Twenty Key Provisions That Must Be Included in Your Master Lease Agreement

Always use separate master lease and real estate option agreements to document your LASH transaction. Whether you buy a sample copy of a valid lease agreement from a professional association or hire a competent real estate attorney to prepare one for you, make sure that all of your master lease agreements include the following 20 key provisions:

1. Parties.
2. Agreement to lease.
3. Legal description of the property.
4. Term of the lease.
5. Holdover.
6. Lease rental rate.
7. Security deposit.
8. Services and utilities.
9. Use of premises.
10. Signs.
11. Waste, nuisance, and illegal use.
12. Maintenance, repairs, and alterations.
13. Entry and inspection.
14. Damage or destruction by fire, storms, and earthquakes.
15. Condemnation.
16. Notices.
17. Applicable law.
18. Arbitration of disputes.
19. Legal costs.
20. Execution of the lease agreement by landlord and tenant.

TWENTY REASONS MOST PEOPLE FAIL TO MAKE IT AS REAL ESTATE INVESTORS

I always strive to tell it to my readers as it really is. I do not believe in sugarcoating the truth. And that is why I want you to know that most people— more than 51 percent—fail miserably as real estate investors. I am telling you this not to discourage you, but to warn you about the consequences of investing in real estate in a haphazard manner.

I attribute this relatively high failure rate to the fact that the real estate investment business does not have any of the so-called barriers to entry, which many other businesses have. In other words, there are no background, educational, competency-testing, licensing, insurance, or capital requirements to set up shop as a real estate investor.

Anyone can enter the business at any time, without the slightest clue as to how to operate a profitable real estate investment business. As a result, most people usually fail to make it as real estate investors for one or more of the following reasons:

Reason 1: Paying above market value for property.

Reason 2: Lack of persistence.

Reason 3: Lack of organizational skills.

Reason 4: Lack of local real estate market knowledge.

Reason 5: Inability to stay focused on a single objective.

Reason 6: Failure to act in a timely manner.

Reason 7: No clearly defined exit strategy.

Reason 8: Lack of capital and credit.

Reason 9: Lack of clearly defined investment goals.

Reason 10: Unrealistic expectations.

Reason 11: Bad advice from unreliable sources.

Reason 12: Lack of planning.

Reason 13: Poor record keeping.

Reason 14: Lack of self-discipline.

Reason 15: Lack of basic real estate investment knowledge.

Reason 16: Lack of patience.

Reason 17: Lack of mental toughness.

Reason 18: Inability to manage time.

Reason 19: Failure to perform adequate due diligence inspections.

Reason 20: Failure to prioritize tasks in accordance with their importance.

Five Obstacles That Investors Must Overcome When Flipping Properties

To read most of the property-f lipping books, you would think that flipping a piece of property is as easy as changing clothes. I hate to be a spoil sport, but in reality nothing could be further from the truth.

The fact of the matter is that most authors fail to point out the potential deal-killing obstacles that investors must overcome when using conventional property-f lipping strategies. And they never bother to mention anything about:

1. Title seasoning.

2. Loan seasoning.

3. Property appraisals.

4. Overzealous scrutiny from lenders and title and escrow agents for possible fraud.

5. Stringent financial tests, which investors must pass in order to qualif y for a mortgage or deed of trust loan on a non-owner-occupied property.

I can tell you from firsthand observations that most of the investors who try their hand at f lipping properties usually end up spinning their wheels. While I was writing this, I received a telephone call from an investor here in Tampa who wanted to know if I was interested in buying a small commercial property that he had under contract to purchase.

As I found out, this guy was unable to finance the purchase of the property, and his purchase agreement was due to expire in five days. He was in a panic mode, frantically trying to find someone to buy his agreement before he lost his earnest money deposit and the seller filed a lawsuit against him for failing to purchase the property as agreed.

I passed on the deal but took down the property’s street address for future reference. Who knows, if the property fits my needs, I may contact the owner later on and try to negotiate an option to purchase.

PROPERTY FLIPPING BASIC INFORMATION AND TUTORIALS

The Definition of Property Flipping
Before I go any further, you first need to know what the term property flipping means. Property f lipping is generally defined within the real estate investment industry as: “the process of buying a property and quickly reselling it for a profit.”

Today, thanks in large part to news reports by the media, the term property f lipping has pretty much become synonymous with fraud. But contrary to what many uninformed members of the media would want the American public to believe, there is absolutely nothing illegal, immoral, or unethical about making an honest profit from legitimately f lipping a piece of property.

It is called capitalism and is what our economic system is based on.

The HUD Rule Prohibiting Predatory Property Flipping with FHA Loans
The U.S. Department of Housing and Urban Renewal (HUD) defines predatory property flipping as: “the practice whereby a property recently acquired is resold for a considerable profit with an artificially inflated value, often abetted by a lender ’s collusion with the appraiser.”

And on June 2, 2003, HUD imposed a rule that places time restrictions on the resale of properties financed by Federal Housing Authority (FHA) loans. This was done in an effort to try to curb predatory lenders and dishonest real estate investors from ripping off unsuspecting homebuyers by reselling or f lipping properties at artificially inf lated sale prices.

However, as far as I am concerned, the only thing that this rule has accomplished is to stop honest investors from using FHA loans. I suspect that crooked investors, appraisers, and lenders are still using FHA loans to perpetrate fraud; they are just using more sophisticated scams, which HUD has not caught on to yet!

For a detailed explanation of HUD’s rule against predatory property f lipping, log on to the following web site: www.f lorida.ctic.com/bulletins/2003/2003-03.pdf