Real Estate Investing Blog

In today’s real estate market, many homeowners, as well as investors, are going down roads and using various tools that they would not have considered previously. When things are going well and the real estate market is hot, most people would believe that the good times are here to stay. Unfortunately, good times were at the peak of the roller coaster, and the market came down twice as fast as it went up. In many areas, prices fell back to where they were eight years ago, before the real estate frenzy started. When times are going well, we all know how to act. “Yippee, hurray, woopdedo, woopdedo!” When times get tough, that is when the real investor shows his true moxie.

There comes a point, when the market is crashing, when you have to ask yourself: “Is this house worth keeping?” For an investor, it is usually a just financial decision. Some people do not want to sell because they will lose too much money. The sad part is that they have already lost their equity. Why ride a horse with a bad leg? Something that has become common in this market is the short sale. A short sale is when a property has fallen in value below its mortgage amount, and the bank is willing to accept less than the amount owed. In the past, most banks would not have agreed to this. Today, there are too many houses that are being foreclosed on, and to the banks, this is the lesser of two evils.

Here is my experience, with an investor I know of, with two different short sales. House A was purchased at the peak of the market for $230,000. The loan was with a bank that he has done much business with. The investor had an eight year relationship with this bank. The original loan officer was a terrific guy, who was great to deal with. Unfortunately, he lost a battle to cancer. Afterwards, the investor was switched around to a few different people. He ended up with a gentleman we will call Dan. (That is actually his real name). He made Dan aware of his history with the bank, and what his intentions were. The area in question has been hit hard by the real estate crash. The property in question was on the market for sale. He was advised by Dan to send in an offer when he received one.

The property was originally listed for $80,000 with a real estate agent. The loan amount was $130,000. After not getting any showings, they gradually reduced the price. When it was listed for $60,000, they received an offer for $54,000. This was an all cash, 30 day close offer. He sent all of the information in to Dan, and was told to counter the offer at $67,000. He did, and the buyer came up to $58,500. All cash, 30 day close. In this market, that is very good. They had an inspection done on the house, and it was confirmed that it needed repair work; it has an original roof, and an original air conditioner. Dan turned down this offer, and said to sell it for no less than $64,000. The buyers of course walked away.

Eventually they had another offer, this time for $50,000. This is still a good offer in this market. This was turned down also. After the realtor also spoke with Dan a number of times, he said he would accept an offer of $58,000. After another month or so, they got an offer for $56,000, all cash, 30 day close. Dan said to counter at $57,000, and the buyer accepted. After he sent all of the paperwork to Dan and the bank to review, they took a while to come back with an answer. In the meantime, the Federal Government came in and shut down the bank, and another bank took over. There was a big article on the front page local newspaper about unethical practices. After this happened, it took at least another week before Dan could get back to our investor with an answer. When he got back to him, he was told that in order for the bank to accept a short sale, he would have to sign an agreement that he would pay back the balance of the loan. It is obvious that Dan and the bank do not understand the meaning of a short sale. Of course, the investor told Dan that he could not accept that. The property is off the market, and the investor continues to collect rent.

This investor had another property that was also on the market at the same time. There was an offer on this property and he submitted all of the information to the bank to consider a short sale. It took about six months before the bank came back with an answer. One week he received a notice that a foreclosure was about a month away. The next week he received a letter from the bank that they would accept a short sale. They closed two weeks later. Each bank is different. In this market, it is in the banks best interest to accept a short sale. When a bank takes back a property in foreclosure, they receive much less for it. In our first situation with Dan, it is easy to see how the banks have gotten themselves in so much hot water with poor business decisions. In our second scenario, everyone came out a winner, especially the buyer. Remember to always be an informed investor.

Don’t be greedy. Aim to make reasonable, short term profits. A 10% profit over the short term is better than a 50% profit that you never get.

Remember, the higher your profits the shorter term your Option should be allowed to remain. If you can see a gross profit, then close the Option fast and get into ownership. Otherwise, the owner could balk later on.

You’ll do much better with distressed or highly motivated owners who have a problem you can solve. Once you solve their problems, the Option is easy.

Avoid any kind of technical jargon. I don’t even like to use the word “Option” because it is usually misunderstood. A misunderstanding leads to lower profits and legal difficulties. Speak in language that conveys the most information to the listener. That’s rarely real estate-ese.

Beware and be wary of buying Options from unstable or tricky people. In those cases, it’s far better to place the title to the optioned property into a title company holding trust, land trust, corporation, your name to prevent it’s being clouded by some future event such as divorce, bankruptcy, break up of a partnership, law suit, judgment, new financing, etc.

When you know you’re going to sell the property, use the prospect of that near term cash as a part of your negotiation technique to whet the appetite of the lender.

If you’re going to get cash, try to get the owner to accept a little cash and a lot of other things such as the car mentioned previously, old low interest rate notes you already hold, hard to sell vacant lots or time shares, etc. This way, when you’ve sold the optioned property for cash,’ you’ll be able to keep most of it and at the same time, effectively, you’ll have sold your property to the owner for the cash he might otherwise have received out of the transact ion. You accomplish this by giving up your property for Option consideration ahead of the sale and receipt of cash!

You can get Options more easily from owners who are in need of CASH, MANAGEMENT, SALES EFFORT, MAINTENANCE, or TECHNICAL REPRESENTATION.

You’ll be able to get PURE OPTIONS more easily from those who need cash or services but who intend to remain in their property or to keep control over the cash flow from any rentals or income properties.

When structuring Option terms, always exchange something if possible. This will not only put cash into your pocket, but could generate long term capital gains in a very short time. And it’s often much faster for selling.

When dealing with the average person in smaller properties or houses, be careful not to frighten the owners with too much paperwork. Use Options with simple language, lots of white space. Except in the context of a lease/Option, it’s best not to use the word OPTION at all! Tell then what you plan to do rather than labeling it. Use VERBS versus NOUNS. The better the owner understands what you want to do, the more chance he’ll agree.

In today’s investment climate, the real key to profits lies in the cash flow the property can be made to produce. One way is to use effective management methods that will enhance property cash flows. We also try to make the point that proper structuring of a transaction is the foundation of all cash flows. When one focuses solely on being able to buy with NOTHING DOWN, one gives up a lot of selection and negotiation possibilities. But the Option resolves the problem by offering the most leverage with the least risk and loss of cash flows.

Recognizing that many investors become intimidated or afraid of items in the investment process, this article describes the major areas of the investment process. The under each area, the steps required or activities needed are laid out. Conceptually, if the would be investor will move ahead accomplishing each, a successful investment will inevitably be the result.

The steps for the investment are:

1. General partner and investor preparation
2. Project identification and analysis
3. Business Plan Development
4. Purchase contract
5. Closing and Initial Operations
6. Investor Communications and Securities Compliance
7. Oprations
8. Marketing and Sales (leasing, developing buyers, developing investors)
9. Debt and equity financing
10. Exit

While there are other topics you will have an interest in understanding or learning more about relative to real estate investing, completing the areas above will lead to a successful investment.

Clearly, these steps are more complex than simple one liners. In the lists below, you will find some of the key activities that you need to be mindful of or complete when executing and investment or series of investments. This list can be made more granular and depending on the investment items could be added or deleted to the process. So, as you approach investments exercise flexibility to meet the needs of your project modifying or adjusting this as needed. The general steps under each area are:

General partner and investor preparation

1. Prepare escrow accounts and agreements
2. Complete personal financial statements for major (>10% owners)
3. Prepare biographies for principals

Project identification and analysis

This step is perhaps the most complex and can be viewed as three major components: 1) market selection, 2) submarket analysis, and 3) property analysis. All of these constitute the due diligence phase of an investment.

During market selection, determine:

1. Population growth characteristics,
2. Economic factors,
3. Transportation factors,
4. Regulation factors (review tenant rights laws, housing authority activity, etc.)

In submarket analysis review:

1. Competition,
2. Immediate transportation,
3. Immediate access to education, government support, recreation facilities, shopping and entertainment,
4. Housing costs,
5. Crime factors,
6. Local area demographic considerations,
7. Local employment

For the property itself, consider:

1. Unit by unit inspection details,
2. Detailed review of the grounds including parking, lighting, landscaping, drainage, fences, signage,
3. Amenity inspections,
4. Building exterior inspection,
5. Review of the properties abutting to the target property,
6. Drive by and walk by traffic,
7. Walking access to shopping, entertain, and public transportation,
8. Walking / bus access to schools,
9. Availability of good contractors and other services or employees

Business Plan Development

The business plan has to answer several question including:

1. The amount of capital needed including reserves, improvements, and purchase needs
2. The returns the investor can expect
3. How risk will be managed
4. How the accounting and finances will be managed
5. How the project will be managed and your qualifications to accomplish this
6. How the investor will eventual exit
7. How the investment will be organized

Purchase contract

1. Describes the terms of closing,
2. The warranties and representations the seller must stand behind
3. The sellers preclosing operations requirements and consequences if they are not met
4. Protection against fraud or mismanagement in the in the information provided by the seller to you, the purchaser

Closing and Initial Operations

This phase includes a number of steps that will have a great deal of influence over the eventual success or failure of the project. Essentially, during this period, the purchaser and seller are checking off items that lead to the successful close and taking steps to kick off operations. Consider the following a s a basic set of steps:

1. Collect in escrow equity for closing,
2. Complete operating agreements,
3. Complete investor subscription agreements,
4. Finalize the business plan,
5. Complete loan commitments,
6. Provide all information the bank will need for set up,
7. Put the rent roll in your management system or spread sheets,
8. Collect investor communication information in email and call set up systems,
9. Set up banking accounts,
10. Set up entities with the local government,
11. Establish contracts, hire employees, determine sources of operating supplies,
12. Complete improvement plans and contracts,
13. Set up initial operating improvement schedules,
14. Create initial operating books,
15. Ensure accounting information for all transactions prior to closing are recorded with date, purpose, who to, whether capital, expense, income, or investment,
16. Enter accounting information from per closing transactions and the closing sheet / HUD1 and ensure books are balanced and prepared for initial operations

Investor Communications and Securities Compliance

1. Pre closing provide risk statements,
2. foreward looking statements disclosures,
3. Reporting plans and intent,
4. Subscription agreements and investor information complete,
5. Operating agreements executed

Operations

This includes all the day to day requirements such as:

1. customer service,
2. Maintenance,
3. Service and supply contracts,
4. Lease management,
5. Collections and evictions,
6. Day to day banking,
7. Human resources and day to day compliance,
8. Capital improvement management,
9. Taxes,
10. Operating statements, year end statements, taxes, and licenses

Marketing and Sales (leasing, developing buyers, developing investors)

1. Online, print, and signage,
2. Promotions and concessions,
3. Sales training and preparation,
4. Associations, social media, etc.

Debt and equity financing

1. This is the culmination of the financing picture.
2. Preparing bank packages,
3. Negotiating loan agreements,
4. Provide financials and business plans,
5. Managing loans and refinancing post purchase,
6. Closing with your equity investors, releasing the funds for purchase, and raising additional capital in the future if needed to protect the investment

Financing is a major opportunity and can turn out to be a major risk for your investment.

Exit

This is preparing and evolving a plan to exit the investors’ cash investment and to eventually sell and completely cash out their investment. The options for this are limited by imagination alone, but most view this as the eventual sale to another investor. The requirements can be daunting, but if the investor will breakdown the process into successively smaller steps as outlined here even a relatively small investor can manage relatively significant opportunities.

We’ve all seen distressed assets that seemingly will with just a bit of tender loving care produce great results. And sometimes, I can tell you from personal experience, this is true. I can also tell you that the risk of being incorrect can be quite large. That is the point of today’s article. Choosing an asset in a great location with timeless positives in its favor can go far to assure a successful investment, long term cash flow, limited risk loss, and a worry free future.

What defines a great location? A list of some identifiers include:

1. Very high traffic areas always stand out;
2. Communities with reputations as preferred for business or homes;
3. Areas with high concentrations of upscale employment;
4. Areas with quick and easy access to employment, commerce, entertainment, transportation;
5. Locations near very good schools;
6. Properties adjoining a large university;
7. Places near major points of interest;
8. Neighborhoods slated for and funded for major development;
9. Locations that are already strong with very limited development potential;
10. Locations that demonstrate long term high occupancy, steady rent increases, and steady value appreciation

Many other items stand out, but perhaps focusing on the most common place are also the safest bets for many investors.Analyzing properties from these locations will demonstrate that while initial cash flow sometime suffers the long term certainty of appreciation in rents and value will quickly overcome these issues.

Analysis of properties of this nature shows that while the may only return 3% – 6% at purchase often they deliver internal rates of return exceeding 15% on a long term hold of 10 years or longer. My opinion is that most investors should be very pleased with these types of returns as the long term snowball effect of this growth is very positive results for the patient investor.

Further, my review of the information and analysis suggests that once such an investment is made that over the course of the investment opportunities to improve the results by several percentage points will inevitably develop as rates fluctuate upward and downward and as values move higher or lower. By following the market, the investor will see and be able to capture stronger performance that this longer term more patient view supports.

Investors should seek value investing opportunities founded on these principals. This will protect their invested asset value, assure their long term value gains, and avoid the unnecessary risk taking of pursuing greater more exciting returns. Over the course of time, this form of investing is a great complement to hire risk investment alternatives and often the better performing choice.

Buying home foreclosures for sale is a great way to start an investment. One needs only the right attitude and skills to attain success in this field. The real estate market is becoming more accessible to many people and is encouraging a lot of first time home buyers and new investors to try out their luck in finding either their dream house or their dream investment.

Instant Equity

Having value for hard-earned money is the goal of every investor and home buyer. When one invests in the real estate business, he does not only want to acquire an asset. He also wants that asset to be a sort of an investment that could generate profit for him even while he sleeps.

A cheap house, for example, can already provide the investor instant equity from the savings that one will gain from its purchase. Foreclosures are often sold for great discounts. This means thousands of dollars in instant equity and savings – money that you can either put away in the bank to earn interest or invest in other properties and options.

Bargain Finds

It is a misconception that home foreclosures for sale are discounted because they come in undesirable state and poor localities. In fact, some of them can be found in good, chic communities and are generally well-kept. First-time home buyers would be delighted to know that there are thousands of properties that have been maintained well are available for them to purchase. And these properties are genuinely bargain finds as they represent picture-perfect houses in nice, quiet neighborhoods.

Smart Investments

Foreclosure investing is one of the smartest investments that one could ever make. If you know how to look, where to find, and how to go about the whole buying process, then you can be assured that your investment will be worthwhile. Many houses are truly bargain finds that you only need to spend a minimum amount to be able to resell it for a profit. And as property continuously appreciates, buying home foreclosures for sale benefit you in the long run by providing you with the option of either renting them to others or waiting for the right opportunity to offer them for resale at very profitable margins.

Successful buy-to-let property investors have the skill to quickly determine the cash positive offer value for a below market value (BMV) property.

Stock exchange speculators are prepared to spend large sums of hard earned cash on technical software analysis tools and hundreds of research hours before they part with a tenth of their monthly salary to buy a small amount of shares.

Yet, most novice property investors are prepared to sign offers to purchase property worth more than 10 times their monthly salary based on a “hot” tip or glossy developers marketing brochures without doing any proper due diligence.

The aim of the simple 7 step desk top due diligence is to quickly determine the offer value that will leave your buy-to-let property cash positive from day one.

Step one: Determine the realistic market value of the property.

This is the most important step as the market value will determine what the financial institutions will be prepared to finance.

Step two: Determine the realistic market related income (rental) for the property.

The achievable rental less a vacancy risk factor will determine the sustainable annual income from the property.

Step three: Determine the running expenses of the property.

Running expenses include body corporate levies, municipal Rates and Taxes, rental agent fees, bond interest servicing costs and repairs and maintenance of the property.

Step four: Determine the once off acquisition cost of the property.

Once off acquisition cost include transfer fees, bond registration fees, sales agent commission if applicable and initial repair fees.

Step five: Determine the expected capital growth rate for the property.

The capital growth rate of the property is the biggest factor that will determine your future profits and wealth creation potential. Always ensure to only buy high growth BMV properties.

Step six: Determine the properties monthly shortfall or surplus.

The properties income less expenses and risk provision for maintenance and vacancies determines the shortfall or surplus. The only expense that is variable is the interest on the bond.

Step seven: Calculate the breakeven point for the property and the offer value.

All the properties income and expenses are fixed other than the interest payment on the bond. You just need to determine the bond amount (interest expense) that will leave the property at breakeven or cash positive. That bond amount is the cash positive offer value. Remember to include the once off acquisition cost of the property in your bond amount when determining the offer value.

High growth BMV cash positive properties are not always available and require some creative sourcing techniques.

The level of finance available for the property plays the most important role in determining the offer value. Financing BMV properties at market value leaves available cash on your bond to pay for the once off acquisition cost of the property and to cover potential initial short falls.

Always buy below market value and determine your offer value before you make the offer.

Congratulations on securing a contract for that special place you will soon call home. The next step will be inspections. Depending on where your home is located, you may have either a city water and sewer system, or a septic tank and water well, or a combination of city water and septic, nonetheless, there are some things that should not be overlooked during an inspection.

An important thing to remember is that the cost of inspections is never refunded in the event a buyer decides to terminate the contract during the option period. These costs are paid to third party service providers that are not a party to the transaction and are recommended for the buyer’s full knowledge of the property’s condition, not considered a part of the seller’s disclosure.

Most buyers concern themselves with the cost of structural and termite inspections. However, one should take caution in preparing for the cost of an inspection of a property that has a water well, septic tank, or both.

To properly inspect a septic tank, it must be pumped so that the inspection company can view the tank and view its condition and inspect for any roots, sludge, etc. There may be separate costs involved for this inspection such as the inspection fee, a pumping fee, and a per hour fee (for anytime over the set expected time frame to pump the tank). The upside to having the septic tank pumped is that it will be a few years before you have to have it pumped again and you will have good record of the maintenance history from day one.

It is always best to have an idea as to the location of the septic tank; a plat or survey should pinpoint the location if the lids are not visible. If it is not known the septic company may be able to locate them, but time is money and you should have them spend the time they allot with their base price pumping the tank and inspecting it.

Have questions? Don’t be afraid to ask them. Often times, they can provide you with great resources of information regarding maintenance and care of your septic tank… who better to ask about septic tanks than the companies who install them?

The lethargic recuperation of the housing market is creating many opportunities for those who are either diversifying their investment portfolios or contemplating the purchase of their first rental property. With the income, ability to add value and generate capital gain and multiple tax benefits they create, rental properties are still a favourite purchase for the kiwi investor and contribute towards fulfilling future income and investment goals.

Coupling the trend of reducing residential values over the past 18 months is the longer term trend towards house value increases. With housing affordability indicators illustrating that it is harder than ever before for new home owners to purchase their first property, rental properties are experiencing a plethora of demand. Additionally, many individuals and families find themselves in a situation where they cannot afford to sustain their high mortgage payments in a time when recessionary forces are placing increasing financial pressure on homeowners, with increasing fuel and energy costs, food bills, the rising cost of children and the threat of redundancies. These pressures will induce many to sell their homes, with their immediate alternative for accommodation in the rental accommodation market.

Future population projections, released by Statistics New Zealand, present an ever increasing population (albeit reducing in yearly rate) with several trends that will appeal to rental property investors. Firstly, as the population increases, there will be unprecedented demand for the housing stock in New Zealand, which will increase the price. Many young families and aspiring home owners will progressively rely more and more on rental properties to cater for their accommodation requirements. Secondly, a structural change in the population due to ageing will create demand for smaller properties, with retired individuals choosing to sell their homes in response to financial pressures of their children and their own retirement, choosing to rent a small, maintenance free property. Lastly, a counter trend to the aging structure of the population will be experienced among the ethnic populations, with a growing proportion being aged between 18 and 30. This will create unprecedented demand for rental properties, especially in those regions and cities where ethnic populations are at their greatest.

In an April 2009 issue of Business Week, Prashant Gopal also confirmed that the market is providing reasons for property investors to be optimistic about the rental market, as future population growth will create increased demand through the period 2011 through 2015. He stated that the growth will be compounded by the lack in construction of apartments and single family homes, resulting in a shortage of rental properties for several years.

With current and forecasted demand only set to increase, investing in a rental property is a logical and secure investment that will not only create a regular income and capital gain, but one that is constantly appreciating.

In any business undertaking there are beliefs that are taken into account and taken into consideration, if it really has any bearing. A belief may be superstitious or may be a common practice. Superstitions evolve into myths. When unfortunate things happen in a business, rumor-mongers always try to find out what the circumstances were. So if the same unfortunate thing repeats on several people in the same business, a superstition crops up. For those who can not convince people on the superstition, they make up a scary story and that’s the time it becomes a myth. What are some scary myths on making money investing in real estate?

1. “Time will come when you can not sell a single property holding for a long time that you’ll be forced to sell it at loss”. This becomes true only when the time comes you become lazy and complacent, relying on the notion that business will come right up your door and knocking. People who fail in real estate investments will never tell others that they became lazy and complacent. They’ll make excuses and sad stories about it. Other failures who would hear that story – make their own story – and that’s it! Even before it spreads as a superstition a myth was already created!

2. “Making money in real estate investment is difficult for me because I do not know anything about it”. There are only very few lucky people who made money out of a business they don’t know about. But there are many who succeeded, especially in real estate investments that took pains to study it. They strove to learn the trade. Also, they did not stop learning and researched more on what they can do. In dealing with real estate investments, you can become street-smart by getting into the roots of the need for properties.

3. “There’s too much money involved in real estate investing and I do not have the resources for it”. Let me tell you a short story of a neighbor who hardly had her house finished up. The main reason is, she did not have the money and could not get a decent bank loan. On her own, she approached several hardware stores nearby. She convinced several of them to give her the finishing materials she needed for her house. The hardware stores gave her some small credit because she was just in the neighborhood and they could see the materials being used for her house. After she was done with the house that became really beautiful, she was able to sell for a hefty figure and immediately paid the hardware stores. From that time on, she made good flipping houses. Buying empty lots and constructing the houses on the same credit terms, she became successful and there was no looking back. Remember she did not have money and as our neighbor, proof was we could see right through their dining room because it did not have any outer wall. She was just a gutsy and fantastic lady. She was able to let all her five children finish college, now retired and living comfortably abroad.

4. “It is scary to start because I’ll never know what could happen with my first investment and after that”. This myth becomes for real if you just jump in with your eyes closed. Very much contrary to “look-before-you-jump”. That is true on any new undertaking, no doubt about it. The more it becomes scary why you even don’t try to ‘nose around’ on how things go in the real estate business. You would admit that getting into a new venture is more comfortable when you have someone with you, right? Sometimes there is some trending in real estate investing. It easily spreads out within the circle of those in the real estate business. Have some friends within those circles. Definitely when a good buy comes up, you have some people with you getting into it.

5. “It is better to invest in banks, financial institutions or trade stocks than putting my money in real estate”. There is some irony to this. If you would look into the financial statements of large companies and check on their assets, you will see that a sizable portion is invested in real estate. Why? Real estate investment is the safest and most secure investment. It can not be stolen, manipulated or close down. Even if you lose the paper deed or title to it, it still is yours. Only improvements like buildings and houses depreciate but not the land. It continually appreciates in time and could give a windfall profit if developments in its vicinity are favorable. So why let banks and financial institutions get your money for some petty interest rate but profit more than double that, investing in real estate?

Myths become a reality when you do not work against it. Learn from experienced real estate investors on how they go around these myths. They have good stories to tell from which you can ask questions. Beware of investors that do not like competition, they might be telling you more myths than what was stated here. Anyway, you should be able to gauge a person talking or telling a story. Eyes of people sometimes tell a different story, if you know what I mean.

Everyone who invests has dreams of making a great deal of money, but if you enter almost any area of investment without the proper knowledge, you will not make money, you’ll lose it. The same is true with. Find someone with a lot of experience in the field to mentor you, until you have the strategies figured out for yourself.

Once you have the necessary knowledge of the transactions and the strategies, you are set up to be able to make money in A good amount of capital is nearly essential to begin to invest in this area, although there are people who have started with a small investment and turned it into big bucks. They have done it by using knowledge, skill and strategy to use property options to their advantage.

There are people earning a lot of money through the strategies of. But this didn’t happen overnight. They learned, as you must, the ins and outs of property options, before they made any money. There are various strategies and concepts online, but those can just as easily steer you the wrong way. Find a mentor you can trust, to teach you everything you need to know about property options, so that you’re not flying blind.

A property option, simply put, is a document that represents the rights of the holder to utilize control over the property of a second person who is the seller, for a certain time period. The holder in this case is the buyer. The time period over which the property is held may vary in each case, from one to three years or so, and this is dependent on both parties agreeing to this time period.

In these cases, the option will be used if the seller doesn’t wish to sell the property at this time, but rather wants to wait for a better time for himself. This gives the property time to increase its value. But whenever the buyer is ready to purchase the property in question, the seller cannot refuse the deal. He is bound by the legal document to let the property go at the price that was agreed upon.

This basic information can get you to the starting point in learning how strategies work in property options, but there is so much more to learn. Find a reputable mentor and you will find that there is money to be made here, if you know the correct way to strategize.