Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Costa Mesa, California.  During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.

Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk.  He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities.  This program will help you follow in Jason’s footsteps on the road to financial freedom.  You really can do it.  And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.

Jason Hartman: Good day.  This is Jason Hartman.  Welcome to Show No. 88.  We’re talking today, of course, about Creating Wealth, but nowadays, things are pretty rough out there for a lot of people.  We’re also talking about preserving what you have, so it’s not just about wealth creating, but it’s about financial self-defense.

Anyway, welcome to the show.  Today we have an exciting show for you.  I have a guest here with me from our office.  It’s my public relations coordinator, Brittney.  Say hi, Brittney.

Brittney: Hi.  Glad to be here.

Jason Hartman: Well, glad to have you, and Brittney has been coerced into her 15 minutes of fame today.  She did not want to do it, but I dragged her on because I thought Lorene is out and we’d have you read the questions today.

Brittney: Hey, I said I was glad to be here.

Jason Hartman: Oh, okay, all right.  You’re just saying that I bet.  But anyway, glad to have you.  So today, we have a great show.  This is a two-part wonder.  We’re going to talk a little about the No. 5th healthiest city in the United States and about the investment opportunities there.  A lot of our clients have invested in this city, so we’re going to just review that for about ten minutes or so.  That’s the short part of the show.

And the longer, more in depth part of the show is on something I’ve been wanting to bring you for a long time and it is a way that you can dramatically improve the cash flow on your properties and make a property that is an otherwise not-so-great property or even a non-working property work financially, where it makes sense.  And the way to do that to really increase your cash flow a whole bunch and reduce your repair issues because you put your tenant in stake is to use lease options and rent-to-own programs.

So we’re going to have more on this in future shows, too, with other experts and this is our first one and we were glad to have Mark Maupin on, so we’ll present that to you here in just a moment.  And then, of course, we have Rafael, our Dallas agent, to talk to you about the fifth healthiest city in America.

So before we do that, let’s talk a little bit about a couple of upcoming events.  First of all, and this is coming right up real fast, that is February 28, we have our Creating Wealth in Today’s Economy event.  This is our most well attended and most popular educational event.  We’ve had thousands and thousands of people come through this and they say it is the most innovative financial education they have ever received anywhere.  They say that it really gives them totally new ideas, totally new thinking about investments, about how to analyze investments, things that they’ve never thought of before.  So I think that you should join us for that, and that’s on Saturday, the 28th, so it’s coming right up real quick.

And we try to have one of those about every month or so if we can, so if you miss this one, look in the future, every month and a half or so.  And remember our offer to you.  For Creating Wealth or any of the other basic events, not including Masters Weekend, if you have to get on a plane to come, we will comp you in for free and we’ll feed you a couple meals to boot, so please join us for that on Saturday, February 28.

And then also, our big event, which is only twice annually, that is the Masters Weekend, A Gathering of Experts.  It’s coming up on March 6, 7, and 8 and you must join us for that.  That’s a really special event where we fly in experts from all over the country, area specialists, local market specialists, property managers from different areas, and we have all sorts of experts on every subject, from loan modification to asset protection.  Brittney, what else do we have?  Give me a little reminder here.

Brittney: We have homeowners insurance.

Jason Hartman: Oh, yes, we’ve never had an insurance person.

Brittney: Property Tracker.

Jason Hartman: That’s a good point, homeowners insurance.  That’s a new one and the reason we haven’t had what sounds like such a simple subject before is because it’s very hard to find an insurance person who has good prices on a national basis.  Remember most insurance is state by state and of course, we believe in diversification geographically.  So we have an insurance person.  That’s exciting.  That’s the first time.  Loan modification the second time.  And what else?

Brittney: We have Property Tracker experts.  We have 1031 Exchange.  We have Go Zone experts.

Jason Hartman: CPAs, tax strategies for the rich and famous.  Well, maybe not so famous, but rich.  Financial self-defense.  Anyway, it’s just a great weekend.  It’s a real special weekend.  Go to, click on Events, and look at the little, short – oh, I don’t know, it’s like a minute and a half – that little video talking about one of our Masters Weekends.  And again, this is only twice a year, every spring and fall, so please join us on March 6, 7, and 8 for that.

All right, let’s go to some questions and then we’ll get into the rest of the show where we have a couple of guests.  And Brittney, what is the first question from our dear listeners?

Brittney: This question is from Brett in Wallingford.  “Jason, can you add clarity to what all the gurus refer to as using other people’s money regarding residential properties?  I would like by definition what they mean.  I’m aware of private financing through the seller, but I don’t know if there are better ways to do it and by what terms a financing should be.  Any feedback would be great.  Thanks, Brett.”

Jason Hartman: Excellent, Brett.  Well, that’s a great question.  There are a few ways to get rich in the world and that is leverage, OPE, other people’s efforts.  Of course, that would mean running a business and businesses are tough.  I run one and it’s pretty difficult.

The other way to create wealth is using OPM, other people’s money.  And just with simple conventional financing you do that when you buy properties the way we recommend you buy them.  You just use the bank’s money.  It’s as simple as that, and of course, that creates a lot of leverage, reduces your risk, and increases your return on investment quite dramatically.

Think about it.  If you own a property and it goes up in value only 1 percent, just 1 percent, and say it’s a million dollar portfolio of properties or it’s one property that’s $1 million.  If it goes up 1 percent, that means it went up $10,000.00, right?  So that doesn’t sound like any big deal on $1 million.  You’d think, well, gee, I could stick that in the bank and I’d probably earn $25,000.00 – $30,000.00 at today’s interest rates.

But what if – just for simplicity’s sake – you only put 10 percent down on that property.  Well, that 1 percent appreciation is now multiplied times ten because you have a 10:1 leverage ratio.  So you have now earned a 10 percent return on investment.  Now, that’s the gross return on investment.  It does not include things like cash flow, which could affect your return either positively or negatively, and it does not include cost of sale or cost of purchase.

Now, of course, if you’re following our plan, you’re going to be a buy and hold investor.  So you don’t worry about cost of sale and cost of purchasing too much because you’re going to keep these properties for the long term.  And that is the best way I know to create real wealth because over the last 23 years that I’ve been in the business, I’ve sold a lot of properties to a lot of investors, and the people who have spending money are the people who buy and sell and flip, and the people who have real wealth are the people who buy and hold for the long term.

So I hope that explains it.  Remember use OPM, other people’s money.  You’ll reduce your risk and increase your return on investment.

Brittney: This question is from David in the Los Angeles area.  “Hi, Jason, I’m closing on my first two properties with you tomorrow.  My situation is that I own four other properties free and clear in California.  I am contemplating my next step to extract perhaps $500,000.00 equity out of a $700,000.00 second home I have in Big Bear, and use that to buy more properties.  I’m a little skittish about having a mortgage on my family’s primary residence.  I have owned two other rentals for about five years now.  I’m interested in your thoughts.”

Jason Hartman: Okay, thanks for the question.  Here’s the thing.  Look it.  I’ve been saying this for a long time and I turned out to be right about this.  The people that followed this advice did much better than those who did not.  America is really, really used to using their property like an ATM machine and they think that equity will always be there.  And what we found out over the past two years is it won’t always be there and that credit line will not always be there.  The ability to access that equity through refinance or second loan or credit loan will not always be there.

So I say you want to get control of that money while you still have the chance.  It is getting tougher and tougher to get financing, and what that is going to do ultimately is make the rental market a heck of a lot stronger.  And when it makes that rental market stronger, it will do so partially because it makes it hard for your renters to get financing.

So what does this mean to you?  It means get control of that equity while you still can.  I would highly recommend borrowing the money out of those properties and if they’re in California, I might even recommend just selling them and getting rid of them.  I don’t think California has a particularly good future.  That’s my personal opinion.  I could be wrong.  We have some clients that simply want to invest in California and you know what?  Sometimes the customer just won’t listen to you, so we occasionally offer a property in California as well.

For you, get that money out of those properties.  Now, my own contingency on that is make sure when you borrow the money it is long term, fixed rate financing so long as you plan on keeping the properties.  For the next couple of years, we’re probably going to see fairly low interest rates.  Who knows for sure, but ultimately, we cannot defy gravity forever.  Interest rates must go up by a whole bunch and we cannot prevent inflation forever.  In my opinion, we’re going to see very significant inflation.

Now, think about the opportunity for arbitrage here.  Arbitrage is the act of exploiting the differences in things.  Basically, that’s what it means to me.  And if you look at someone like George Soros, one of the richest people in the world, he really made a lot of that money through arbitrage.  So if you can borrow money at say 6 percent and it’s a 30-year, fixed rate loan, and right now, we’re experiencing a little bit of deflation in many things, but ultimately, we will experience, in my opinion, inflation.  Then think about what happens.

What if the inflation rate goes to 6 percent and you borrow at 6 percent?  You’re paying effectively zero to borrow.  Plus the IRS does not properly recognize inflation, so they still give you a tax deduction potentially on that interest.  So that is a really good deal.  You’re getting paid to borrow.  Go to and click on Resources, and then open up that little page where it says Conference Call, like from – I don’t know when it was, but we had a conference call and I posted a little chart up there that shows how you basically can get paid to borrow money.

What if inflation goes to 10 or even 20 percent and you locked in for 30 years at 6 percent?  Wow!  You’re getting paid a whole bunch of money to borrow and that’s pretty darn exciting.  It’s amazing that you can even see your real estate decline in value while still actually making money.  Most people can’t get their head around that and for you to do that, I don’t have enough time to explain it here because we have a whole show to get onto, but I’ve discussed it many times in previous shows.  Look for a show called “The Great Inflation Payoff” and many of my other shows, where you’ll see it or if you use iTunes in there.  Look through the titles and the show notes.  I’ve talked about this quite a bit.

By the way, for all of you listeners, I’d like to mention one more thing.  If you look on our website at, we have a little Google search engine there.  And this little search engine you can type in keywords and find lots of different things.  So if you’re interested in Go Zone investing, you want to hear something about points, or see something written about points, loan fees, or loan modification, and all the occurrences of that, all of the podcasts are transcribed and that little Google search engine on our website will find exactly where we talked about that.  Then you can either read or you can go to the appropriate podcast and listen to it as well.

So I hope that answers your question and thanks for asking.  Next one, Brittney.

Brittney: Our next question is from Jeff from Sydney.  Jeff is wondering, “What qualifiers do I need to be able to invest in the U.S. and can you assist with this process, please?”

Jason Hartman: You know I think I had a question like that recently.  Was it from someone from Australia?  I hope we’re not repeating your question.  I don’t think we are.  That’s a new one.  But anyway, the qualifiers that you’ll need to invest in the U.S. are you’ll need to put more money down.  It will be a little bit harder to qualify for a loan on a U.S. property.  Well, it may not be harder than in your own country actually, but it’s harder than it would be for a U.S. citizen to qualify.  I will say that.

But it can still be done and we have lenders that work on that and do it quite often, so it’s not a problem.  Of course, you don’t have probably a U.S. credit report, so they ask for a little bit more money down.  Some different hoops to jump through.  But again, it’s not impossible by any means and believe it or not, I’m saying this in this global economic disaster we are experiencing.

The U.S. is actually doing a lot better than a lot of countries and I still think the real estate here is just a bargain in many, many markets around the country.  Now that doesn’t include the bubble markets that are still bubbling, like California, Arizona, Nevada, Oregon, Northeastern states, New York, Washington, D.C., Boston area, a lot of Florida, Hawaii, Chicago.  Those markets you avoid.  But so many of the markets we recommend on our website at are just phenomenal deals on a global scale, on a U.S. scale.  The population is increasing folks, so invest in those packaged commodities.  I won’t go into what that means.  You’ve heard me talk about it on prior shows.

Next question, Brittney.

Brittney: This question is from Adrian.  “Hi Jason, my question pertains to how banks account for profits and losses.  I have been trying to research the question, but quickly run into roadblocks trying to decipher the terminology, etc.  After watching your “Money is Debt” video podcast, I have come to realize that banks create the loan money amount.  So is that created money then counted as a profit?

“Likewise, if the loan defaults, the banks are required to set aside reserves of between 3 – 8 times the loan amount.  Not sure if this varies by state or some other factor.  So is this amount set aside then counted as a loss?  Maybe I’m being too simplistic, but I’m trying to wrap my head around how the banks can generate astronomical profits and also astronomical losses without ever producing anything of real value.

“I do realize this is a huge topic, but any insight you could give me would be much appreciated.”

Jason Hartman: Boy, that is a huge topic.  One of the things I say is that you need to avoid the smoke and mirrors economy, which consists of bankers, lawyers, and Wall Street.  It is a scam.  It is a sham.  It is a Ponzi scheme.  It is a whole bunch of things.  And that “Money as Debt” video podcast is fascinating.  All of you listeners do what this listener did.  Go and listen to it.  It’s about 40 minutes long.  It’s an animated cartoon type video and it is totally, totally mind-blowing.  In fact,  you really have to watch it a few times to get your head around it because what you really discover is that money is a totally fake thing and you discover how money is just made or I should say created out of thin air.  It’s not even printed.  It’s just created.

There was a very interesting case back in the ’60s.  I think it was 1968 or something like that, where someone had I think it was their farm in Illinois or something go into foreclosure.  Their defense against the foreclosure was they went into court and they said to the judge, look, one of the things that you have to have to have a valid loan is you have to have consideration.  And the bank, the president of the bank, got on the witness stand and when questioned, could not prove that they actually loaned the money to buy the property.  The money was just created out of thin air.

This is a very esoteric concept.  It’s very hard to get your head around.  It is a very big question.  But suffice it to say that money is debt because money is created by giving loans.  And I’ll give you the very, very simple Jason version of this.  This is not a real academic version, but just look at it this way.  If I were to loan money to Brittney and say Brittney buys a house and I loan you money, and I’m the lender and Brittney’s the borrower, and then I, as the lender, decide you know what, I really don’t want to wait 30 years for Brittney to repay my loan.

So I say this loan, this note that I am holding is an asset for me and a liability for Brittney.  See, remember a bank counts a loan as an asset and a deposit as a liability.  It’s the opposite way that we think of it.  Well, that makes sense really because to a bank, the deposit is something they owe you.  The loan is something the bank has an asset.  Banks are in the business of loaning money and taking deposits and making the margin.

What happens here is now I’m holding this note and if I decide I want cash now, I can sell that note to another party.  So I go out and find another party who will buy my note from me.  My note is an asset.  It’s an income stream and I’m going to sell Brittney’s income stream, or really my income stream, but Brittney’s payments to this third party.

So I go out and find a third party.  I sell my note to them.  They buy it from me.  Now, what if I sold my note to this pseudo governmental entity called Fannie Mae?  They had a bunch of completely fake accounting rules that are engineered by people that just make stuff up.  Then the way I count this note as a bank, as a lender, that I own – I have a whole bunch of these notes – they’re assets on my balance sheet.  And what they do is they allow me through fractional reserve lending, they allow me to loan out a percentage of my assets.

So say for example that’s a 10:1 ratio.  Say I found ten more Brittneys and I loaned them each $100,000.00.  So now I have $1 million in loans.  Now, those aren’t loans.  Those are assets.  Now, if I have a fractional reserve lending requirement that’s a 10:1 ratio because I have $1 million in loans I’ve made, debt I’ve created – money is debt – I can now get $10 million more to loan.  Money is debt.  Debt creates money the way our financial system works.

Again, this is hard to get your head around and it’s hard for me to explain, but I do have some other good news.  We had a prior guest on the show, Chris Martinson, and Brittney did a great job getting him on the show.  We have now been authorized by him to broadcast some of his materials on the show.  And we are going to be, on future shows, broadcasting some of these and they are really, really interesting the way he presents them.  So look for that.  That’s a lot more on the Money is Debt subject.

And folks, if you think this is too esoteric and just way out there in space, this is important stuff because once you understand how the game is being played at the highest levels of our financial system, you can game the system and beat them at their own game.  It totally relates to you.  It has a real effect on your real life, so keep listening for more on that and go to and watch the video podcast, “Money is Debt.”  You can also, on iTunes, if you’re an iTunes user, just type Jason Hartman in the search bar and find our video podcasts, not the audio one that you’re listening to now, where you can watch that video.  It’s really, really fascinating.

Anymore questions, Brittney?

Brittney: We do have one more.  This question is from Andrew and it’s more of a comment.  He says, “Talk about unfair.  The middle class self-employed, myself, got cheated.  Since I’m self-employed and my income is relatively low on paper, as most self-employed people’s are, now since the mortgage meltdown, essentially no banks are issuing stated income loans anymore.  I guess it used to be stated income loans were originally designed for the self-employed, but then banks started allowing people with W2s to state whatever incomes they wanted to and it screwed up the whole process.

“I’m going to keep saving money and keep my fingers crossed.  Even if I put 35 percent down, they say no one is going to give me the time of day.  Since nobody holds mortgages anymore, they discretize them and sell them off immediately.  This sucks.”

Jason Hartman: Basically, you’re right.  It does.  The whole lending game has been totally irresponsible and yes, some people that legitimately should be able to get loans are finding it a lot tougher nowadays because the products by which they would get loans as a self-employed person, like a low-doc or no-doc loan, have been totally, totally abused.  Just remember folks, with everything in life, the greatest management principle in the world always applies.  What gets rewarded gets repeated.  That is probably life’s greatest rule.

And just look out there on the landscape now in the financial world and look at what we’re rewarding.  We are rewarding irresponsibility.  We are rewarding – if you saw that thing Rick Santelli did last week on CNBC where he said who wants to pay for your neighbor’s big screen TV and adding on to their house and all that kind of stuff?  Do you hear that President Obama?  And he got a lot of play on that.  He has really made a career for himself just on that big statement last week.  And everyone in the room at the exchange got up and said no, they don’t want to pay.

We’re rewarding a lot of the wrong things.  This is called the “Moral Hazard.”  Unfortunately, you just have to act accordingly because just notice what’s getting rewarded.  It’s not good news philosophically, but you have to do what’s right for you and I understand that.  There’s a lot of unfairness out there and it seems to be only getting worse.

Anything else?

Brittney: We do have one more.  We have many repeated of these.  This is from Bret.  “I was interested in getting some information on your services as an investor.  Can you send me something?”

Jason Hartman: Great question!  Okay, Bret, so what do we do here?  A lot of people listen to the podcast and they still don’t know what we do.  So let me explain real, real quickly.  We provide the complete solution for real estate investors and what we do is we teach people how to invest properly, prudently, conservatively, the plan that really works in real life.  Not the stuff you see hyped up on late night TV.  We provide that complete solution through a five-step process.

And when you see those arrows on our website at, and you see the first step is education and consultation, we educate you through the show here.  We educate you at our live educational events and through our email newsletters.  Make sure, by the way, that you’re on our email list.  Go to and sign up for that and you’ll get our newsletter.  Look at our blog.  And these are all the things we do to educate people.

And then we provide free consultation to you where our investment counselors will sit down and meet with you in person, talk to you over the phone, whatever it takes, and help you design a portfolio and a plan to create wealth or at the very least, for financial self-defense.  And then we help you analyze your financial situation, properly use leverage.  Not abuse leverage, but use it to your advantage.  We help you acquire properties, allocate your assets.  We help you with the ongoing maintenance, management, and monitoring of that portfolio for the overall goal of wealth accumulation and preservation.

That’s what we do in a nutshell.  We’re here to help you, so just give us a call.  Go to our website.  Fill out any of the “Contact Us” forms there.  Get our free CD at the site and we will be happy to help you with your investments as well.  It will make a world of difference, put time on your side, put this economic fiasco we have going on on your side, and let us help you make it work.  Don’t give your money to the crooks on Wall Street.  They’re in it for themselves.  There’s just way too much counterparty risk and the thing is they are the counterparty, the people that should be fiduciary and have your best interests at heart.  We’ve certainly seen that they’re not and I don’t have to prove that to you anymore, do I?  Just look at the news.

Take advantage of our services.  We don’t really charge anything for our services.  We don’t make money off of education.  We give that all away to get business and we’re in the business of being a referral network.  And the way we get paid is by arranging referrals in any one of our 39 different markets around the United States that make sense.

So that’s what we do.  Let’s get into the show now.  Let’s talk a little bit about Dallas here real quickly, just a quick market profile.  I went on a big trip through Oklahoma and Texas a few weeks back and I interviewed a lot of people on my road trip, so here is one of them.  And then let’s talk about increasing cash flow and improving the performance of your portfolio by using rent-to-own and lease option techniques.  Listen in.

Dallas Interview

Jason Hartman: I’d like to welcome to the show Rafael.  Rafael is our local market specialist from the Dallas area.  Rafael, it’s great to have you here.

Rafael: Thank you.  Good to be here.

Jason Hartman: Now, I have to apologize to all of our listeners for the sound quality.  We are outside at a gorgeous, brand new shopping center and, Rafael, tell them a little bit about where we are.

Rafael: We are actually just north of downtown Dallas in the city of Allen, just a 20 – 25 minute commute from downtown Dallas.

Jason Hartman: Excellent.  Well, you’ve shown me some properties and I have to tell you I’m pretty impressed with the development around here.  The retail development is just exploding and I talked a little bit about how I’m rather bearish on that and I think that some of these retailers will face some trouble.  But you have to admit, they are investing a lot in this area.  There’s a beautiful, new PGA golf course.  We looked at some high-end homes that are $2 million or so on the golf course, just a lot of stuff here.  Very, very impressive and I mean these are just beautiful new complexes, office buildings, just a lot of development, a lot of new home development and so forth.

And of course, we’re in the middle of this market that is definitely experiencing troubles around the country, but Dallas is holding up pretty well.  I read a lot of rent surveys that say the rents are pretty strong here.  Tell us what your insight is.

Rafael: Absolutely.  I think what people don’t realize about the Dallas market is just as many corporate offices are downtown or up north in the Collin County area, which encompass Frisco, Plano, McKinney, and Allen.  So for example, you would have Texas Instruments National Headquarters, JC Penney, Pizza Hut, EDS, Alcatels.

Jason Hartman: Diverse employers and big employers.

Rafael: Exactly.  Again, JC Penney, I believe they’re at 30,000 as their workforce here, along with Countrywide Home Loans is here.

Jason Hartman: They moved from Southern California about two years ago, I believe.

Rafael: And now the announcement that AT&T is now coming back to Dallas, so to have two of the largest companies, Exxon Mobile, along with AT&T stationed here in the Dallas area is just done tremendous for our relocations.

Jason Hartman: Excellent.  Tell us a little bit about the housing inventory, the rental property, income property inventory.  Today we looked at some beautiful new properties.  We looked at one very, very nice foreclosure property.  I was pretty impressed with that.  And then a not-so-impressive foreclosure property.  The deal was impressive, but that house definitely needed about $20,000.00 worth of work, I think.

Rafael: Yes, without a doubt.  I mean again, like any market, you’re always going to have the foreclosures, but the nice thing is the rental market has always been historically strong in the Collin County, again just north Dallas; easy commute, 15 – 20 minutes, so whether it’s a new construction – and that’s the nice thing about it is for $5,000.00, $10,000.00, $15,000.00 more, you can get a brand new property that would rent within 30 – 60 days.  It’s kind of hard to pass that up.

Jason Hartman: Tell us about that tri-plex opportunity.  That was pretty interesting as well.  I know that all of the details aren’t there yet, but maybe just a general idea of what it is and what it entails.

Rafael: Well, there is one here located in the Allen area.  It would be one building, three units.  Probably it’s going to run about half a million and it actually would be built brand new, so it needs to be constructed.

Jason Hartman: And this is Class A stuff we’re talking about.  I mean that neighborhood was gorgeous.  So it’s not for the bottom-feeder type of investor, but more for the Class A, high quality investor, who really wants excellent type tenants.

Rafael: Yes, without a doubt.  It’s one of these places that anyone would feel comfortable coming here and living in one of the units themselves.  Again, high class, high rental.  You’re definitely going to get a top quality renter.

Jason Hartman: And it looks like the RV ratio there will be almost 1 percent, so that’s a fantastic RV ratio.  Why do you prefer this area on the north side so much?  Just fill us in a little bit on that because the Dallas-Fort Worth metroplex, Rafael, is just gigantic and it’s hard for investors to sort of focus themselves sometimes.

Rafael: Well, I think Collin County offers a lot of advantages, No. 1, lower tax rates in comparison to Dallas County.  Not only for tax rates, but for auto insurance, home insurance.  Collin County is one of the leaders in the nation per insurance quotes.  And then also again, you get that top quality tenant.  The buy-hold strategy really comes into play there just because you’re going to get a tenant that’s obviously going to take care of the property.  And then also, it’s one of those where it’s a safe bet to say the least.

Jason Hartman: Other than aspect of it, you see a lot of the big, big, giant institutional names.  I’m looking around here.  Of course, I see the requisite Star Bucks, but a lot of other major retailers, major restaurants.  The center is just gorgeous.  And you see a lot of the institutional landlords building big apartment complexes that they’re renting out here as well.  So this is definitely high class and it’s pretty darn impressive.  We’re in kind of a mixed-use development now, where we have condos, apartments, and retail dining, entertainment just beautifully done.

But then that one apartment complex, which is brand new, just about a year ago or eight months ago and they rented it out completely.  It was pretty much fully leased up in about eight months.  That’s pretty good.

Rafael: Yes and especially a high-end apartment.  I mean I believe an efficiency there was starting around $950.00 – $990.00 for an efficiency.

Jason Hartman: Which is just a studio type unit, not even one bedroom.

Rafael: Exactly and it’s all location driven.  And not only that, Collin County historically has better school districts and again, lower tax rates in comparison to a Dallas County or even in Fort Worth, Tarrant County.

Jason Hartman: Well, you took me over and we saw the country club.  That’s a beautiful golf course, obviously, and there’s an aerobics center and we saw the minor league hockey.  That was in a different area.

Rafael: And actually, the PGA, it’s their newest golf course.  It’s called TPC at Craig Ranch; right down the street from Hank Haney’s training facility where he trains Tiger Woods.  And then next to that, you have Cooper’s Aerobics Institute, Mr. Cardio himself.  Again, a high-end neighborhood, a high-end area for that matter, and then again, everything along the highway, Toll Way 121, is where all the four cities meet.  And then in Frisco, you have the Dallas Stars training facility.  You have the Texas Rangers minor league team, along with the MLS soccer stadiums.  So you definitely get the sports arenas in the Collin County area.

Jason Hartman: Excellent.  Well, Rafael, thank you so much for joining me today and for showing me some properties and neighborhoods around the area.  Of course, this is not my first visit to Dallas by any means.  I’ve done extensive looking around this market and saw you here just about what – a year and a half ago maybe?

Rafael: That’s right.

Jason Hartman: Any comments you want to mention in closing on this market?

Rafael: Certainly.  Feel free to contact me directly or Jason and you will be pleasantly surprised when you see the numbers for your next investment in the Dallas area.

Jason Hartman: Thank you so much and let’s listen in to the interview.  Here it goes.

Mark Maupin Interview

Jason Hartman: It’s my pleasure to welcome Mr. Lease Option, Mark Maupin to the show.  He’s talking to us from Detroit, Michigan, which is a challenging market and we’re going to hear how he has successfully used lease options hundreds of times to increase his cash flow and make his investment portfolio perform better.  He teaches a course on lease options and Mark, it’s great to have you on.

Mark: It’s great to be with you, Jason.  I really look forward to this.

Jason Hartman: I have long been wanting to get a lease option expert on the show and we’re at almost 100 shows now and we have never had anyone on talking about this subject.  I have long thought that it would be good for our investors to hear about it.  I think it’s a great way to increase cash flow and make the tenant at stake so they take better care of your properties.  I think there’s a good, good place for the lease option, so I hope all of our listeners listen very attentively and Mark, tell us all about it.

Mark: Well, I’ll be glad to.  To give you just a little bit of my background, I bought and sold over 3,500 properties, but I want you to hear that hasn’t been without challenges, upsets, and mistakes.  And at one point in my career, Jason, I had over 300 rental properties and I was really out of control.  I didn’t really know how to get out of them and I was doing find, fix, and sell, and I had gotten all these rental properties and I just was worn out.

At one point, I was at the City of Pontiac, Michigan, at the Buildings and Maintenance Department and was actually just about in a breakdown with tears.  And I ran across a lady.  Her name was Shirley Foot and she spent hours and hours with me and we actually created a rent-to-own or lease option package that totally altered my world and allowed me to exit out of those rental properties.

A lot of them, I had the monies to actually be able to go fix them up before I put them on the market, but in some cases, I didn’t even have the monies and lease option exit strategy worked very well for me.  It allowed me to get longer-term tenants that paid above market rents.  And it also allowed me to take people that were looking for homeownership and they took more pride in the property.  I got sales that wouldn’t have happened otherwise.

Now, in the lease option world, a lot of people will change their mind and not purchase, but over a period of time, I figured out how to actually use an option to put the tenant at risk.  And that’s kind of how I got started into it.

Jason Hartman: Okay, well, let’s get down to some of the mechanics of lease options.  What is the right way and the wrong way to do them?

Mark: First of all, in real estate there is no such thing as a standard form, but what I am going to do is I’ll go through one of my option agreements with you on this call.  But I think since your group has never had anybody speak on options before, I want to just first say what an option is.  An option is where you give somebody the exclusive right and privilege to purchase a certain piece of real estate at a certain price and terms at some time in the future.

And there are certain things that you need to create an option to make it binding and there’s an acronym.  They call it CCLOMP and I use that to just check to make sure that I have my option that it actually qualifies as an option.  And what that CCLOMP stands for is Competent Parties.  And I’m going to be talking about Michigan, so you’d want to check with an attorney if you’re in another state or something, but I think it pretty much holds true all over the country.

First, you want to make sure that you have a competent party of the right legal age and they’re mentally, emotionally, physically competent to do the deal.  In Michigan, it’s 18 years old to be able to purchase a property.  You have to have consideration, so if somebody wanted to get an option with you, they need to actually come with either cash, a note, they could offer goods or services, they could give you their spare tire.  That can even be consideration.  But there needs to be consideration in the deal.

Then the “L” in CCLOMP stands for lawful, legal purpose.  In other words, if my purpose was to do a rent-to-own from you Jason and my purpose of that was to open up a crack house, that would not be a lawful objective, so therefore, it wouldn’t qualify as a legal binding option.

There needs to be offer, delivery, and acceptance, and that’s what the “O” stands for.  And then there needs to be the “M” stands for mutual agreement or meeting of the minds.  So both parties have to be totally on the same page and there needs to be a meeting of the minds.

And then it needs to be on proper legal form.  Now, in some states, that might be a napkin in a restaurant and you could write out an option.  In other states, it might be a different legal proper form.  And then there’s always two parties to an option.  There’s the person that’s giving the option or if you were doing a rent-to-own and you’re a landlord, the landlord would be called the optionor, the person giving the option.  And then there’s the person who’s receiving the option and if you were doing a rent-to-own and that was the tenant, he would be called the optionee.

Jason Hartman: So let’s talk about sort of the typical situation that I see somewhat common nowadays.  People got themselves into a mess because they didn’t follow my advice and they didn’t have a property that’s what I call a sustainable investment.  So they have cash flow problems, they didn’t keep money in reserves, whatever the case may be.  They bought in markets that didn’t make sense and they have a property where they have a negative cash flow of $400.00 a month, for example, and they want to make that property perform better.  What do they do?

They put an ad in the newspaper?  They put an ad on Craigslist offering rent-to-own?  What does the ad say?  And then let’s talk about structuring the actual deal.

Mark: Sure, I’ll be glad to.  Now we’re just going to make up a number and say the house is worth $100,000.00.  That’s what the market value, top-dollar retail price on this house would be.  Now, like you said, you have negative cash flow.  You’re upside down, so what you want to do is you want to look for somebody who wants to purchase a home, but doesn’t think they could purchase a home.  And if you were going to do – people do a rent-to-own on a television, they’re not concerned about what the price of the television is; they’re concerned about what the payments are.

So what we’re going to do is we’re going to put an ad in the paper and we’re going to say rent-to-own.  Now if you could put the term in there, lease option, but a lot of people don’t know what that means.  Everybody understands rent-to-own.  Then I’m going to hold an open house and you want to create a team of people when you’re doing a lease option, so you want to get a mortgage broker or mortgage loan officer that understands what you’re achieving here.  He’s actually going to be what I call the coach in this situation because he’s the guy that’s going to be able to look at when you run your ad under rent-to-own; you’re going to start attracting people.  You’re going to hold your house open.  You’re going to show it and the mortgage person is going to be like the negotiator because he’s going to be able to know how much the people can really afford to pay.

In my case, when I had the 300 properties, I needed to get out of the properties.  My goal was to actually sell the properties.  Even though only 40 percent of them closed, it was a great exit strategy for me because I was putting the tenants at risk.

So the first thing we do with this house is we put our ad in the paper.  We have people show up.  We want to collect a deposit from the people to be able to run their credit with the mortgage person or if the mortgage person is running their credit at no charge.  And that mortgage person is really looking for the right person.

Now, what we’re going to be doing is we’re going to be asking for 10 percent down.  You know that nobody is going to have 10 percent.  Anybody that’s going to do a rent-to-own on a television isn’t going to have the 10 percent down.  But that’s what you’re going to be asking.  Typically, like if it was $100,000.00 house, people might have a couple thousand, might have $3,000.00, might have $4,000.00 to actually put down in the form of option consideration.

And I’m not interested in getting security deposits.  I’m interested in collecting the full amount of money that they have available to them.  I want to get whatever the market rent is for the house, so I’m going to be working with a separate rental agreement for whatever the market rent is.  So on that $100,000.00 house, if the market rent was $800.00 or $1,000.00, whatever that market rent is, that would be what I was asking for in rent.

And then since it’s a $100,000.00 house, I’m asking for 10 percent more as a down payment in the form of option consideration, which they’re not going to have.  They’re going to have the $1,000.00 or $2,000.00.  So what I’m going to do is I want to put the tenant at risk and the mortgage person is going to explain to them, look, you don’t have this other money, but what we can do is structure a note as part of the option consideration.  So let’s say they had $2,000.00 cash, then there would be an $8,000.00 note.  The mortgage person knows what they can actually really afford to pay a month, so he might structure the note with an additional $400.00 a month payment if that’s what they can afford.

So now you’re collecting your rent, plus you have the note payment that they’re paying.  It might be $200.00; it might be $300.00.  It’s whatever would qualify and he’s looking at all the different prospects you have.

An option agreement is a unilateral agreement, so I’m not obligated, if I’m the tenant, to buy the house from you.  I can walk away from this deal if I want to.  But if I have a note at risk where I owe you an additional $8,000.00, I’m going to be a lot less likely to walk away from your particular house.

Jason Hartman: So you have the market rent on the property, so say just for round numbers’ sake, that’s $1,000.00.  Then you have the note and the note represents the option consideration?

Mark: It is, so the option consideration, your actual agreement when you sit down with the people, you would say in consideration, a sum of $10,000.00, consisting of $2,000.00 cash and $8,000.00 in the form of a promissory note.

Jason Hartman: But are they likely to put up that large of an option consideration?  I mean just as an example, talking real numbers, like percentages.  So we’re talking a little $100,000.00 property just for round numbers’ sake.  How much option consideration would they put up on that $100,000.00 property?

Mark: Typically, they have maybe $1,000.00 or $2,000.00.

Jason Hartman: In cash.

Mark: You’re going to get the cash and you’re going to get a note for the additional amount, and they don’t have a problem at that time because that’s when they want the house.  I made some assumptions here.  I’m making the assumption that the house is in good shape.  It’s something that they really want.

Jason Hartman: But the option consideration overall is 10 percent of the value in this example?

Mark: That’s how I structure them.

Jason Hartman: Our typical house that we sell through our network is probably $180,000.00 I’m going to say.  But let’s say it’s a $200,000.00 property.  They’re going to put up maybe $4,000.00 in cash as option consideration, plus sign a note for another $16,000.00?

Mark: Absolutely.

Jason Hartman: Does that go toward the down payment or is that just the owner gets to keep it?

Mark: No, 100 percent goes toward the down payment.  You can structure it any way you want to structure it.  In my case, my objective was to get the house sold, so I wanted to put as much down towards it and to structure a deal that closed.  But don’t forget, we have 60 percent of these that won’t go through.

Now, let’s say that the tenant does decide that they want to walk away.  At that time, you could forgive the note as long as the house came back clean.  You could forgive the note if they brought you another person that’s interested in doing it.  You have that person at a lot more risk.

And don’t forget what we’re screening for are people who want to buy a home, so we put our ad under rent-to-own and we’re really looking for the person who they have hospital bills they haven’t paid, they don’t think they qualify, or maybe they’ve had a bankruptcy, but no foreclosures, and in their head, they can’t qualify to ever buy a home, where they actually could qualify with an FHA.  That’s why we’re using a mortgage person as the coach in this situation to determine that and that mortgage person is helping me determine what the length of the option agreement is going to be and what the people can really qualify for.  It’s his job to maximize the amount of money that I can collect from them in structure.

Jason Hartman: What is the typical length of the option agreement?  Is it a year, two years?

Mark: Well, a lot of my option agreements when I had those 300 properties, I ran them for a year.  But now when I do an option agreement, it could be for 18 months, it could be for six months.  It’s all based upon what the tenant qualifies.  In other words, how quick would the tenant actually qualify to buy it?  If you’re not wanting to sell the house, I guess you could structure your option however you wanted to that would be tougher for them to qualify.  But in my case, I wanted to make sure that they were actually able to buy the house.

A lot of the time when I was marketing properties in some of the areas I was marketing in, I would actually go and hold an open house and work the neighborhood because I had a parent or somebody that had their child that they wanted to move in closely.  And I would ask even for a cosigner on the note when I was doing this.  Now, I did not get that most of the time, but I would ask for it if they had some credit issues.  In almost every case, they did.

Jason Hartman: So in almost every case, they do have credit issues.  That’s why they’re not buying outright, is that correct?

Mark: That’s correct.

Jason Hartman: And they usually don’t have the down payment and that’s why you’re taking a note for part of the option consideration.

Mark: Yes.  That’s absolutely correct.

Jason Hartman: Now, our clients have properties all over the country, so it’s really the property manager who needs to sort of cooperate in this whole thing and help facilitate it.  So the property manager might be taking the calls on the property, showing the property, and then of course you want to cut the property manager in for some commission the time the option is exercised, right?

Mark: Correct.

Jason Hartman: Okay, so that will motivate them.  So the property manager may just sign a lease today with a client, but it’s a lease to own and a year later, they’ll be getting a nice sale commission as well, so the manager might like that really well.

Mark: And you can structure those payments.  When I’ve done them for other people, I’ve charged them $1,000.00 commission.  They got $1,000.00; I got $1,000.00.  And that $1,000.00 went toward the actual purchase price when it actually closed, and then I waited for the rest of my money until the closing date.  Or you could take part of the cash flow that you’re getting from that note.  And they sign an actual note and everything.

Jason Hartman: Have you had trouble collecting on those notes because I could sort of look at this deal blowing up like this, Mark.  The person does the deal, they move in, they live there for a year, and then they decide the market went down and they’ve paid maybe a little bit of the note, and they’re like I’m never going to exercise this option.  I don’t like this house.  It’s not the right one for me.  I got transferred out of the area.  Whatever it is.  Then they go ahead and they say we’re not exercising the option, and they haven’t paid you fully on the note, and then they just leave.  Do you have collection problems with that note that they signed?

Mark: Yeah, absolutely.  Anybody that would tell you anything different is hokey pokey.  In some cases, you have honorable people that are going to sit down and work it out with you or you have an opportunity to be able to talk to the people.  Or you could turn it over to a collection agent.  It’s all up to the individual what they want to do.

I’m a firm believer in negotiating it out and doing mitigation on my note.  But you have created a receivable and you do have a collectable note, and if you’re screening your tenants right and you have the mortgage broker, like in here in the state of Michigan, if I end up going and getting a judgment against somebody, I can actually garnish their state tax return and get the money.  So it’s strictly up to the investor how far they want to take it.

Jason Hartman: So how much interest do you charge them on the note?

Mark: And I’m going to refer back to Michigan.  In Michigan, the legal amount of money that you can charge on a note is only 7 percent, so our notes are for 7 percent.

Jason Hartman: Okay.  Some of the multiple listing systems I find address the lease option opportunity where you can put it in the MLS that way, but some don’t.  Any comment on what to do when we’re using the multiple listing service to list the property?  So it’s listed for sale and for lease maybe, both ways.

Mark: And then it’s up to the listing agent to determine how the commission is going to be broken down.  They have to spell it out.  I mean if you’re going to be not collecting all of the money at that point, that has to be negotiated out on how the commissions are going to be paid.

And I don’t know what to say if you have an agent that doesn’t want to do it.  I guess you just need to find another agent.

Jason Hartman: Some agents might say that’s too complicated for me or they just want to sell a property and make a commission right away, but the fact is the market may not cooperate with that.  Our investors really mostly don’t want to sell the properties.  They want to keep them.  The buy-and-hold strategy really seems to be the real long-term wealth creator with history as our guide at least.

Mark: Well, I would say if it’s an investor’s intent to hang onto it, when you’re doing a rent-to-own on a television, price is not a consideration.  And like if you were doing that in our market here and you structured your price at the full retail price and our values are still dropping in the Detroit market, you’re going to be able to keep the house because they’re not going to qualify for the loan.

Jason Hartman: How do you set the price at which you’re doing the rent-to-own or the lease option?  It’s two years down the road, for example.  How do you decide on a price?

Mark: Look at whatever the retail prices are and if the market is an appreciating market, maybe raise it, like if it’s 5 percent or 10 percent, or if it’s a market that’s declining, you might put it at whatever the market price is.  And then if your goal is to actually sell the house, then you might have to adjust your price down, if that’s what your goal is as an investor.

Jason Hartman: And the lease option agreements are not written subject to the tenant qualifying, are they, because I could see that being a huge loophole where the tenant would say I don’t qualify for the loan and of course, the lending requirements are changing so quickly and they would just use that as a way to back out of the deal.

Mark: Remember when they do the option with you, it’s a unilateral agreement, so they are not on the hook to even do the rent-to-own with you.

Jason Hartman: They’re not on the hook to buy the property, which is fine, but I want to make sure if they don’t buy the property, they at least pay the option consideration, right, as the person doing it?

Mark: Correct and that’s why I get it in the form of a note, which is consideration, which is a consideration they can’t walk away from.  They owe that.  So I get all the money they have cash and I get the note in addition to it, whatever to come up with that.

Jason Hartman: Do you record that note anywhere or is there just a note you stick in your file cabinet and wait until it’s paid off?

Mark: The most I’ve done in the past, I’ve had one set of parents that signed, and they were actually able to get a second mortgage on their residence, so the note was secured by a mortgage.  But typically, they’re just strictly a promissory note.  I’ve also taken their automobile and gone on as a secured party on their auto.

But as a general rule, it’s strictly just a promissory note.  It’s not recorded anywhere.  It’s not a public record, but it is a binding note.

Jason Hartman: Your program, Success in Generating Leads and Controlling Real Estate, that looks like it has five audio CDs and a DVD with it, too, right?  What else do you tell us in there?  I mean there’s a lot more to this, right?

Mark: Well, I have a whole bunch of courses that I’ve done.  I have one on Find, Fix, and Sell, one on Lease Options, and they’re all just based upon my own personal experiences and include all the forms and stuff that I use.  Generating Leads is how I market to get the buyers and the sellers with the properties in that and I go through all the different ways that you can do that.

My option agreement just says, “This agreement made [today’s date] between the landlord, who is called the Optionor, and the tenant, who is called the Optionee, the consideration, which is the sum of” – and then we’ll use this house we talked about – “$10,000.00, $2,000.00 of it cash, $8,000.00 in the form of a promissory note, a copy of which is attached and paid by the Optionee, the receipt of which is hereby acknowledged by the Optionor.  The Optionor gives the Optionee, the tenant, the exclusive option right and privilege to purchase certain real estate located in” – and I list the city and I list the county and then I give the legal, and then the common address and then the tax number.

And then I go on to my ten clauses and they’re really simple.  The first clause is that the option is subject to the following terms and conditions, and the first term and condition is, “This option is not assignable by the Optionee unless the Optionor, who is the landlord, agrees separately or in writing.”

Second thing is the “Optionor grants the Optionee the right to exercise this option for a period commencing on” – and it would be today’s date – “and terminating” – if it was a year from now, you would put that date in there – “and the Optionor shall be released from all obligations hereunder legal or equitable.  The Option shall cease and the consideration here above receipted for by the Optionor shall be retained by the Optionor.”  In other words, if they don’t get that option during that period, you keep their option money, which would be the $10,000.00 and they forfeit it.

And then my third clause says, “If the Optionee elects to exercise this option, the sale shall take place according to the terms of the attached purchase agreement, which has been initialed by the Optionee and Optionor.”  And a lot of times, when you attach the purchase agreement or the contract for sale, both parties find themselves signing it.  It just needs to be initialed because if they actually signed it, then it no longer would be an option agreement.  It would be a binding purchase agreement.  So I just have them initial it.

And then, “The notice of election to purchase shall be given by the Optionee in writing by registered mail, addressed to the Optionor at their address” – and I have a blank spot for that – “and all the aforementioned property shall be performed by the Optionee or this option may be withdrawn by the Optionor and the option consideration will be forfeited by the Optionee.”

I put the registered mail.  I’ve never had anyone ever give me the registered mail, but I did that in case I was ever in a landlord/tenant court.  The tenant was saying I have an equitable interest in this house, that I need to ask the judge to have him produce his registered mail, which I never, ever had to do.  And when I did all the houses with these rent-to-owns, I actually never, ever had a problem in court with anybody.  It was surprising.  Nobody ever asked for it, claiming equitable interest or any of that kind of stuff.

Jason Hartman: And that was after how many transactions, 300?

Mark: Yeah, easily.  It just never, ever happened and it’s never happened to anybody I’ve coached around it.  Now, what does happen to you, you’re not getting any security deposit from them and in Michigan, by law, you have to give the security deposit back or if they’ve done damages, then it has to be taken into court.  But with a rent-to-own, I’ve taken all the money already as option consideration, so if I got houses back, I had the tendency to get them back more dirty than if they had deposit because they had no money to get back, so they were walking from the house.

But I’ve also had lots of rent-to-own situations that have turned out incredibly positive.  I had one where somebody gave me $5,000.00 option consideration.  They put a brand new roof on the house.  They put a new furnace in the house and they rewired the house, all with my supervision, all with licensed contractors.  They were in the house for three years and they had equity in the home.  He got transferred to Texas and walked away from it.  So I got back my house improved above market rents and it was a great deal for me, although when they left the house, they left it dirty.

Jason Hartman: And you also kept the option consideration, right?

Mark: Oh, all that is kept.

Jason Hartman: Wow, that is fantastic!  Everybody listening, this is a way that you can really, really improve your cash flow when investing with these lease options.  I think this is a good thing.  And you’re saying in your personal experience, 40 percent of the time they end up buying the property and 60 percent of the time, you’d get the property back and have extra cash flow, usually a nicer house, and keep the option consideration.

Mark: Correct.  Now, remember I told you we were using a mortgage person as the coach when we’re doing this.  I have paid my mortgage broker to help me because they’re not getting any money until it closes.  And so you have to work with them if you’re going to expect them to help you, but I needed somebody there helping me figuring out their debt-to ratios and making sure I was able to maximize the money I can get.

So I’ll jump back into the agreement real quick.  The next paragraph is “The Optionee agrees to accept the subject property in its current, “as is” condition.  Should the Optionor be required to make any repairs of any kind whatsoever for the property, the cost of such repairs shall be added directly to the purchase price, stated in the purchase agreement.”

So let’s say that in the state of Michigan, by law, the landlord is responsible for the repairs on the property, but they have a rent-to-own and we have an agreement saying they’re going to make all the repairs, but they don’t or they have some major repair, like the furnace goes out, and I have to go in and they don’t have the money to fix it, and it’s my property, so I’m going to protect it.  So I fix the furnace.  Now, in the event that they buy it, that’s been added now to the cost of the purchase agreement, so that’s how I structure.

And the option consideration, the next paragraph is, “The option consideration is for the sole purpose of granting an option, exclusive right and privilege to purchase the subject property at the stated price and terms.”  So I just spell that out.

And then the next paragraph is, “This option to purchase will be terminated and all option consideration forfeited if a payment required on the option agreement note or if any payment required on the rental agreement is late for more than ten days past the due date.”  Now, you could put five days, three days, it’s up to you.

Then the next paragraph is, “This option to purchase shall apply and bind heirs, executors, and administrators of the respective parties.”  And the last paragraph is, “Time is of the essence.”  In other words, it has to move quickly forward.

That’s my entire option agreement.  I have in bold print at the bottom of it, I put, “In the event that the Optionee does not meet the terms and conditions contained in this agreement and the addendum, all option consideration paid will be kept by the Optionor.”  So that’s how I structure it.

Jason Hartman: And the only proviso to that is it may not be valid in other states.  That’s written for Michigan, right?

Mark: Yes, it is.

Jason Hartman: With your course, though, you include forms and documents in there.  Does someone buying your course have to take it to the lawyer in that various state?

Mark: I would highly recommend that and then the attorney can adjust whatever the forms are to meet that particular state’s regulations.  Let’s say that my mortgage guy says, look, you need to write the note for a year.  So I structure the note payments for a year and my note has clauses in it, like the monthly payments of principle and interest.  Let’s say it was $150.00 a month are to be made and the balance of the principle and interest are due to be made at the closing of the option – in other words, if they closed it earlier, the note would come due – are one year from that date.

And then I have all the typical clauses that you would put in a note and they’re in there and they sign it.  So I have all the forms and all the sample stuff, the rental agreements and all that, but they still need to check with the state and check with an attorney in their area.

Jason Hartman: Okay, fantastic.

Mark: Or if you had a local real estate group, they probably have a real estate attorney that could probably review it for their group and put it in the format that would work.

Jason Hartman: Yeah, they may have that and the other thing that can help you – remember again, most of these clients aren’t in the same city as their property, so the property manager, the real estate agents in that area, may have standardized forms that they use as well and you just get those for free from them.  Just make sure you read them over to understand what you’re agreeing to, of course.  Getting a lawyer is always helpful as well.

Anything you’d like to say about this in closing, Mark?

Mark: It works and I’ve coached a lot of people on it.  It’s not for every circumstance, like the house you described earlier, where they’re $400.00 upside down.  They can screen to work to find and get the extra money they need to cover it.  So it’s a great tool.  It might not fit all circumstances, but it’s one that you want to have in your tool chest to use as an investor.

Jason Hartman: The website is and Mark offers various educational products there.  And the option course is – what is the price of that, Mark?

Mark: I think it’s $97.00, so it’s pretty reasonable.

Jason Hartman: Good stuff, Mark.  Thanks so much for being on the show.

Mark: Thank you, Jason.  I appreciate being on it.

Announcer 1: Copyright, the Heartland Media Company.  All rights reserved.  This show is designed to provide general advice and education concerning real estate for investment purposes.  Nothing contained in this show should be considered personalized investment advice because every investor’s investment strategy and goals are unique.  You should consult with a licensed real estate broker, agent, or other licensed investment advisor before relying on any information contained in this show.

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Duration:  68 minutes