Lou Brown:

Hello everyone.  Welcome to another installment of our Group Q&A where you become Street Smart on all the ways to buy, sell, and hold properties, and also how to protect your assets.  We have been excited over the last few weeks about how the market is going.  I know a lot of people are afraid of how the market has been and all the negative news that the newspapers are doing right now.  I want everyone to keep in mind that the newspapers are trend setters not trend followers.  In many cases, they create the trends in order to have something to report.  By that I mean, they often say things that are not quite the way things really are.  They make it seem like everything is dropping like a rock and that things are absolutely horrible.  Taken as a whole, our country’s economy is not doing all that bad.  We do have to consider gas and we do have to consider inflation.  Those are two issues that face us.

However, they face all of our tenants and everyone else as well.  That means we should be able to raise rents and we should be able to raise the amount of money that we can get down for properties.  What is good about that is, we have a real opportunity ahead.  The opportunity is that there are lots of folks that are interested in buying property and they do not really have a big down payment to work with.  We do have an opportunity to give them up to three years to buy and we do have a backup owner-financing plan.  With that, plus all of the other exit strategies that we have got, we have really got an opportunity for people to be taken very well care of by working with us.  Keep in mind that we have a unique program that really does attract buyers who do have money to work with.  They are excited about what we have.  To prove that, we have moved, I think, four or five properties, over the last couple of weeks, all with people paying down payments and excited about the program we have to offer.  Get excited about buying property.  Right now, there is an awful lot of opportunity in the street, where people are taking huge discounts and being willing to get their property moved if they possibly can.  They will take just about anything.

So, sharpen up your buying skills and we are going to do more of that at the MDM event, Millionaire Deal Makers, October 23-26.  You will be ready for another installment to remind you of what it takes to buy right and buy cheap.  Now on this call, we are going to focus on all the things that you have sent in over the last couple of weeks.  It is going to give us some great questions to be able to solve your problems, as they occur.  That is one of the things that I love about our Group Q&A.  These are pressing questions that are on your mind right now, and we get them taken care of, right now.

Let us start with a purchasing property question from Craig Berry and it is on short-sells.  He says, “Lou, can you address the average turn around time for short-sell in the current market?”  Alright.  The average turn around time Craig is one day to one year.  The real question is not how long does it take to get a short-sell done, the real question is, who is the lender?  You see, it really depends on what the lender’s situation is as to how quickly they will do the short-sells.  The financial markets are in turmoil, and many banks are doing things that they have never done before.  They are really looking for solutions to be able to move their properties quickly.  So, that is what we provide with our offers on short-sells.  Unfortunately, we really do not know who we are working with.  I can tell you that today we are seeing CitiGroup as being very easy to work with.  City Mortgage and Chase are also very easy to work with.  They even call you back, which is almost unheard of in the short-sell industry.  We are working with lost litigators.  It is almost impossible to get them to call you back, but these folks have gotten their act together to the point that they realize and recognize what a value we are in the market to get properties moved.  They are calling back.  There are other lenders, such as Countrywide that are not calling back.  Now lately, they have started approving short-sells again.  But, I will tell you that they are one of the toughest in the industry to work with.  They would meet with our one year program and the others would be more of our one day to one month program.  It really does depend on who the lender is.

Again, pulse is changing regularly, so never get discouraged by who you are working with.  What was a no yesterday could be a yes today.  The unfortunate thing about short-sells is that they are very unpredictable.  That is why I say that short-sells are a piece of what we do.  It is one our tools in our toolbox, but it is not all that we do.  It is just that when a deal leads us to do a short-sell that is exactly what we do in that particular deal.  We do not look for short-sells to do.  For most of us, they are too time consuming and too delaying to really have a predictable business.  I want to help you build a predictable business.

Second question from Craig, “What are areas where people make common mistakes in getting these deals closed once they are approved?”  Craig, I would say that if you have gotten approval, the only mistake that you would make is not having the money to be able to close that transaction.  I can tell you that the lenders are ready, willing, and able to close once they have given you the approval.  In fact, they do not have any involvement after that.  It is really up to the closing attorney or title company who is going to close that transaction to get it done within your time frame and within the agreement that you have made with the lender.  That is really the focus.

Getting the title company to do what they need to do in order to get it closed quickly.  When you say, “Once they are approved?”  That indicates that you have received a letter from the lender stating exactly what they will accept and under what terms they will accept.  That is why I say that it is really up to the title company to provide those solutions or those answers once the closing has occurred.  In most cases, or in some cases, the HUD One closing statement has to be approved prior to the actual acceptance by the lender.  The only mistake you could make here Craig, is showing that the seller is going to get money.  You see, that would blow the deal.  That would be a mistake that people have made.  Another problem that can happen is, on the HUD One closing statement, it would not have the right numbers, or it would show that third parties are being paid out of the closing that was not approved by the lender.  Those are all issues that could come up for the lender to have them not approve the HUD One closing statement.  Be very careful what the lender is going to see and make sure it matches what the expectations are and you should have no problem with your short-sell.

Very good questions from Craig.  Crag is our Biz Whiz rep in Columbus, Ohio, so I encourage all of you who have friends in the Columbus area or if you are in Columbus, to participate in Craig’s meeting that is monthly in Columbus.  If you do not have the information or contact information for Craig, be sure and call our office at

1-800-578-8580.  I will be more than happy to connect you his next meeting.  I will put you on a list for his next meeting.

Now, we have a subject-to and lease/option question from George Chope and Sarah Peterson.  They are saying, “Regarding Texas law, subject to lease/option no longer allowed, what do we do?  Alternatives?  Please advise.”  This is in _____8:55, Texas where they are.  The answer is George and Sarah, good news, you can do subject-to in Texas.  They have not passed a law that you cannot do subject-to in Texas.  You can take over existing loans.  What they have done is put restrictions on lease/options and owner-financing.  What is called contract for deed in Texas.  One of the stipulations in the lease/option law is that it says that you can have a lease/option for a term no longer than six months.  If your term with your buyer is for six months or less, you are in fine shape.  The second issue is, when it is a simultaneously lease with option to buy, you can only do it for a period of six months.

My recommendation is that you do our lease/option, but you do a lease for a month.  You tell the folks, “Hey, if you pay your next rent on time, then you can have a three year option to buy this property.”  You see, you have separated the lease from the option and you have separated the period of one-month on the lease to three years on the options.  In other words, the distinguishing dates are a month apart between the two different agreements which puts you in position to not be in violation of law because they were not executed simultaneously.  That is a very powerful way you can deal with it.  Then, of course, contract for deed is the other issue in Texas.  They have got about a 32-page law that details out how you can do contract for deed in Texas.  Basically, it does not say you cannot do it there.  You just have to do it under the terms of the law.  It is specifically stated.  Essentially, what they are saying in the law is you have to act like a mortgage company.  So, that is what I encourage you to do.  Act like a mortgage company where you send annual statements and how much interest they paid and all those distinctions that they require and then you can also do that.  Well, George and Sarah, I hope you found that to be interesting and exciting.  You can do everything that is Street Smart in Texas.  You just have to do it with a little tweak that we do not have to do in other states.

Now we have got Richard Toshiro who has a question.  “I live in Gastonia, North Carolina.  I had a call from a seller that has two single family homes.  They are free and clear, inherited from their dad who recently passed away.  There are three sisters on the title.  Two live locally and one lives close by.  One sister is supposedly representing the other two, as she has been handling the details since before their dad died.  One sister whom I have not talked to wants cash.  Lead sister is not sharing contact info.  Should I be working on finding the other?  They are considering renting them out, but the lead sister wants closure.  Until I find the third sister, I will not know what she wants.  I have been in this situation before and have walked away when siblings could not agree.  However, I am unsure what type of deal structure to use in this situation.

The houses are in a blue collar neighborhood comprised of mostly rentals, mill houses, _____12:52, with close to a ¼ of an acre lot.  One house needs cosmetics.  The other needs a roof and updating.  $10,000.00 on the first one and $30,000.00 on the second.  Both are large enough to convert to three bedrooms, 1-1/2 baths, at least, without any addition.  Approximately, $35,000.00 and $45,000.00 respectively, ARV with minimal repairs without adding bedroom and ½ bath, $40,000.00.  Rental potential is $500.00 dollars per month.  The numbers to me do not seem to work.  I merely would like to know what sort of possible options I could offer, if any, to obtain a good property in a similar situation or am I wasting my time trying to figure out a solution?  Thanks.”  Well, Richard, what I would do is take your cost to sell worksheet and I would work backwards from what their asking price is.  I think it sounds like you are talking about after repaired value, but you have not really told me what they want or what they need.  I always start with that number first as the beginning number and then we work backwards on the cost to sell worksheet, which is in your seller presentation.  Your worksheet is also in your Buying Volume I.  It is on your forms disc on your website or on your desktop, where you can click open Street Smart Forms, then click open cost to sell worksheet.

That will give you the details of how we do it.  I would definitely start with the number that you agreed with.  The sister first, and then work backwards on all the cost to sell, giving yourself an understanding of the numbers, but also giving her an understanding of how you came to your numbers.  It is always best if you can work with all of the heirs at one time.  If you cannot work with all of the sisters at one time, you may be able to get on a conference call with them.  It is best if you do have some kind of connection with them.  If the sister is controlling everything, you may not know her full agenda.  She may have hidden things, and also between themselves.  One may kill the deal without you really knowing what the objection is.  All of a sudden, the sister comes back to you and says, “Absolutely not,” and you do not even know why, or says, “Well, we just thought we would go a different way.”  You really do not even know what the objections are so you can overcome them.  I would say definitely spend whatever time is necessary to try to be able to talk to all three of them.  As far as these deals go, there is a lot of work to be done here.  The way I look at evaluating deals like this is, let us say that you have $10,000.00 dollars in arrears, and you are saying they are old mill houses and you are saying that they are only on ¼ acre of land and you are saying that they really are not all that great.  So, they are perfect rentals and even lease/options, but you have got to be able to make a profit in between.  One of the challenges, when you get involved in a renovation is, how long will it take and how much will it cost?  Understand that when you are doing a renovation, you really have two jobs.

You have one as the general contractor, coordinating all of the repairs on the property.  Secondly, marketing the property and how are you going to get it sold or rented or lease/option or sold on owner-financing, whatever it might be.  There is an awful lot of work involved and to be done.  You have to value both of those jobs separately.  The way I look at it is, if there is $10,000.00 dollars worth of repairs, I am going to double that to $20,000.00 that I have to get out of the deal, plus my normal mark-up.  Let us say that if you had a house in nice condition, nice location, nice everything, and you want to make a $20,000.00 profit on the equity, then you need to add 20 plus 20 or $40,000.00 to the number that you are going to pay for the property.  In other words, that number has to be below the after repaired value of the property.

In other words, you are going to be able to offer a very low number for these two properties, because they need so much work.  The way you want to value these properties is, we have a property acquisition worksheet in your Buying Volume 1, and we have also got a cost to sell in your Buying Volume 1.  Your property acquisition worksheet is on page 81 and your cost-to-sell guidelines are on page 84.  Again, these are on your forms disk, as well.  Take a look at those and they will guide you on some of the things you need to pay attention to in putting your deal together and your offer together.  Very good.  Very good question.

I want you to pay attention, all of you, on this call, because Richard has asked a very important question.  The real question you want to ask yourself is where is the profit?  How am I going to make the profit?  Am I going to have to spend an awful lot of time, three to six months on a renovation and sell, as opposed to setting up a business where I have regular monthly leads coming in and I do not have to be in the rehab business.  The rehab business is really a business in and of itself.  You want to be careful about the time that it can take from your overall plan and your overall business strategy.  Be careful when you make that decision.

Next question is a selling question from Garimo _____19:07 who says, “Let us say that I sold a house using your owner-financing technique, what would happen if the person who bought the house wants to sell it in a year or later.  Can he?”  Well, Garimo, the answer is you get to decide.  There is a requirement that the loan has to be paid off for it to be sold to a third party.  Essentially, you would have to approve any sell.  You can always say, if you want to sell it to someone else with my owner financing, then you would have to refer them to us for us to be able to approve them.  That person who is selling does not have the deed to the property.  They have an agreement for the deed.  Therefore, you still control the deed and you still control who you receive your payments from.  So, you would have to approve of any third-party coming in, which I like.  No, I would not stand in the way of them selling the property to someone else; I would just want to be able to get my monthly payments.  I would be very careful about the hand-off and may even require that all of them, the new people and the old ones, stay on the loan.  If you do not get your money from the new people, the old people still have some liability in there, as well.

Otherwise, the new people have to go to the bank, qualify for a loan, and pay you off.  Being in control is exactly why we have those stipulations and requirements in there.  I have found that the most success in this business comes from being in control.  We have definitely done it for you on the owner-financing side of the business.  Those of you who are on the call who do not know, this June 5-8, we will have Massive-Passive Income, which is an in-depth training on our holding and selling side of the business.  We will get in-depth on rentals, lease options, owner-financing, graduated payments, graduated interest, fixed rate payments, when you are receiving them from the buyer.  Also, selling for cash, selling for new loans, working with realtors, and working with mortgage brokers, all kinds of details about the holding and selling side of the business.  You absolutely do not want to miss this training.  I only give it once per year.  I encourage you to definitely get to Atlanta, June 5-8 and get that training.  It is critical.  Thank you Garimo.  That is a great question.

Alright, next question is a business management question from James Kauffmann, Jim.  Jim says, “How do you avoid a negative cash flow crunch with a good accounting system and help from your accountants.  Do you use special software, or just keep selling more houses.  I have serious physical limitations, both in terms of getting around and having the energy it takes to sustain the operation.  I do not want sympathy, just understanding and help to get it moving.  Thanks for your help.  I hired two real estate assistants.  One just disappeared and the other decided she wanted to be a licenses agent, so I told her good luck, and she should try to find a broker to hire her.  I met you at one of Ron’s boot camps.”  Okay.  Great Jim.  Here is the idea Jim.  It is not the accountant that controls your cash flow, it is you.  It is your business plan.  Rather than business management, we should say business plan.  Your business plan needs to be that you have set up an operation that provides dependable monthly income.  The way we do that is to of course, buy right and buy cheap.  Then, sell where you have that income coming in.  It is the difference between the mortgage that you have got on the buy side, by either taking over, subject to, or getting bank financing, whatever the case may be, or private money, my preference, than what you have rented it or sold it for on the sales side at making the spread in between.

Also, that initial down payment of the person moving in is another income stream.  Now, you start multiplying that by the number of properties you are acquiring and all of a sudden, you have got a really good business plan that really does provide dependable monthly cash flow.  In the beginning, that is hard to do.  In the beginning, you have got to buy one, buy two, buy three, buy four, before you can really build up some serious cash flow and synergy within your operation.  It is the continuation of acquiring property that provides that to you.

On the other hand, you do have to sell some from time to time in order to have hunks of money to fund your business or capitalize your business.  The capitalization can come two ways.  One is to borrow money that gives you capital to work with and the other is to sell properties, wholesale, or retail where you get hunks of money and that money can fund your operation.  I encourage you to look at your business from two different aspects.  One is your dependable monthly income to cover your monthly bills.  Your capitalization to capitalize all the other details of your operation, such as, being able to fund your marketing plan, when a water heater goes out or a roof goes out, that you have the funds to be able to return that property into a cash flowing valuable asset.  If you will do it that way Jim, you will have a business plan that works.  If you have not been to Millionaire Jump Start, you absolutely need to come.  That is where we address those issues in-depth.

The next Millionaire Jump Start is going to be June 28 and 29 in Columbus, Ohio.  Jim, if you have not been, you absolutely need to go.  That way, we can create your business plan right there in class.  In fact, it is one of the things that we provide to you as part of Millionaire Jump Start.  I can help support you in getting this plan down.  Again, it has nothing to do with the accountant, it has to do with your business plan, and to make sure the money is there.  To answer that question more in-depth though, we do have an accounting system that is an overlay of QuickBooks.  It is $499.00 dollars and it has got all kinds of bells and whistles and calculators.  Things that really guide you step by step and screen shot by screen shot, showing you exactly how to set up your books, how to set up your operation, and everything you need to be able to follow up with your tenants, have cash flow reports, as well as every other report in the world and support you in having the details you need to be able to do your taxes on an annual basis.  Everything is there.  All of it is included.  If you do not have that, by all means, get the Street Smart Accounting System.  It  is designed by real estate investors for real estate investors by a CPA who is one of our students who understands exactly what we need to be able to put our business together and our operation together.

Next question is another buying question.  It is from Larry Hogan who is one of our Gold coaching students.  He says, “Hi Lou.  I am negotiating with a seller on taking her house subject to.  We spoke a little bit about this on the coaching call last week.  She wants me to put the property in escrow, quit-claim the deed back to her and enough money to cover two payments so that if I do not make the payments, she can get the house back and have the money to make up the back payments.  I do not have a problem doing that.  However, her most recent request is, she wants me to put in writing that if the mortgage calls the loan due, because of the due on sale clause, then, I will refinance the property in my name.  I am not so sure I want to do that because I may not be able to qualify for a mortgage at that time and the cost of hard or private money on a loan would not make the deal worthwhile.”  I agree Larry.

In fact, explain to her that due to the volatility of the mortgage markets, you cannot make that guarantee.  Explain that it is the savings from not refinancing that makes this deal viable for you.  For her to truly understand why subject to makes a lot of sense for you, she has to understand why it makes a lot of sense for her.  By that, I mean, she has got to allow for if she was to sell the property for cash.  Most realtors, with their new contract coming in, are going to say, “Look.  We want you to pay the closing costs.  If you do not pay the closing costs, then we have really got a problem here.”  They are usually going to put in their contract that you are going to pay 3% closing costs, which is not too much fun.  However, you are going to account for that up front, using your cost to sell worksheet and show her, look, you are going to have pay it one way or the other.  By the way, if I go to the bank and qualify for a loan, we are going to have a delay in time, and there are going to be costs involved.  Would it not be better if I go ahead and by your property today?  I can actually pay you more than it would cost me to get a loan, because you are allowing me to take over the existing loan you have already got.  Since those points have already been paid, all I am doing is coming in and taking over your financing.  Does not that make sense?  Of course, then it saves both of us that cost of funds and then it allows me to pay you more for your property because I do not have to go out and pay that cost.

Now, you have really illustrated for her what her costs are and what your costs are.  That way, subject to makes a lot of sense, because you have really laid it out for them and explained exactly why it makes perfect sense for them to let you take over the financing because of the costs involved.  I encourage you to get back to her, by all means, and spend whatever time is necessary to get her comfortable with what you do.  You see, having a good plan and a good plan of attack is what it is all about.  If she does not say yes now, she may say yes in three weeks when that property has not sold, or three weeks after that, or three weeks after or three weeks after that.  I encourage you just to continually go back, go back, go back, and see what you can create with her.

Let us see.  Here is a purchasing property question, a commercial question.  “How can we structure the purchase of a hotel without owner subordination and sale price is close to current appraisal, but below market and under producing?”  Well, John, I would tell you that about the only way you can structure a commercial deal is to make sure that all the numbers make perfect sense.  It is going to have to give you enough capital to be able to turn the business enterprise around.  Understand that commercial property is a business enterprise more than it is real estate.  Business enterprise has to have the right income and the right expenses and everything accounted for.  With that said, your commercial property deal can be structured much the same way that a residential can.  With this one _____31:52, subject to the way I teach, cannot be done on commercial property.  Anything over four units can be called by the lender and is not protected under the rules of the _____ _____ 32:07 act.  In those cases, you want to go direct to the lender and tell them that you are the shining star, and the white knight.  You are coming in to save the day, solve the problem, and return the business to operating capacity.

Only one thing, I want you to leave the loan in place, lower the interest rate, give me a moratorium on payments, give me the time to do it, and then, the business becomes a viable enterprise.  Unless you do that, it is not going to make any sense at all for me to do this.  You pull the lender in as a support base for doing the deal and then you can buy it at the right price.  You can fund it at the right price and you can get the right set of circumstances with the lender, as well.  Great question John.

Alright.  Here is a residential question from Ann.  It says, “What general percent does Lou aim to buy at?”  Well, Ann, it really depends.  The reason I say that, is that it depends on the financing that is in place.  Let us say, for example, that I am able to buy a $100,000.00 dollar house and let us say that it has a 5% loan on there, and let us say that I can buy I for $80,000.00 dollars and the payment per month with taxes and insurance is only $600.00 dollars per month.  Well, that is a wonderful deal and I know that I can rent a $100,000.00 dollar house for $1,000.00 dollars a month.  So, I am going to be able to make a $400.00 dollar a month cash flow.  In that case, I am not so concerned about percent as I am monthly cash flow.  Be careful about allowing percentages to be your ruling factor.  Instead, we want to look at the circumstances of the deal and how much cash flow it is going to give.  Of course, if you are going to sell the property for cash, then percentages have to be a ruling factor.

Here is another factor, where you do not look at percentages, you look at dollars.  I want to have at least for me a $30,000.00 dollar profit, $30,000.00 dollar equity in the deal going in.  Now, if you are just getting started in the business, and you do not want to wait for what it takes to learn how to do that, then you can lower your expectations and just get a deal under your belt.  In that case, look at the risk and you could accept less than $30,000.00.  For most of you, $10,000.00-20,000.00 would work very well on your first deal.  But, that also puts you at a higher risk because there is less equity in the deal.

I would say be very careful, but you could accept less than a high mark and just look at the equity itself rather than the percentage of the profit and that equity, just as long as you have an exit strategy.  Again, at MPI, we are going to be talking more about exit strategies and how to build a buyer’s list.  That buyer’s list is what gets you your traffic.  It is a very exciting thing to be able to create the traffic, to get your deals done.

Here is a question from Tracy.  “Now that I know what I know, I am spoiled.  I cannot pay retail for anything anymore now that I have graduated your class.”  That is good.  “Does anyone know where to look for and get RV’s, or boats at distressed pennies on the dollar prices?”  Well Tracy, I would say that the idea is that you want to buy commodities, things, and toys the same way you buy houses.  We have got to attract leads, we have got to look at deals, and we have to compare them to all the other deals in the market place and buy them at a discount.  You can use my cost-to-sell worksheet for stuff, as well.  Of course, everything does not apply.  A lot of things do apply.  Then, show the seller that it is going to cost them all this money to get the property sold and you can offer to buy at a discount.

Another thing that works, is cash.  When you show up to look at the asset, if you already know, through your research, that you would pay, say $3,000.00 dollars for it, and they are asking $5,000.00 and you know that they are flexible from your interview over the telephone, then show up with cash and show them what you are willing to pay.  Take out a wad of hundred dollar bills, now of course, this is with someone that you feel safe with and definitely, bring someone else along with you when you are bringing cash, but show them the cash and all of a sudden they will buy it.  All of a sudden, many times, they will just reach across and say, “Give me the money.  I will take it.”  There is no more fuss, muss, showing, and everything else.  We make the mistake often of thinking that other people are just as sharp, just as bright, just as well-trained as we are, and the truth of the matter is, they are not.  The truth of the matter is most of the population out there is very right now.  They want now.  They do not want it later.  When you come along with cash, they will take that cash and you make your deal.  Great question Tracy.

Alright.  Let us see here.  Okay.  Now I have got some various questions, such as buying notes and then we will go into some trust questions later on after I get through some of these other unique questions.

I have got a question here from Mr. Small that says, “I would like to learn more about buying notes, and where can I find people to whom I can sell the note to after I purchase the note.”  Interesting that you should mention that Mr. Small, because we are working on a Street Smart of buying discounted paper, creating paper to discount at closings and other neat stuff.  We are working with Bob Leonette and we are going to have a Street Smart version of what Bob teaches.  We can teach you anything you want to know about paper.  The concern that I have is that paper is really a business in and of itself.

We want you to take the leads as they come.  So, from time to time, you are going to have paper involved in transactions, such as, that people have carried back paper and that is an asset they can sale at discount.  In other cases, when we are buying a property, we can get the seller to carry back seller financing and provide them a buyer for that note at a discount, which we can show you how to do, as well.  So, keep in mind that buying notes is a good thing, but it also requires its own marketing campaign and its own marketing strategy and its own set of understandings about paper.  Paper can be very dangerous.  I want you to keep this in mind.  The reason it can be dangerous is because it can be created out of paper.  It can be created out of thin air.  You want to be able to confirm every aspect of the paper just as you would with a sticks and bricks house sitting right in front of you.  You have got to confirm that the paper is real.  That it is properly recorded.  That the proper parties are involved in the transaction.  That the parties are paying.  That there is a true history of payment, so you can evaluate what it is really worth.  That the payers have jobs, they have income, they have ability to pay, which is so critical when it comes to paper.

Paper, as you have seen with the subprime crises, is worthless, if there is not a buyer behind it with a job that can make the payments, and an asset behind it that is actually worth what the paper is worth.  That is another concern you have, as well, when you evaluate the paper.  What is the asset?  Where does it sit?  What is worth today?  There is a lot of paper out there that its face value is much higher right now than the asset is actually worth.  Let us be careful here.  Let us make sure that the right paper gets to the right place and that you pay the right price for it.  Be very, very cautious when buying paper.

As far as sources, some people actually advertise in the newspaper to sell paper.  All you have to do really, is you can put an ad in the paper saying that you are interested in buying any seller held notes or seller financing notes or promissory notes, or defaulted paper and see what comes, if that is what you want to focus on.  Hope that helps Mr. Smallwood.  Give us a call and let us know.  Stay on the program here and continue to ask me questions about this.  It is a wonderful thing you can do, as long as you have an entire business plan structured around it.

Now, Janice asks about Street Smart Forms.  She says, “Hello Lou.  You mention periodically having a local attorney from out of state review your forms for compliance with the state.  What specific forms do you recommend that we have reviewed?  Thanks so much.”  Well, Janice it really depends.  It depends on what are the challenges that you have got in your state.  For example, I gave you Texas as we started out the call today.  Texas has its own set of challenges and circumstances.  If you are not aware of what those challenges are, then those would have to be allowed for in the paperwork.

For the most part, our forms are very generic enough to be able to be used in your own state.  The thing that changes from state to state is the notarization requirements.  Well, we have got a place for you to look that up.  It is at www.lewisbrown.com and you will go to the member’s only section.  There you will find a user name and password.  The user name is student.  Password is the number that is on your forms disk.  Remember when you got your foundational package from Street Smart; it has a form number on there, very detailed.  You have got WEJ and then the number is after that.  You just input that as your code and that gets you into the backside of lewisbrown.com What happens is now you can see the state laws of all 50 states.  That is a copy of a mortgage for all 50 states, a copy of a deed for all 50 states, the landlord tenant laws for all 50 states, the foreclosure requirements for all 50 states, and even a copy of a mortgage for all 50 states.  All the details are right there.  The notarization is there, as well.  Everything that you need can be at your fingertips.

As to specifics, things that you want to have reviewed, I would say our purchase and sale agreement does the job, our rental agreement does the job, our lease/option agreement does the job and our owner-financing does the job.  The only challenge is that from time to time, things might be found to be unenforceable in your state.  Here is what to be careful of.  In my paperwork, I do have words in there that say should any part of this agreement be found unenforceable; the balance of the agreement is fully enforceable.  You would not find that out until there was a challenge or you run it by an attorney, or that anything in your agreement is disallowed.  Just because it is disallowed does not mean that that is an accurate ruling.

Many times, judges rule on what attorneys tell them.  If the opposing counsel tells the judge something and the judge thinks it is logical without doing the research, sometimes they make decisions that are inaccurate.  Then, you have to appeal that decision and show where the judge was wrong.  If they are right, then obviously, they are right and you have to go and abide by the ruling.  If they are wrong, you can usually appeal that very, very easily.  So, pay attention to your business Janice.  Do not get too hung up on the forms, but again, be careful about things that are exemptions to your area.  Know what they are.  I call it know when to hold them and know when to fold them.  I will give you an example.  Let us talk about my rental agreement.  My rental agreement has some very aggressive things in there.  I know there are things in there that would be disallowed even in our own state.  However, what I am looking for is compliance.  I am looking for folks that are going to be compliant to our rules.  I do not make it _____46:20 on them.  I do not try to get them in trouble or have them fail; I just look for people that are going to do what they are supposed to do.  We like to use the paperwork as leverage to do that.

Again, if that were found disallowable in court, well, that particular segment would be disallowed, but think about the 95% of the cases that you do not have problems and suddenly you realize that it makes a lot of sense to make your agreement as strong as you possibly can, even if there are things that you know would be disallowed.  Hopefully, that explained my philosophy and belief about that Janice.  We have really been doing this for a lot of years and there are certain reasons that you do certain things that may not make perfect sense to everybody out in the world, particularly attorneys.  Again, they are the ones that have to defend you later.

Now, Neal Mohan has a trust question.  He says, “Would it be better to keep our personal residence in our.  personal names or move it into a revocable living trust?  My wife and I live in Florida.  The house is valued at $230K.”  Neal, the answer is I would highly recommend that you move your house into a land trust and then you can even have a revocable living trust as the beneficiary.  Now why would I not just have you go ahead and put your property directly into the revocable living trust?  The only problem is that it also contains everything else you own.  Would it not be better to segregate and separate that asset into an individual pocket called a land trust?

What I do is have you deed each property into its own trust and then have the beneficial interest of that trust be another trust.  Let us say that the second trust is your revocable living trust that has the beneficial interest of everything else, such as your vehicles, your stocks, bonds, mutual funds, bank accounts and all of those have the beneficiary as the revocable living trust.  Now it has given you the benefit of segregating and separating each asset into its own trust, but having the beneficial interest of each of those trust go to this living trust.  Now that living trust is the place that if there is a death, that is what avoids probate and avoids the need to have to go through the costly, expensive, time delaying, frustrating, process called probate.  I encourage you to definitely go ahead and do that.

Now you have got to be careful because once that property is transferred out of your name and into the trust name, then you are going to have to re-file for homestead exemption.  Previously, it was in your name, and you were provided with the homestead exemption.  Until the county is told differently, they presume and assume that every property that has been transferred, has been transferred at full value and without homestead exemption.  You have to re-file for it to get that discount that homestead exemption provides.  You say well Lou, how can I do that when the fact of the matter is I do not own the property any more.  It is now owned by the trust.  Well, your trustee, on your behalf, is going to file for the homestead exemption and that is going to give you the benefit of homestead exemption there in Florida.  Neal, hope that helps and answers all your questions.

Great questions folks.  Alright.  Richard Toshiro has a trust question.  “When buying subject to, is it best to list myself as the trustee, and my LLC as a beneficiary, or is it better to list my LLC as the trustee and myself and/or wife as the beneficiary or is there a better option that will allow us to control the property and benefit from any income from the property?”  Richard, when buying subject to, the process is that we have to move the seller off of the deed, but we cannot move ourselves onto the deed because the lender could call the loan due.  What we do is help the seller move their property and their name into a trust and they become the beneficiary of that trust.

While they are the beneficiary of that trust, they sign all the documents notifying the lender that you have taken over as the manager of the property.  All future correspondence and anything related to this property and this trust is now to be directed to you.  Then after signing those documents, then they assign and quit-claim their beneficial interest, not to you, but to another trust.  This time, that trust is going to be a personal property trust.  That personal property trust is going to have its details and its requirements all built in.  Then, that trust, the secondary trust or personal property trust will say who the final beneficiary is.  So let us say that if it is your LLC or your corporation, that is who is going to be the beneficiary.  We do not want to have the LLC who is going to be the beneficiary act as trustee.  No.  Instead, I say it makes more sense to have individuals act as trustees for a lot of reasons.  One of them being, if it is your LLC and you are the manager of that LLC and you die, then who in the world is it that is going to be able to pass that asset on to your airs.  You see, we just made a mistake.  One of the biggest benefits of trust is that it avoids probate.

So you got to consider, someone has to be the one to issue a deed at your death to your airs, or keep the trust in place and allow them to simply move up in the beneficial ranking as now the primary beneficiary instead of the successor beneficiary.  Does it not make sense then to have an individual who can do all of that for you and not charge an arm and a leg, which is often what probate costs.  In deed, you could have an LLC as a beneficiary of the trust, but you do want to make sure that there is a way that those shares can be paid out to the living trust.  We always put a living trust after the LLC and we assign all the trusts to the living trust, so the living trust actually controls at your death.

I will give you far more details on that at Maximum Asset Shield, which is August 21-24 in Atlanta.  Maximum Asset Shield is the keys to the kingdom, as far as protecting your assets.  It is so critically, vitally important to have each of your assets placed in a separate trust and not only that, I want to reveal to you the thirty different benefits of trusts that most people do not know, have never considered and never heard of before.  I found it humorous the other day that someone is circulating a _____54:35 from an attorney called Death of the Land Trust.  When you read deeper, it is Death of the Land Trust in Short-Sells when using it to convince the bank that there has been no seasoning on the title.  I laughed because my list of 30 different benefits of trusts does not even have that on it.  In other words, there are many, many, many benefits of trusts that you can take advantage of by holding title in that name and you definitely need to understand and know and use all of these benefits.  They are going to be critical to your long term success in this business knowing that anybody can come along and take your assets at any time.

What we want to do is make sure that it is not easy for them to do that.  In fact, expensive to do that.  It is the thing that causes most folks to just simply slink away.  They do not get the ability to take advantage of you and your assets.

Now Bernice Stewart has a question here.  “You said to put each property in a land trust.  You also said that you can use one bank account.  How do you set up the bank account to handle multiple land trusts and distinguish income expenses from each trust?”  That is pretty simple Bernice.

You are going to use QuickBooks and my Accounting Overlay that I mentioned earlier that will handle that absolutely beautifully.  It does not matter how the deed is handled, what matters is the deed tails of those properties and the entity that is the beneficiary is the one who files the tax return.  Let us say that the LLC is the beneficiary of your various land trusts, then that is going to be who files the tax return.  The same is true with you, as an individual.  If you act as the beneficiary, and you are the one who files the tax return, you are the one who gets all the benefits of all those various trusts and you get all the write-offs and everything else.  Really good stuff.

Alright.  We are coming to the end of another group Q&A and I hope that you have found a lot of value in this call.  We do this twice a month.  I want you to be sure and be on our Bronze level coaching program because it really provides a lot of information.  Do you agree that today’s call has been incredibly valuable and has been loaded with information?  If so, then you will definitely want to stay on board.  We do not do a lot of solicitation on staying on board.  We expect you to say absolutely, yes, I want it.  Call our office at 1-800-578-8580.  Some of you have been granted some of these calls for free and you are probably coming to the end of your free sessions.  Now, we want you to go ahead and call in and say yes, absolutely, I want to stay on board, 1-800-578-8580.  The other thing that many of you want to take advantage of is our direct Q&A where any time during the month you can fax or e-mail questions in and get an answer to those questions.  You do not even have to wait for this call.  You do get the benefit also, when you are at that level, our Silver level, of also getting the Bronze Group Q&A, as well.  Then there is the Gold coaching, where once a month, I am on the phone with you, directing your business, telling you exactly how I want you to operate your business, getting it up and running and supporting you in every aspect of how to build and operate that business.

We look at what has happened over the last month and we make a plan for the next month so that you are able to step-up and move-up on a monthly basis.  The big idea is for you to make big money on a monthly basis.  I want you to make tens of thousands of dollars a month.  The only way you can really do that successfully is with a good coach.  By the way, you do get all the benefits of the Silver, and the Bronze level in the Gold.  Finally, there is our Platinum level.  This is a mastermind where three times per year we get together for two day sessions and actually mastermind each other’s businesses.  There are two levels.  There is the Apprentice level and the Pinnacle level.  Those of you who are just getting started, done just a few deal, you qualify for the Apprentice level.  Those of you who have mastered and become successful in buying single-family houses and have several, then we encourage you to be in the Pinnacle level.  We get together and support one another.  There are also many other benefits at the Platinum level including the inner network of Platinum’s where all the Platinum’s talk to one another on a 24/7 basis through our special chat storage place where everybody posts deals, details, and gets support from the entire group on their success.  That is really where we are trying to support you in as many ways as we possibly can.

Imagine that you would have just two hours with me just answering questions, plus the once a month business direction call, plus the anytime fax or e-mail deal evaluation or any other issue evaluation, and then the three times per year coming together with other like-minded folks that are at the same level you are and then me supporting you through that process as we mastermind one another’s businesses.  I encourage you to get involved in the coaching programs.  Absolutely critical to your success.  I found that is where the true success comes from.  You can go it alone, or you can get involved.  Alright.  Well, we have come to the end of another twice monthly group Q&A call where you have become Street Smarter than you were before we started the call.  I encourage you to come see us at the next event.  Call the office 1-800-578-8580 to get enrolled.  Remember that we do have special information and special materials for you at the events, so you must be preregistered, so we do have those for you.  Take care.  Good luck.  Good health.  Good profits and may God bless.  Good day.