases won’t cost much to renovate. Look for the property that has never been “updated” or improved or one that has been improved, in a very tacky way. Don’t be deterred by the pet urine, feces, or mice droppings. Where some see damage and odor, you should see dollars and opportunity. “Ugly Ducklings” are the properties that have the least competition, houses that can be fixed up by remodeling, not by rebuilding. Many people are scared about things like leaking roofs and broken windows; they’ll discourage most inexperienced investors from purchasing the property. In many areas, you will be competing for some deals with “do-it-yourself” homeowners.

The oddest thing about it is that most people will sell the home when they’re done, thinking they did great but they really broke even. They may outbid you simply because they figure they can buy a home for $50,000.00 that will be worth $70,000.00 when they’re done fixing it up. It never occurs to them that they will spend $10,000.00 for materials and professional labor, one to two years working on it, and live in a construction zone the whole time. Buy, flip and sell works best in a 90-120 day time frame, with professional contractors quickly completing the decorating, repairs, and renovations.

I suggest that in order to avoid making such common mistakes you network with like minded people to get trained in the investing business. There are Real Estate Investor Associations all over the US. Many of these associations are non profit, usually referred to as a REIA. Investor groups are for the purpose of investor education, networking, and training. They bring national and local real estate experts to their meetings. They have training on wide topics like: foreclosures, pre-foreclosures, land lording, rent to own, lease options, short sales, deed offs, credit, wholesaling, find, fix, and sell, private money, lines of credit, and accounting.

To find a Real estate investors association or group in your area you can go on line to one of the major search engines. Type in the one of following words with your local City name: REIA, Real Estate Investing Clubs, Real Estate Investment Association, REIAs, Real Estate Investing Classes, Real Estate Investing Groups, Landlord Club, Real Estate Mentoring Programs, Foreclosure Boot Camp, Real Estate Training Classes, Real Estate Seminars, Real Estate Schools, Real Estate Courses, Real Estate Investing Network, Real Estate Conventions, Real Estate Boot Camps, and Real Estate Forums. Using a search engine to search for topic like how to find a boot camp or class on foreclosures in the state or city you are in works great.

Ralph Marcus Maupin, Jr. Nick Name ‘Mark’ is one of founders of National Real Estate Network LLC. He teaches real estate investing and Internet Marketing for a local Michigan College. You will find many free resources such as: Free Real Estate Forms, Terms, Articles and Real Estate Investor Clubs Locations at: http://MegaEveningEvent.com. For low cost Michigan Real Estate Investing CDs, DVDs, and E-books on • http://stores.ebay.com/Real-Estate-Investing-Guide

Copyright © 2008 by: Ralph Marcus Maupin, Jr. (Mark)

The sellers you want to look for are those who want to sell their property more than anything else. I refer to this type of person as a motivated seller (A DON’T WANTER). Motivated sellers will be willing to negotiate and offer you their property at an ideal price. If you are dealing with a seller whose main priority is to make a profit you are on the wrong path. In order to make money when dealing with this type of seller it would be a good idea to get a real estate license. A real estate license will enable you to earn money by listing the property for the person or referring them to a listing agent.

This way, you will profit from the sale without having to buy the property yourself. Most sellers know the value of their property and they have the option to list their property in order to get the best offer. They can also refinance their property or sell it to a mortgage company. I feel it is important to discuss these options with them to demonstrate that their best interest is being served. If they are motivated sellers whose #1 objective is to get rid of the property, then they will look to work out a sale with you.

The sort of motivated sellers I look for are divorcees or separated couples who would rather sell the house they once shared than have to pay a mortgage that requires two incomes. I also look for probated estates because the attorney in charge will want to liquidate the estate as quickly as possible. Tired landlords who can’t handle property management and people who have lost their jobs are usually motivated sellers. Foreclosed homes being sold by mortgage companies or banks are often listed at prices below market value.

In this business, the key is to stay focused on making sure you have a motivated seller. Said any other way is that the person’s #1 objective is to get rid of their property. Good hunting for Motivated Sellers!

Mark Maupin has purchased over 3,500 single-family homes and many multi family properties. Mark teaches real estate investing seminars, and he leads a real estate mentoring program. Ralph Marcus Maupin, Jr. Nick Name ‘Mark’ is one of founders of National Real Estate Network LLC. He teaches real estate investing and Internet Marketing for a local Michigan College. You will find many free resources such as Free Real Estate Forms, Terms, Articles and Real Estate Investor Clubs Locations at: http://MegaEveningEvent.com. For low cost Michigan Real Estate Investing CDs, DVDs, and E-books on • http://stores.ebay.com/Real-Estate-Investing-Guide

Copyright © 2008 Ralph Marcus Maupin, Jr. (Mark)

The “Step By Step Guide to Exit Real Estate at Top Dollar Prices” By Ralph Mark Maupin, Mr. Lease Option

A few years ago I was an overly ambitious investor, I thought the more properties I had the better. I ended up with 300 rental properties which was far more properties than I could manage. After concluding that I would be better off selling most of those properties I encountered another problem. How was I going to sell so many properties at a price to make a profit before things spiraled out of control? That’s when the answer hit me, “RENT TO OWN”, otherwise known as Lease Options.

I put together a Lease with Option to Buy Program to sell most of those rental properties. The result was I got long term tenants who pay above market rent and show pride in ownership, making improvements to the property. This is a tool that you will absolutely want to include in your “toolbox” of investment strategies- especially homeowners in slow moving markets or investors purchasing property for re-sale. The sales I made would not have happened at above market prices if not for this strategy.

Rent to Own, Lease Option, Lease with Option to Purchase all mean the same thing. Tenants might not necessarily know the meaning of Lease with Option to Buy, but they do know the term, Rent to Own! Rent and lease mean the same thing; a lease is simply a rental agreement that is for a set period of time whereas people often refer to month-to-month situations as rentals.

The benefit of Rent to Own is it attracts more interested and qualified tenants as well as getting you higher monthly income from your property with higher sales prices and reduced maintenance expenses. If you place an ad for your property offering a lease with Option to buy, you can generally expect five times the number of responses to the “Rent to Own” add than you get from a regular “For Rent” ad. More People are looking for an opportunity to own their own home, than just continue to rent.

An option is a grant of the right to purchase property, at set price and terms, from the owner of the property. The person who receives the option can (but is not required to) purchase the property during a set period of time agreed to by both parties when they enter the option.

An option is different from an agreement to sell (Purchase Agreement) in that with a Purchase Agreement, the buyer agrees to buy and the seller agrees to sell. Under an option, the seller agrees to sell, but the buyer does not agree to buy, they simply have the option of buying during the option period.

Note: In an Option, the Seller is the Optionor (The one who gives the Option) and the Buyer is known as the Optionee (The one who receives the Option.

To set up a Lease with Option to Purchase with a tenant, you will need all of the documents you would normally use to set up a simple rental/lease. Find a rental agreement, written by an attorney, according to Michigan Law at http://stores.ebay.com/Real-Estate-Investing-Guide You will need an Option agreement, and you want to be sure that you’re using one that protects you as the Optionor, as many option forms available favor the Optionee. Attached to the Option will be a Purchase Agreement, which will spell out the terms of the sale that the tenant may purchase under, in the future.

Over the years, I have developed a good guideline for structuring Lease Options. I suggest you don’t give discounts on rent just because the tenants are also paying you a monthly option fee or they are planning on buying the house; the option is separate from the rental agreement. Get as much option fee as you can up front, the more the perspective tenants pay up front, the greater their risk will be if they don’t follow through. I will take a note and payments combined with cash as option fee. The option fee is non refundable in the event the tenant defaults and the note keeps the tenant at risk. The option fee is credited towards the sale price, if they close.

When doing an option, don’t charge a security deposit; apply the funds the tenant would have paid to the option fee, which is non-refundable. Make your option cancelable by you if the tenants default in any of the terms of the rental/lease. Work with a mortgage loan officer to qualify your perspective tenants. Have the loan officer advise you on how long it will take to have the tenant “mortgage ready”, then set your lease option term accordingly. When pricing your property, you will be able to get more than market price, but remember the property will have to appraise for the purchase price when they qualify for the mortgage.

Last but not least, make the tenant responsible for repairs and maintenance to the property; make sure your rental agreement states they are responsible for the cost of such repairs and renovations. (Check state and local laws for rules) As you can see, options create opportunity though creating larger profits, decreasing management and repairs, and selling your property at top dollar.

Ralph Marcus Maupin, Jr. Nick Name ‘Mark’ is one of founders of National Real Estate Network, LLC. He teaches real estate investing and Internet Marketing for a local Michigan College. You will find many free resources such as: Free Real Estate Forms, Terms, Articles and Real Estate Investor Clubs Locations at: http://MegaEveningEvent.com. Learn more about lease options at http://www.mrleaseoption.com

By: Ralph Marcus (Mark) Maupin, Jr.

If you buy investment properties, what do you need to know about hiring contractors?

1. Where do you find contractor? Ask for referrals from other investors. You can also go to Home Depot early in the morning where the contractors check out. Talk to the clerks about who are the regulars and talk to the contractors in line. Check out their work start to finish and their references. Home Depot is a great place to find a reasonable crew that works for builders.

1. Does the contractor need insurance? You need to make sure you or your contractor has two types of insurance. They are:

A. Workman’s Compensation Insurance: If you are doing a lot of rehabs, you will want to get a minimum workman’s compensation insurance. If your contractor has workman’s compensation insurance, you will want him to give you a copy of his insurance with you shown as an additional named insured. You then have proof of coverage. Even if you have a minimum policy covering you, you will still need the proof of coverage for your insurance carrier or you will be charged for their cost on your own policy. If you hire a contractor working by himself he can choose to exempt himself from workers compensation, but he needs to sign a form that you get from your insurance company.

B. Liability Insurance: Make sure again that you’re named as additional insured on your contractor’s policy or have your own policy. You should talk to insurance experts to determine the amount of coverage you need.

C. Builder’s Risk Insurance: You may want to check on getting builders risk insurance for other coverage on your equipment, tools, and etc.

1. How do you pay your contractor? If you are dealing with new contractors that you don’t have a track record on, I recommend that you buy a small amount of materials and see that they get the materials to the job. Only pay for the work that gets done. The question you need to ask yourself is if the contractor walks from the job is there enough money to hire someone to finish the job. Even experienced investors, as well as new investors make the mistake of paying out too much on the job all the time. I have had Home Depot call me and tell me that my contractor is bringing materials back for a cash refund. I have had great contractors who I have had a long relationship with me walk off the job. It is a must to hold back enough dollars to hire someone to finish the job. I don’t care how long you have worked with contractors you have to inspect the job before paying. If you don’t inspect the work, don’t get in the business. Consider placing a provision in your contract that final payment is contingent on passing a city certification inspection.

Should you have a contract with your rehab crew? I say yes. At the end of this article is a sample contract. See your attorney for what you need in your contract.

1. Should you pull permits? Yes, Yes, Yes!!! The people I see who try to bypass the system and city inspectors just end up in trouble and end up doubling their cost. The short cut to getting the job done is to pay for the permits required.

Next week we will talk about mistakes made in contracting.

The comments in Mark’s Corner are shared personal experiences. They are not intended to be legal or accounting advice nor solutions. You should always consult with the appropriate professional when making decisions.

Copyright. 2004. R. Maupin
All rights reserved.

INDEPENDENT REHAB CONTRACTOR AGREEMENT

This agreement is entered into this day of _________________. 20 , in the city of ____________, State of Michigan between _________________, (owner) of 17177 Laurel Park N, Ste. 265, Livonia, MI 48152 and:

Contractor: _____________________________

Contractor is a Corp. ( ), Ltd Liab Co. ( ) Partnership ( ) Sole Proprietorship ( )

Street Address: __________________________

City, State, and Zip: ____________MI_________

Phone: ( ) __________ Fax: ( ) __________

Pager: ( ) ___________ Cell Phone: ( ) __________

Emp. Fed. Tax ID No (EIN):___________ Soc. Sec. No._________

Contactor License No (s):___________ Type of License: ________

Person authorized to sign and bind Contractor: _______________

1. Schedule: The Contractor agrees to commence work on: _______________, 20 . The Contractor agrees to complete all work by: _________________, 20 , subject to excusable delays such as strikes, unavailability of building supplies or acts of nature. Owner reserves the right to cancel this agreement and Contractor agrees to forfeit the balance of money due under contract if work is not completed by this date. The contract herein shall be void at the option of Owner, if contractor does not commence work within _______________ (____________) days from the date of the signing of this contract.

2. Scope of Work: Contractor agrees to provide the following described labor, materials and construction in accordance with plans and specifications as may be referred to herein on the following described property:

(A) Address of work site: _____________________________

(B) Description of work (Describe Labor, materials and Equipment to be furnished. Attach additional pages, estimates, and work sheets if necessary.
______________

Other Special Provisions:__________________

The Contractor’s supervisor/project coordinator of this project shall be designated agent for the Contactor. The name of the person is: ____________

3. The Contractor agrees to perform this work in a workmanlike manner and to comply with applicable building and construction codes for residential and commercial structures. The Contractor warrants that his work will conform with such codes and pass any governmental inspections. (If any plans or specifications are part of his job, they are to be attached and made part of this contract).

4. Price: Owner agrees to pay to the contractor for the satisfactory performance of the contractor’s work subject to the terms and conditions of this agreement:

Total Contract amount: _________________________.

Initial Payment Amount: ________Payable on __________.

Extra work, if any, will be priced as agreed.

Payments will be made only on satisfactorily completed work based on progress inspections done by Owner’s approved supervisors. Contractor has the responsibility of arranging time for inspections. All check requests must be submitted by Wednesday proceeding for Friday payments. Should work not be performed to Owner’s satisfaction and /or accordance with the codes and standards in paragraph #2, Owner will retain a sufficient amount to complete the work as a final payment until the contractor brings the job up to code and/or Owner’s satisfaction.

5. The following is prohibited unless agreed to in writing and signed by Owner and Contractor: extra services and work, deviation of the work as specified herein, or assignment or subcontracting of the work to be performed.

6. The Contractor agrees to indemnify and hold harmless the Owner of the property from any liability or claims arising directly or indirectly from the Contractor’s work under this contract whether due to Contractor, its employees, workers, and agents or any other person hired by the contractor. (This includes Construction (including mechanics and materials) liens). Contractor agrees to pay all fees and costs incurred in defense of Owner and or Owner. Contractor specifically agrees to assume and pay any liens that shall be filed by its sub-contractors.

7. The Contractor agrees to obtain and pay for: Workers Disability Compensation Insurance, Personal liability Insurance, Errors and Omissions and/or contractual Insurance, Public Liability Insurance, and any other Insurance or Bond coverage, or submit appropriate waivers which may be necessary or required by Owner, the municipality and/or State of Michigan. Copies of such documents, binders, declaration sheet, proofs, or waivers will be presented to Owner before commencing work.

8. The Contractor agrees to pay and withhold where required all federal, state and local taxes on the money earned from Owner for itself or its employees and to file all proper tax returns. Owner will not withhold any sums for any sums for any taxes due Contractor. Contractor’s relationship to the Corporation shall be that of an independent contractor and not of an officer, employee, or agent of Owner. No partnership, joint venture, or similar relationship is created by this Agreement. The Corporation shall have no liability to Contractor except to pay its compensation under this contract.

9. Building permits will be pulled by: ______________. Costs will be paid by: ___________. City certificates will be obtained by: _____________.

10. No modification of this contract will be effective unless it’s in writing and is signed by both parties hereto. This contract binds and benefits both parties, assigns, personal representatives and any successors. Time is of the essence of this Contract. This document, including any attachments, is the entire agreement between parties. The laws of the State of Michigan govern this Contract.
This is a legal contract. If there is anything you do not understand about this contract or the language, DO NOT sign it. It is recommended that you consult with a legal or tax advisor of your choice. It is assumed by you signing this contract that you have either consulted with your advisors or have decided not to do so.

The parties accept the terms and agree to abide by them.

Owner

Dated___________20___ By: _________________
Authorized Agent

Witnesses: Contractor:
___________________________ __________________________

___________________________ ___________________________
Signature Authorized Agent

__________________________________
Printed Name

Disclaimer
Real estate investing by nature is risky. You can win, lose, or break even. We cannot guarantee a profit or loss. We do not provide legal, accounting, or contracting advice.

Ralph Marcus Maupin (Mark) is an expert in the real estate industry, with over 25 years experience buying, rehabbing and selling residential and commercial real estate. Learn more at http://mrleaseoption.com/