Buy Low, Rent Smart, Sell High

240 Pages·2003·1.46 MB·English

by  Scott Frank

This book is for informational purposes only. It does not provide legal advice, and should not be
relied on as such. Neither the authors nor the publisher guarantee or warrant that the information
in this book is accurate, complete, or up-to-date, or will produce certain financial results. This in-
formation is general in nature and may not apply to particular factual or legal circumstances. Laws
and procedures—particularly those relating to real estate—change from state to state and county
to county, and are subject to differing interpretations. This book is not intended to substitute for
obtaining legal advice from competent, independent legal counsel in the relevant jurisdiction. If
you want legal advice, please consult a lawyer.This book is not intended to create—and your use
of this book does not constitute—a business or lawyer-client relationship between you and the au-
thors or publisher of this book.This book is not a substitute for sound business and legal judgment,
and you should not act upon any of the information in this book without first confirming that the
suggestions, processes, documents, and information in this book are appropriate for your situation.
Vice President and Publisher: Cynthia A. Zigmund
Acquisitions Editor: Mary B. Good
Senior Project Editor: Trey Thoelcke
Interior Design: Lucy Jenkins
Cover Design: Design Solutions
Typesetting: the dotted i
© 2003 by Scott Frank and Andy Heller
Published by Dearborn Trade Publishing, a Kaplan Professional Company
All rights reserved. The text of this publication, or any part thereof, may not be reproduced in
any manner whatsoever without written permission from the publisher.
Printed in the United States of America
03 04 05 10 9 8 7 6 5 4 3 2 1
Library of Congress Cataloging-in-Publication Data
Frank, Scott M.
Buy low, rent smart, sell high : real estate investing for the long run / Scott Frank, Andy
Heller.
p. cm.
Includes index.
ISBN 0-7931-7756-1
1. Residential real estate—United States. I. Heller, Andy H. II Title.
HD259.F7 2003
332.63′243—dc21
2003010799
Dearborn Trade books are available at special quantity discounts to use for sales promotions, em-
ployee premiums, or educational purposes. Please contact our special sales department, to order
or for more information, at [email protected] or 800-245-BOOK (2665), or write to Dearborn
Financial Publishing, 30 South Wacker Drive, Suite 2500, Chicago, IL 60606-7481.
Scott’s Dedication
This book is dedicated to the memory of my father, Denny Frank,
who laid a strong foundation for me as a real estate investor and, even
more important, was a great role model and father. He instilled confi-
dence in me and taught me that you can be fair, honest, caring, re-
spectful, and very successful in business—and anything else you set your
mind to—all at the same time.
This book is also dedicated to my wonderful, loving wife, Marie, who
is always there to support and encourage me, and to my four precious
gifts from God, my children—Dennis, Danielle, David, and Diana—who
make every day better than the previous one.
Andy’s Dedication
This book is dedicated to the memory of my father, Dr. E. Maurice
Heller. My father dedicated his life to helping others, becoming a leader
and innovator in the field of cardiology and creator of Canada’s first ex-
ercise program for recovering heart attack patients. My father was a
medical man with no formal business training, yet he instilled in me a
sense of fair dealing and a commitment to charity as key components of
how one should live life. Additionally, my father could see the positive in
almost any situation and certainly any person he encountered. Lastly, it
amazed me how he was always there with the right words for any situa-
tion, whether business or personal. These are all wonderful and special
qualities to spend a lifetime observing, and without his influence, I
would not be where I am today.

C o n t e n t s
ACKNOWLEDGMENTS ix
INTRODUCTION We’ve Made Good Money and So Can You xi
1. MAKING YOUR FIRST MILLION DOLLARS 1
Other Real Estate Investment Programs 1
Our Real Estate Investing Program 2
Illustrative Examples 4
Our Philosophy 9
2. GETTING STARTED 13
The Three Essentials 13
Part-Time versus Full-Time 16
Finding Your First Property 17
Lease/Purchasing Your First Property 17
Marketing Your First Property 19
Finding Good Lease/Purchasers 20
Our Philosophy 21
3. OUR STORY, GOALS, AND NICHE 23
A Brief History of Our Partnership 23
Our Goals 25
Our Niche 27
Our Philosophy 30
4. SETTING UP YOUR REAL ESTATE TEAM 31
Attorney 31
Accountant 32
Insurance Agent 32
Financing Sources 33
Property Sources 34
Contractors/Repair People 36
Our Philosophy 37
v
vi Contents
5. MONEY FOR PURCHASING YOUR HOMES 39
Cash versus Financing 39
Money Needed When Purchasing a Home 40
Cash on Hand 42
Loan Financing Options 42
Three-Phase Evolution for Using Money Wisely 47
Our Philosophy 49
6. FINDING GOOD HOMES 51
Distressed Properties That Go Back to Lenders 51
Single-Family Homes in Middle-Income Neighborhoods 53
What to Look For in an Investment Home 54
The Potential Investment Home Checklist 55
Valuing the Property 57
Ugly and Awful Homes—Often Great Purchases 59
Working Your Real Estate Network 62
Avoid Taking Advantage of Distressed Families 66
Foreclosure Sales on the Courthouse Steps 67
Our Philosophy 68
7. MAKING OFFERS AND NEGOTIATING PURCHASES 69
Understanding Key Price Points 69
The Negotiating Process 75
Leveraging Relationships with REO Agents 77
Our Philosophy 80
8. THE REAL ESTATE PURCHASE CONTRACT 81
Understanding Key Provisions 81
Buyer Protection Clauses 83
The Cover Letter 88
Our Philosophy 89
9. FIXING UP YOUR HOMES 91
Our Approach to Repairs and Improvements 91
Impact of Home Improvements on the Neighborhood 98
Protecting the Home’s Value 98
Our Philosophy 99
Contents vii
10. OUR LEASE/PURCHASE PROGRAM 101
Why Lease/Purchase? 101
Six Profit Sources 102
Our Lease/Purchase Program versus Others 103
Same Property,Different Terms 109
Our Philosophy 110
11. MARKETING YOUR HOMES 111
The Lease/Purchase Terms 111
Three Marketing Tools 113
Voice-Mail Message 117
Timing for Homes Needing Major Repairs 119
Our Philosophy 120
12. FINDING THE RIGHT LEASE/PURCHASERS 121
What the Right Lease/Purchasers Look Like 121
Responding to Inquiries 122
Showing the Home 129
The Application Process 130
Final Steps in the Selection Process 131
Our Philosophy 137
13. THE LEASE/PURCHASE CONTRACT 139
The Lease Agreement—Key Points 140
Option to Purchase Agreement—Key Points 147
Our Philosophy 149
14. MANAGING LEASE/PURCHASE RELATIONSHIPS 153
Separating Business from Personal Relationships 153
Establishing and Maintaining Rapport 155
The Little Extras 158
The Saved Money Letter 158
Handling Late Payments 158
The Dispossessory and Eviction 161
Dealing with Lease/Purchaser Problems 164
When Good Lease/Purchasers Can’t Buy on Time 166
The Lease/Purchase Extension Amendment 167
Need for Flexibility 169
Our Philosophy 170
viii Contents
15. SELLING YOUR HOMES 171
A Key Component to Generating Real Estate Wealth 171
The Lease/Purchase Sale 172
The Straight Sale 173
Our Philosophy 178
CONCLUSION: FINAL THOUGHTS 179
APPENDIX 181
INDEX 209
A c k n o w l e d g m e n t s
W
e owe special thanks to Barbara McNichol,
the Word Tripper, who always kept a positive, fun attitude while helping
two rookie writers put their thoughts on paper.
We also deeply appreciate the Dearborn publishing team that helped
us turn our concept for a book into a reality. We are especially grateful
to Mary B. Good, Acquisitions Editor, for her willingness to publish the
work of first-time authors and help us turn our concept into an outline,
then a draft, and ultimately a book we’re proud of.
Although the list would be too long if we mentioned everyone, we
also want to thank all the great people we’ve had a chance to work with
and get to know over the years. Here are the names of some of the peo-
ple who have made our real estate business profitable, fun, and satisfying:
Bernard Newson, Charles and Lisa Chandler, Bonnie Gergans, Andy
Shuping, Mike Warner, Al Stewart, Sheree Berk, Eddie Scott, Fred
Brown, Jacob and Cindi Gang, Jim King, Tim Sherrer, Becky Matherne,
Wendy Miller, Jerome Rhodes, Mike Barry, Bob Hodge, Ruthann Davies,
Debbie Johnson, and Randy Nice.
Finally, we wish to thank all of the “good” lease/purchasers we’ve
been fortunate to learn from and to have in our lives. Again, the list is too
long, but you know who you are.
From Scott. I also wish to acknowledge Ellen Frank (my mother)
who has done and continues to do so much for our family, as well as
Brian Frank (my brother) and Marcy Frank Cooper (my sister) who have
been my real estate partners for many years and, even more important,
lifelong friends. I’d also like to acknowledge Lucille and Melvin Falkof
(my maternal grandparents), Ella Schechtman and Oscar Frank (my
paternal grandparents), Whitney Frank (my sister-in-law), Mike Cooper
(my brother-in-law), and Barry Feinberg (my stepfather), who have
ix
x Acknowledgments
shared in many of my life experiences, including some in real estate.
Thanks to all of you for always being there for me.
From Andy. I also wish to acknowledge my mother, Barbara Heller,
who helped foster my interest in real estate and my sister for motivating
me with her own entrepreneurial career as founder of Atlanta-based Cir-
cus Arts summer camp for kids. Lastly, I wish to thank a handful of life-
long friends and extended family who have always been there to support
and listen to me in both good and bad times. Thank you Loren, Mark,
Rob, Frauline, Matt, Alon, Jens, the Nemoys, and the Starkmans.