Make a Fortune Investing in Apartments The easy, proven system for buying apartment buildings for big profits – with no money, no credit and no experience

Scott Scheel The Commercial Property Academy MakingMoneyWithCommercial.com 1-888.807.9964

Testimonials

Scott,

With your coaching, on my first commercial deal I was able to get the property without a penny

out of my pocket. The seller was willing to do owner financing for a year with a purchase price

of $170K.

The rents for the property total $2,250 a month with the tenants paying all utilities except

sewer. The cash flow will conservatively be $1,000 per month. I thought this was a pretty good

start into the commercial world :-). Thanks again for everything!

Steve Kansa

Atlanta, GA

I have only been in this country for seven years, and have never invested in real estate before.

The day after I came back from Scott's event in Ft. Lauderdale, I quit my job and found a 29-

unit property for $525,000 with enough cash flow to replace my income. I bought it ‘no

money down' the way Scott taught me.

After one year, the property will be worth over $1 Million. I will be able to pull out over

$200,000, still own the property, and it will still cash flow over $50,000 per year. I am so

thankful.

Mila Mazancova

Charlotte, NC

After listening to Scott speak, (and being in the middle of negotiating a deal), we couldn't resist

hitting Scott up for some advice. Friend, I can tell you it takes a lot to impress me! In 30

seconds, Scott gave us advice that made us $20,000 on this deal!!! The units will rent for $430

per month. My wife can now quit her job. Yes, I am impressed!

J. B. McConnaughey

Kannapolis, NC

The deal analysis section gets FIVE STARS! The information far exceeded what I expected. I

really appreciate the Opportunity Evaluator™ software -- now I can finally evaluate my

current and future deals. Thank you so much!!!

Booker T. Perry

Maitland, FL

Great course. We feel empowered enough now to make creative offers based on truly

evaluated numbers, not just guessing. Thank you.

Rick and Kimberly Gossett

Waco, TX

Scott,

Before I attended your academy, I was strictly focused on single family and small multi-family

housing (2-4 units) and doing OK for myself. I was caught up in the flip mentality... we sold

everything and held nothing. I got good at creating lump sums of cash, but the challenge was

that if I didn't have a deal closing each month or so, I was struggling to cover overhead.

I heard about you and your Creative Commercial Real Estate Academy. I didn't hesitate to sign

up. What I learned has truly changed my life forever! Within 6 months of attending your class,

I find myself closing on a 99-unit apartment complex here in New Orleans and close to closing

on a 10-story office building downtown. These 2 deals together will yield almost 3 million

dollars in equity and a passive income of around $30,000 per month. Without the knowledge I

gained at your seminar I wouldn't have had the slightest clue as to how to make these deals

work. Your course taught me everything I needed to make this dream come true. And it IS like a

dream. I feel like I am holding a winning lottery ticket!

Warmly,

Chris Daigle

New Orleans, LA

About the Author

J. Scott Scheel

Scott Scheel is the nation’s leading authority on creative commercial real estate investment. His

unique strategies for investing in apartments, office buildings and retail shopping centers of any

size have changed the world of successful real estate investing forever.

Scott is a self-educated entrepreneur and multimillionaire. He has also been recognized twice

by the Wall Street Journal as Congressional Businessman of the Year.

Scott has created an amazing commercial real estate empire with no formal education or

previous experience. In the last 15 years, he has bought or partnered on commercial properties

worth more than $1 million.

Since the founding of the Commercial Property Academy, Scott has personally trained more

than 100,000 investors from 27 countries on six continents. He has trained investors alongside

notable financiers such as Donald Trump, Robert Kiyosaki, Alan Greenspan, Rudy Giuliani,

Richard Branson, Tony Robbins and former vice president Al Gore.

Scott will teach you how to take your investment career to the next level. He will guide you, as

you foray into the extremely profitable world of commercial real estate. Scott provides in-depth

training that covers all major types of commercial properties, including apartments, retail,

office and raw land.

Table of Contents

Testimonials ................................................................................................................................................ 2

About the Author ........................................................................................................................................ 3

Table of Contents ........................................................................................................................................ 4

Chapter 1 - Why Apartments & Types of Apartments ................................................................................ 7

Part 1 - Why Apartments & Why Now .................................................................................................... 7

Part 2 - Why Apartments Make Strong Investments............................................................................... 7

Part 3 - The Time is Perfect ..................................................................................................................... 8

Part 4 - The Monopoly Principle ............................................................................................................. 9

Part 5 - Four Personal Investment Stages ............................................................................................... 9

Part 6 - Setting Goals for Yourself ......................................................................................................... 10

Part 7 - Types of Apartment Buildings .................................................................................................. 11

Part 8 - Understanding Property Classifications .................................................................................... 12

Part 9 - A basic overview of the Entire Apartment Buying Process ....................................................... 15

Student Testimonial - Peter Zebka Las Vegas, NV ................................................................................. 16

Chapter 2 - Finding Apartment Deals ........................................................................................................ 16

Part 1 - Bank Workout Departments ..................................................................................................... 16

Scripts and Role-Playing at Live Events ............................................................................................. 17

Part 2 - Auction Houses ......................................................................................................................... 17

List of Auction Houses at Live Events ................................................................................................ 20

Part 3 - Letter Campaigns ...................................................................................................................... 20

Letter Campaings at Live Events ....................................................................................................... 21

Part 4 - New Commercial Real Estate Agents ........................................................................................ 21

Scripts and Role-Playing at Live Events ............................................................................................. 24

Part 5 - Loopnet.com ............................................................................................................................ 24

Part 6 - Other Ways to Locate Deals ..................................................................................................... 24

Student Testimonial - Steve Lazarus, Washington, DC .......................................................................... 25

Chapter 3 - Evaluating Apartment Deals ................................................................................................... 26

Part 1 - Check and Verify the Numbers ................................................................................................. 26

Part 2 - 7-Move Quick Check ................................................................................................................. 27

Part 3 - How to Calculate the Cap Rate Example................................................................................... 27

Part 4 - Cap Rate Modifiers ................................................................................................................... 27

Part 5 - Debt Coverage Ratio ................................................................................................................. 28

Part 6 - Using Software to Help You Evaluate Deals .............................................................................. 29

Part 7 - Crucial Questions to Consider During Your Evaluation ............................................................. 31

Student Testimonial - Renee Miller, Seville, OH.................................................................................... 32

Chapter 4 - Funding .................................................................................................................................. 32

Part 1 - Traditional Banks ...................................................................................................................... 32

Part 2 - Seller Financing ........................................................................................................................ 34

Part 3 - Partners .................................................................................................................................... 34

Part 4 - Hard Money.............................................................................................................................. 35

Part 5 - Private Money .......................................................................................................................... 35

Part 6 - City, State, and Federal Grants ................................................................................................. 37

Student Testimonial - Tommy Sirianni and Mark Arnella, Massapequa, New

York..……………………………………..38

City, State, and Federal Grant Programs at Live Events .................................................................. 409

"How to Talk to Lenders" at Live Events ............................................. Error! Bookmark not defined.9

Chapter 5 - Developing Your Exit Strategy ................................................................................................ 39

Part 1 - Quick Turn .............................................................................................................................. 419

Part 2 - Reposition ................................................................................................................................ 40

Part 3 - Keep the Property .................................................................................................................... 41

Part 4 - Keep the Property and Then Refinance It ................................................................................. 41

Part 5 - Exchange and Refinance the Property ...................................................................................... 42

Part 6 - Sell the Property ....................................................................................................................... 44

Student Testimonial - Timothy Owens, Dana Point, CA ........................................................................ 44

Chapter 6 - Presenting Your Offer ............................................................................................................. 45

Part 1 - Construct & Present Offers....................................................................................................... 45

Part 2 - Creating a Letter of Intent ........................................................................................................ 46

Part 3 - Example Letter of Intent ........................................................................................................... 47

Part 4 - Sample Contract Contingencies ................................................................................................ 49

Part 5 - The Contract ............................................................................................................................. 55

Student Testimonial - Jillian Herfurth, Cambridge, ON ......................................................................... 71

Contract Case Studies ........................................................................................................................... 72

Chapter 7 - Closing on Deals and Increasing the Value ............................................................................. 72

Part 1 - Closing on the Deal ................................................................................................................... 72

Part 2 - Increasing the Value ................................................................................................................. 73

Student Testimonial - Roger Ketchum, Kilgore, TX................................................................................ 74

Chapter 8 - Managing the Property .......................................................................................................... 75

Part 1 - Deciding Your Management Structure ..................................................................................... 76

Part 2 - Should You Self-Manage ........................................................................................................... 77

Part 3 - Five Factors for Choosing the Right Property Management Company ..................................... 77

Coaching Opportunities ........................................................................................................................ 78

Testimonials .............................................................................................................................................. 78

Chapter 1

Why Apartments & Types of Apartments

Part 1 - Why Apartments & Why Now

Let me start from the beginning. In 2000, I was totally broke.

A business I was involved in had failed, so I found myself out of a job. I had over $400,000 in

debt and lived in a 450 square-foot apartment. I had hit rock bottom. The only bright side was

that there was nowhere to go but up.

I decided to learn about real estate, since the real estate industry has created more millionaires

in this country than any other area of business.

I sought out people who REALLY rake in the big bucks and found that the truly wealthy

investors own APARTMENT BUILDINGS, not single family homes. I realized that it is these

people who own large apartment buildings that live the lifestyle I wanted.

Also, the wealthy commercial real estate investors do not waste their time tending to their

properties. Instead, they have property managers who take care of that for them. However,

they are the ones who spend the big checks, travel to exotic destinations, and live the lifestyle

that I desired.

So I decided to buy a 24-unit apartment building as my very first investment property. I bought

the building with “no money down” and even got a check for almost $50,000 CASH BACK at

closing.

A little over ten years ago, I knew NOTHING about apartment buildings. In fact, I overpaid for

my first investment property. The seller was asking for $900,000, and I agreed to pay $918,000

because I was too eager to buy. I made a lot of mistakes.

Realizing my mistake, I invested heavily in real estate education during the next three years.

Because of what I learned in those three years, by the time I finally sold that first building, I had

made over $1,620,000 in total profits from that ONE apartment building investment. That first

deal changed my life forever, and I never looked back. I have never done a smaller deal since.

Part 2 - Why Apartments Make Strong Investments

Apartments make strong investments for several reasons. The main reasons are:

Similar to Single-Family Houses - Apartments are closely related to single-family residential investments. Therefore, residential investors who are looking to move into the commercial marketplace will easily understand apartment investments.

Economies of Scale - Apartments allow you to develop wealth at a faster pace than most investments because of their economies of scale. This is because small rental increases are multiplied by the number of units in each property.

Many Tenants - Your risk is substantially reduced because there are many tenants paying your mortgage instead of one.

Commodity - Finally, and most importantly, apartments are the only sector of commercial real estate that is truly a commodity, fulfilling a basic human need (shelter). When couple that with the basic principle of value based on the cash flow that a property generates,

you realize that apartment investments truly share the best of both worlds. In other words, it’s a commodity that gives you cash flow.

Part 3 - The Time Is Perfect

Because of the state of the national and global economy, now is the perfect time to invest in

multi-family properties. In the current economy, houses stay on the market for months on end

as a result of the housing bust; retail properties are lagging because of decreased consumer

spending; and office properties are weak because of cuts in the workforce. However,

apartments are stronger than ever!

In fact, the market is seeing a boom in the demand for apartment units, and it's not even close

to the peak! Literally hundreds of thousands, if not millions, of people who would have been

able to purchase a home just 12 months ago, but are now forced to rent. This is because there

are no loans available after the sub-prime meltdown, especially for those on the economic

border of buying versus renting.

Also, the market has created huge opportunities to acquire apartment buildings - way, way,

way below retail value. The market is bursting with great properties, in great areas, with great

tenants looking to rent. Many tenants find themselves without a home, since being dumped

by owners who bought during the real estate craze of 2003 to 2007 and now find themselves

unable to make their mortgage payments. Even banks are having to clear out tenants in the

dozens or more foreclosed properties on their books and sell these properties for under market

value. These properties are simply sitting there, waiting for an investor with the right education

and skills to come along and make a fortune off of them!

This means that even during a recession, there is more demand for apartment units. Plus,

finding quality tenants may be easier than ever. Not to mention that there are more great

properties available than ever before! Now is the time to become filthy-rich by investing in

apartments!

Part 4 - The Monopoly Principle

In the last decade or more that I have been teaching multi-family investing, I have developed a

technique that I call the Monopoly Principle.

I'm sure that Monopoly® is a game that you've played many times before. Have you ever won

the game by only buying houses?

Of course not. That's not a winning strategy. So what do you do to win in Monopoly? After

you've bought four houses you exchange them for a single larger property, right? That's when

the income really starts flowing in. It works the exact same way in the real world, too!

If you've been investing in single-family homes, the last 18 months probably haven't been too

kind to you, correct? Now I'm not saying that buying single-family properties is a bad

investment, I'm only saying that Multi-Family properties are a much better investment! It's

time for you to trade in those houses and start making real money!

Part 5 - Four Personal Investment Stages

As we grow in life, most people go through four stages of investment. Where do you stand?

Knowing this will help you determine your goals for investment.

Asset Accumulation: This normally takes place in your early to mid 20’s and continues through your early to mid 30’s. During this time, you’re laying the foundation of acquiring the basic necessities of food, clothing, transportation and shelter. Also during this time frame, most people begin to save and initially become aware of the importance of investments.

Wealth Creation: Occurs from your mid 30’s to mid 50’s. This is when the majority of people really start to take a more aggressive investment posture. They recognize that they were saving too little while actively working within their career.

Asset Management: From your mid-40s to mid-60s is the time when you manage your assets to ensure that you are creating stabilized cash flow, as well as fail-safes in case some of your assets do not perform as you anticipate. Generally, your risk tolerance decreases substantially during this phase, and you recognize the value of watching each and every dollar.

Asset Disposition: Occurs from your mid-60s and on. During this final phase of wealth creation, most individuals begin to look for ways to convert their hard assets into liquid wealth. Most will do so through creative tax structuring to ensure a long, healthy and happy retirement, characterized by abundance. Most people in this phase also want to provide an effective way to transfer their assets to loved ones upon their passing.

Part 6 - Setting Goals for Yourself

When it comes to embarking upon any new venture, the most important thing is to assess

where you are at the moment and set solid goals with specific milestones for whatever it is you

hope to create or accomplish.

Setting Goals: When it comes to setting goals, it is important to set short-term goals, mid-term goals and long-term goals in order to achieve the best results and keep you motivated along the way.

Self-Evaluation: When most people set goals, they think of things outside of themselves, especially in business. However, everything you do in business revolves around where you are in your personal life. At this time, you want to assess where you are in order to prepare for where you will go.

Determining Your Risk Tolerance: Many people evaluate a project and find themselves unable to move forward for any number of reasons. Most commonly, they find themselves undermining their own success out of fear that the project will fail. With this in mind, it's incredibly valuable to determine your true risk tolerance.

Time Management Evaluation: One of the most important elements within commercial real estate is to choose a management style and understand the amount of time that is required to properly manage your investment.

Part 7 - Types of Apartment Buildings

Now that you’re clear about your goals, you can start thinking about what kind of investment

you would like to buy. You can focus on a variety of different types of properties within the

multi-family marketplace.

From a physical standpoint, consider the type of structure in which you want to invest, as each

type of structure brings certain benefits to the table, as well as certain challenges. Here’s a

breakdown:

Quadplexes

Easy to acquire

Plentiful in the market

Excellent starting point for the new investor

Requires on-site manager

Converted Motels

Motel conversion is a good way to buy smaller properties, which allow for easy conversion

Unit sizes can be small

Often located near major highways or high-traffic areas

An opportunity to combine units

Plentiful in today's marketplace

Can be purchased below value or asking price because of adaptive reuse

Garden Style

Garden style apartments are usually one to four stories high with a courtyard.

Solid starting place for beginning investors

Usually have more units

Plentiful in the marketplace

Manor House Style

Also called big house or Mansion style

Modern version of the Garden style

Found in more affluent areas

Multi-Building Attached/Detached Townhomes

Excellent opportunity for creative strategies

Staged renovation

Staged leasing

Good conversion or subdivision prospect

Mid-Rise or High-Rise Buildings

Typically more expensive because of more units

Offer incredible economies of scale

Usually very high profile

Part 8 - Understanding Property Classifications

It’s important to understand how buildings are classified, so you understand what you are buying. Here’s a list:

Lower-Income Properties

Usually in downtown areas or first ring suburbs

Often government-subsidized

Usually suffering from physical and functional obsolescence

High management intensity due to the property condition and fragile financial condition of the tenants

Usually underserved population of tenants

With sound management, often has strong growth potential

Excellent potential for state, federal and local assistance for acquisition, renovation and ongoing management

Middle-Class and Blue-Collar Properties

Scattered throughout the city

Client base is usually a mixture of white-collar, blue-collar and recently retired residents.

Moderate management intensity

High competition in the marketplace

Very competitive leasing environment

Luxury Properties

Usually positioned in affluent areas or near amenity-based sites, such as golf courses, waterfront locations, scenic vistas, etc.

Client base usually composed of those that choose to live in an apartment for convenience

Usually high management intensity based upon the service level that tenants demand

Often strong competition, due to recent overbuilding in many metropolitan areas, as well as the current economic downturn

Little to negative anticipated rate growth

Class A Properties

The newest buildings

Extremely functional and modern

Feature modern amenities

Often built using green building standards

Well located

Generally serve the luxury market, but not always

Typically less than 10 years old

Usually most expensive, on a per unit basis

Class B Properties

Typically constructed within the last 15 to 30 years

Condition varies based on how former owner maintained the property

Usually serve middle income tenants

Class C Properties

Typically constructed within the last 30 to 50 years

Generally composed of outmoded design styles

Functionally limited

Often serve lower-middle to low income tenants

If acquired properly, the highest potential for growth and increased property value

Class D Properties

Typically constructed 30 to 100 years ago

Extreme functional obsolescence

Excessive deferred maintenance

Extreme management intensity

Very difficult tenant relations

Possible elements of drugs, prostitution and violence.

Personal safety concerns when visiting the property

Part 9 - A Basic Overview of the Entire Apartment-

Buying Process

Right now, I’m going to give you the basic steps for buying an apartment. This will give you an

overview of the process. In later chapters, I go into more detail, explaining each step. Here’s is

the entire process:

Lay the foundation by taking this business seriously.

Take a realistic assessment of your financial condition and skill set.

Engineer a personal investment blueprint to achieve success on your terms.

Choose the city and neighborhood where you wish to invest.

Choose the size of property that will meet your needs.

Choose a property class to focus on (choose your niche).

Locate opportunities that match your blueprint.

Quickly prescreen your opportunities.

Request initial due diligence documentation. (This will be limited in scope and somewhat questionable in accuracy.)

Conduct a thorough evaluation using the full “Opportunity Evaluator Premier Apartment Edition” software.

Evaluate your acquisition strategy and pathway to profit.

Conduct your initial analysis of financing requirements.

Construct and present your offer (Give them a Letter of Intent only at this stage). Negotiate the terms of the deal based on your financing needs.

Upon acceptance, launch the physical due diligence process and determine which inspections you will require.

Have your qualified legal counsel prepare Purchase and Sale agreements.

Stay in control of the deal; conduct thorough due diligence of all financial and operating histories and recommended physical inspections; open escrow with your title company.

Be armed with the details to renegotiate the terms.

Finalize all components of financing.

Conduct a site visit to gain an understanding of current management styles and philosophies.

Review takeover procedures to prepare for a smooth transition.

Close the transaction.

Announce your presence; inform tenants of new procedures; and establish a new professional relationship with your tenants.

Implement your pathway to profit.

Stabilize the property.

Prepare for sale, refinance or long-term ownership.

Student Testimonial - $50,000 monthly cash flow on first deal!

Dear Scott, using your creative technique taught us how to look where no one else was looking.

I found a seller through one of your letter campaigns who wanted to retire and was motivated

to sell. He was only asking $5.2 million, even though I was able to determine from your

awesome software that it was worth close to $7 million. Using your tools, I was able to get the

deal done. The property and the accompanying business cash flow of $50,000 per month after

mortgage ($600,000 in positive cash flow per year,) along with the $2 million in equity that I

gained at the closing table, was a decent deal for my first try. You gave me the tools I needed

to get this deal done. Without the system I wouldn't have gotten this - or any - deal done.

Thank you again for changing my life. I am forever indebted to you.

Peter Zebka

Las Vegas, NV

Chapter 2

Finding Apartment Deals

Part 1 - Bank Workout Departments

In this chapter, I show you more than six ways to find apartment deals. These include: bank

workout departments, auction houses, letter campaigns, new commercial real estate agents,

Loopnet.com, and more.

Let’s start with bank workout departments. This section of the bank deals with buildings

where the mortgage holder has missed payments. This is similar to the real-estate owned

(REO) departments for single-family houses.

When mortgage holders miss payments, it points to owners who are struggling financially. The

bank, which holds the mortgage, may be willing to negotiate lower prices on their loans, in

order to stop the losses. This is similar to short-sale negotiations in single-family houses.

The key points to remember when dealing with bank workout departments are as follows:

They are also known as the Asset Management Department.

Typically it is best to work with lenders face-to-face, rather than over the phone, until you have built a solid relationship with someone in the workout department.

Position yourself as a problem-solver that specializes in turning around properties.

After you have successfully solved a lender’s problem once, they will be happy to give you more deals. The lender will look to you to help solve future property problems.

Work with the lender to become a part of the management team.

In the past, many banking institutions were shy about disclosing their involvement in defaulted or workout type properties because they felt that it reflected negatively upon their lending institution.

In today's marketplace, with the overwhelming number of defaults in both the residential and commercial arena, lenders now realize the importance of working with investors to turn properties around.

Recently, a growing trend among brokers is to market properties as REOs for multifamily use. While some brokers have done this in the past, this trend is becoming more popular with real estate agents now because they know opportunistic buyers are on the prowl.

Scripts and Role-Playing at Live Events

At our live seminars, Boot Camp events, and in my videos, I give you scripts to use when talking

to bank asset managers. In our live events, we also do role-play exercises to help you gain the

know-how and confidence to effectively communicate with bank workout departments. Please

visit MakingMoneyWithCommercial.com for more information on live events you can attend.

Part 2 - Auction Houses

I have purchased, literally, tens of millions of dollars worth of properties at commercial real

estate auctions and received millions of dollars in discounts per property. The question

becomes: How are you going to find auction houses?

Well, what you need to do is to go to your favorite Internet search engine. (I don't care if it's

Yahoo, Google, etc.) Type in “commercial real estate auctions.” When you do that, you are

going to get back thousands of search results. Choose only the top 10 commercial real estate

auction sites and request to be added to their mailing lists.

However, you must do one thing differently than most of the other people who sign up: You

must request to receive physical mailings. Once you’ve done this, you will receive auction

flyers in the mail that detail the types of properties available and the areas that they are

located. Also included are highlights regarding how the property performs. Specifically, the

auction flyers provide information regarding property value and background details and contain

several pictures of the property.

The reason I'm asking you to sign up for physical mailings is to avoid a flood of property

emails from each auction house. Auctions houses are more willing to flood you with

information via e-mail. Generally speaking, there is nothing wrong with signing up to get

information via e-mail, but let us think this through.

Say you sign up at 10 auction sites, and each auction site sends you anywhere between 10 to 50

different property opportunities each week. This means that if one site sends you 50 e-mails a

week and you multiply that by four weeks in a month, you will get 200 to 250 e-mails per

month from just one auction house.

Multiply that figure by the 10 sites you signed up for, and you could end up receiving 2,000 e-

mails per month! Furthermore, you would have to go through each individual e-mail and click

on each link in the e-mail to download the photos for each property available. Then you would

need to evaluate all the information in each e-mail and link to a variety of different web sites in

the meantime.

No one is going to go through all that. Not to mention that this will destroy your e-mail address

and you will not be able to use it any longer. If, after reading this, you still want to receive

property information via e-mail, be sure to set up a separate e-mail account that serves no

other purpose than to receive information from these auction houses.

Now, if you request to have property flyers mailed to you instead of e-mailed, as I’ve

advocated, you will be able to sort through the physical mailings much like you sort through

junk mail and toss the irrelevant items in the recycle bin. Yes, I am interested; no, I am not

interested. This is a much more efficient process. It should only take you two to three minutes a

week, and you will be able to sort through all the available properties and discern which ones

you are interested in. The rest of the evaluation process will take a little more time, but I’ll

explain that process of checking and verifying numbers a bit later.

Initially, however, I want to focus on locating opportunities. The good news is that when you

receive auction house flyers detailing which properties are available, you know that these

properties are being offered for sale at far below market value. This is how the auction house

generates public interest. The auction houses offer properties for far below what it is worth,

and everybody recognizes that.

The challenge here is that not all the properties that are offered for below market value sell

for below market value because appealing properties create a bidders’ frenzy. In a bidders’

frenzy, potential buyers occupy a room together and compete against each other to buy a

property, which usually increases that property's price quite a bit higher than what it was

originally set at.

Having said all this, I want you to know that I have been able to purchase tens of millions of

dollars in commercial real estate with multiple millions of dollars in discounts. This is a viable

strategy. And what I can tell you about today's market is that the shake-up in the economy

coupled with rising interest rates have come together to create the unique circumstances that

we currently have in the commercial real estate market ,as well as in the residential real estate

market.

This means that there are more auction opportunities today than I have seen in my entire

career! Literally, four times the amount of transactions cross my desk on a daily basis. In

addition to that, there is more value in each of these deals, so don't miss out on my strategy. I

believe that you will find it to be extremely powerful.

However, it is important to pay attention to the unique components of auctions in order to

be successful. In order to be successful with an auction property, you must make sure that you

take into account all the elements that make an auction come together; and these elements

will be detailed for you either in the auction house’s flyer or on the web site.

Here’s what you need to know about working with auction houses:

Many auction houses - There are a lot of auction houses nationwide, and they are filling up very quickly as more and more properties become distressed in the current economy.

Get on lists - Call about a dozen of these companies and ask to be placed on the list to get current and upcoming opportunities sent to you. Most of the companies will send you dozens of leads via e-mail each and every month.

Below cost - Every one of these properties is going to be listed significantly below current market value and also below replacement cost. Typically the property’s economic performance is already established.

Line up money - The challenge of financing these types of properties calls for your creativity because you have to line up the money before you know if you have successfully won the bid.

“As is” basis - Nearly every property that you will encounter will be sold on an “as is/ where is” basis with no contingencies.

Sold with financing - The excellent news is that many of these properties are being sold with financing - and even seller financing - because of current market conditions.

Here are some strategies for getting started with auctions:

Call auction houses - Call an auction house regarding a property you do not want. Do this, so you can go through the process without having any risk of actually making an acquisition before you have witnessed what goes on during the feeding frenzy.

Request and review bidder’s package - Keep in mind that the majority of the information is provided to attract your attention, and that there may be significant omissions of critical material facts that would be uncovered during standard due diligence. Often, this is the reason for going to auction.

Requirements - In the requirements section of the bidder’s package, they are going to tell you the amount of money needed to attend the auction; usually, certified funds must be verified prior to entering the auction.

Evaluation - Your evaluation of the project should include not only the money necessary to win the auction, but also any money for renovations, holding costs and any anticipated funds during leasing.

Pitfalls - The major pitfalls include a short due diligence period with all the investment capital required up-front before you even know if you will be successful in getting the property. In addition, the contract is already drafted for you ahead of time. Finally, the property is usually sold “as is/ where is” with no contingencies.

List of Auction Houses at Live Events

At my live events and boot camps, I give you a complete list of auction houses. It is also

included in my coaching services. See MakingMoneyWithCommercial.com.

Part 3 - Letter Campaigns

Letter campaigns are extremely powerful and are a way to utilize specific lists of information

to target property owners that are willing to do a deal the way we want, in areas that we want,

on properties that are of the size we desire.

Keep in mind that I am going to give you multiple strategies with which to use these letter

campaigns. You will find you are dealing with a highly targeted individual, who is very

motivated to work with you.

Here are some ways to generate leads to mail letters and how to market to them.

Sources of Leads

Title companies

By offering to use their services in closings, they are usually much more open to making these arrangements.

County courthouse/website

Courthouse clerks can often be enticed to pull records during their off-hours for compensation.

Paying .50¢ - $1.00 per lead is a good starting point.

List brokers

Have enormous databases of nearly any demographic segment available for sale.

A popular site is www.infousa.com

Search Internet for “List Brokerage Service.”

Marketing Strategies

Recurring letters have a much higher success rate. Mail at least 3 times to each person, 30 days apart.

Do not use bright colored paper (such as green, blue, pink, etc.).

Leave multiple ways for the target to respond – email, phone.

The more specific and targeted your lead criteria, the better results you will get.

Your goal is to obtain a list of at least 100 owners every 90 days; keep compiling these names

throughout the year. You want to make sure that you send your mailings out every 30 days. By

doing so, you increase the chances that your message reaches the potential seller on the day

that he or she decides that he or she no longer wants to be an owner.

Letters at Live Events

At our live events, I give you sample letters that you can use. These letters are proven are

tested to attract potential apartment building sellers. See

MakingMoneyWithCommercial.com.

Part 4 - Commercial Real Estate Agents

New Agents

Another way to find deals for apartment buildings is through new commercial real estate

agents. Why are you going to use new commercial real estate agents? Simply because new

commercial real estate agents are hungry, and they are more than likely to be dealing with

the types of properties that you want to find anyway. They typically deal with those value-

added opportunities that allow you to step in, turn the property around, and create value in a

very short period.

Now, here is the good news: New commercial real estate agents are willing to talk to

prospective buyers now, even if you have no experience, no money and no credit.

I am going to show you how to work with commercial real estate agents. You do not want to

call them up and say, “Hey, Mr. Realtor, I do not have any money, credit or experience, so all

the time that you will invest to find a property is going to be fruitless; since I will not be able to

close the deal.”

The idea here is to tell them that we work with a group of national investors, and if we find a

good property, we will make the deal happen. And that is the truth because you are working

with my organization now, and we close properties all over the United States all the time.

Now, new commercial brokers will also give us one additional advantage that the established

brokers will not; new commercial real estate agents will run top-notch property prospects by

new investors, while established brokers already have a list of clients that they present their

very best deals to. This is to say that by the time a deal trickles all the way down to us from an

established broker, the likelihood is that the deal is probably not that great anyway, or

somebody else would have grabbed it before us.

These are the basics for working with real estate agents:

Agents know the market - In any level of creative investment, you have to learn to work with real estate agents - no matter what anybody tells you. Agents always have a better handle on what is going on in the marketplace than you do. They have more opportunities and are more aware of the big picture trends than you. That is, if they are qualified, capable and doing their job properly.

Paid on performance - The best news for you is they get paid on performance. This means that if they do not bring you a profitable deal that closes, they will not get paid. The worst news for you is that they get paid on performance. This means that if they bring you a qualified deal, and you cannot close it, they will not get paid. To overcome this, you need to understand how to create a relationship with someone whose very survival and well-being depends on your ability to do what you say.

Start with high-priced properties - Understand that when you request deals in the beginning stages of your pursuit, they are not going to send you the pick of the litter. The very best deals are usually reserved for their top-flight clients. Usually in the beginning, you see high-priced

properties with very little value-added opportunities. They are trying to qualify your investing savvy. This is your opportunity to take your relationship to the next level.

Give specific criteria - When they send you a property that does not meet your investment criteria, redirect them, let them know what you are looking for, and give them specific criteria.

This is the criteria to give commercial real estate agents:

Mid-size building - If you are just beginning, a midsize building of 20 to 40 units is usually best. Also, you want something 30 years old or newer. It is not going to suffer from as much physical obsolescence or deferred maintenance, and it will likely have more modern and efficient utility systems.

Avoid flat roofs - Whenever possible, avoid flat roofs. This is not possible on high-rise and mid-rise buildings, but it is important for garden style apartments, especially when you are dealing with multiple buildings comprising one complex.

Value-added upside - You want to ask for properties that have a value-added upside. Do not overpay or purchase a property based on pro forma – or estimated figures based on previous operations.

Creative financing - Let your broker know you are always interested in properties that allow you to acquire it with creative financing techniques, including: seller financing, assumable financing, deferred mortgage payments, or the ability to get in very little money down.

Market conditions - The attitudes of brokers will vary depending on how hot the real estate market is in the region you are looking to invest. If the market is overheated and filled with a lot of unsophisticated investors willing to overpay for properties, then you are likely to find little to no interest from brokers willing to work on creative deals. However, when the market returns to normal or turns cold, brokers are interested in creative deals that can get done and will give you great opportunities.

Remember - We are bottom feeders!

Scripts and Role-Playing at Live Events

At our live seminars and Boot Camp events, as well as in our videos, I review scripts with you,

and we role-play to help you gain the know-how and confidence to effectively communicate

with commercial real estate agents. Please visit MakingMoneyWithCommercial.com for more

information on live events coming to your area.

Part 5 - Loopnet.com

LoopNet has replaced the MLS in many areas and has become the go-to place for brokers and

agents to advertise commercial properties for sale. Like the MLS, there are great deals and

terrible deals on LoopNet, so you have to filter through the properties.

The site has some great tools for researching areas, pulling comparable sales and prospecting.

You can also set up alerts, so anytime a new property that fits your criteria becomes available for

sale, you will be notified about it.

Listings available on LoopNet include all commercial real estate property categories, including

commercial office space for lease and for sale, hotels and motels, multifamily apartments, retail

space and land for sale.

Part 6 - Other Ways to Find Deals

Here are more ways to find deals:

Apartment Associations

Courthouse Auctions

Real Estate Financial Advisors

Internet Lead-Generation Campaigns

Foreclosure Properties

Government Sources

The United States government-controlled properties are available by the thousands, and they

are offered at deep, deep discounts. The government has properties strewn throughout all of

North America that they have no money invested in. These properties were reclaimed for tax

purposes or to shut down illegal activity. Government properties give you tremendous cash

flow, and you are able to get them at huge discounts.

Student Testimonial - I Switched My Thinking to Bigger Deals and Bigger

Profits.

Wow, Scott, it doesn't seem like it's been almost a year since I started using your system.

Looking back, I can't believe how different my business has become. When I started out in this

business I was basically in a “buy a junker, flip a junker” mindset. Don't get me wrong, I did

pretty well flipping 40 to 50 houses a year, but after learning your system, everything has

changed. I switched my thinking to bigger numbers and bigger deals. As a result, I bought a

property for $300,000 and sold it for $625,000 within six months; that's $325,000 in just six

months! I also converted a nine unit apartment building into condominiums with a profit of $1

million. Thanks to your system, not only did I do the above with little - if any - of my own

money, but I expect to do even bigger deals this year. I have a team that works for me now,

doing the little deals. Also, I won't go see a project these days, nor do I consider it worth MY

time, if there's not $300,000-$400,000 profit within six months on the backside. I simply can't

afford to. The breakthrough concept of Evaluating and Funding Deals was worth the price of

your system alone.

Steve Lazarus

Washington, DC

Chapter 3

Evaluating Apartment Deals

Part 1 - Check and Verify the Numbers

There are numbers that you can verify and numbers that you cannot. The numbers that you

can verify are things such as utilities, taxes and insurance. When you get a bill, it tells you what

property it applies to, as well as what time period is covered. The bill also gives you an amount

due. Therefore, you can compare that amount to the operations of the property, so you can

clearly see how the property was impacted.

However, there are also numbers that you cannot verify, such as management; you will never

really know what it actually costs for someone to manage a property. The seller may plug in a

figure, but who can you go to, to have the figure verified? No one, really. This is because the

cost of management is not something that is typically billed on a monthly basis. In addition to

that, you are not going to be certain about repairs and maintenance; it is very easy for a seller

to reduce the overall expenses that they reflect on a property by simply excluding some of the

repair invoices that they had to pay along the way. And you will not have any way of referring

to such invoices to verify whether or not that expense actually occurred.

Another little-known way that sellers are able to manipulate numbers is with management of

the rent roll. Unless you have a good system in place, this is another area that will be difficult to

verify. Sometimes, the seller will list a property as having an “occupied” suite when it isn’t. In

this case, the property’s income will be artificially inflated, so it will not help you assess the true

value of the property and the kind of revenue it should generate in the upcoming year.

The three areas you may have a hard time verifying are: vacancy, management, and repairs

and maintenance. One way to assess this is to look at the income and expense statement

they provide you. You will see six income categories by year. You always want to get at least

three years of historic operating expenses. You will also find nine expense categories. These are

broken down into separate categories and then listed by year, with again, three years of

historic operating statements.

This is simply a summarized income and expense statement. It does not provide a tremendous

amount of detail. Maybe the income says, “Rent: $270,517,” but it does not tell you where the

rents come from; it does not tell you how long the tenants have been paying, who’s paying

them, or how long they will continue. The continuity of income is extremely important.

In the initial phase, when you first make an offer on a property, you will only receive

summarized information, not directly detailed information. The directly detailed information

is usually held back until the offer is made and accepted.

Once this happens, you enter into what we call the due diligence phase of the contract. In

order to successfully evaluate the property, you must be able to break down the numbers

that you see. Furthermore, you need to break down the numbers properly and because your

goal is to derive the value of the property.

Many people say, “Well Scott, all you have to do is take the net income and divide it by the

appropriate “Cap Rate” or rate of return, and you can discern what the property is truly worth.

Those people will find themselves in an awful lot of trouble because you have to scrutinize the

numbers to determine if they are accurate or not. If they are not accurate, how can you

derive a proper value?

You should perform approximately 150 separate calculations to determine if the property is

a good investment or not. I do not say this to intimidate you; I tell you this, so you understand

the responsibility that you, as an investor, have when making multimillion-dollar decisions.

Breaking down 150 separate calculations would be difficult enough, even if you had a financial

calculator. This is because most of you probably do not know what formulas you need in order

to determine the correct information. And even if you did, it would take hours or weeks to do

it. But I am going to show you a quick way to check those figures.

Part 2 -7-Move Quick Check

You should utilize several preliminary financial evaluation figures when

determining the value of a property. I call these figures the 7-Move Quick Check,

and they are listed below.

1. Purchase Price

2. Gross Potential Rental Income

3. Vacancy/Credit Loss

4. Gross Operating Income

5. Total Operating Expenses

6. Net Operating Income

7. Cap Rate

Part 3 - How to Calculate the Cap Rate

It is important to know how to calculate the capitalization rate (cap rate) of a property in order to understand the true value of that property. Below is an example of how to calculate the cap rate.

1. Find the recent sold price of an income property, such as an apartment building.

Example: Eight - unit apartment building sold for $500,000.

2. For that same apartment building, determine the net operating income, or the net rentals received by the owners.

Example: The net rental income (income after expenses) is $40,000.

3. Divide the net operating income by the sale price to get cap rate.

Example: $40,000 / $500,000 = .08 or 8% Capitalization Rate

Part 4 - Cap Rate Modifiers

Capitalization Rate

Now that you know how to calculate the basic cap rate, I will go over other factors that may

modify the cap rate. Here is a list of capitalization rate modifiers:

Liquidity of investment - How quickly you can get your money out

Tax benefits - What tax shelters are created by the acquisition of the property, and do you have the income necessary to use as an offset?

Potential for appreciation

Immediate cash flow

Creative and flexible terms

Risk tolerance

Ease of financing

The market where the property is located

CAP Rates vary by property classification and will vary by market and by city; however, the

general guideline for CAP Rates are as follows:

Class A buildings – 5% to 7.5% capitalization rate

Class B buildings – 7% to 9.5% capitalization rate

Class C buildings - 8.5% to 12% capitalization rate

Class D buildings - 10% to 14% or higher

Part 5 - Debt Coverage Ratio

Debt Coverage Ratio (DCR)

The debt coverage ratio is the net operating income divided by the annual debt service amount.

The DCR is used to determine what kind of cash flow a property will generate.

Also referred to as “Debt Service Ratio” or “Debt Service Coverage Ratio”

Annual NOI ÷ Annual Debt Service = Debt Coverage Ratio

Examples:

Negative Cash Flow

$100,000 NOI ÷ $110,000 Debt Service = .91 DCR

Break-even

$100,000 NOI ÷ $100,000 Debt Service = 1.00 DCR

Positive Cash Flow

$127,000 NOI ÷ $100,000 Debt Service = 1.27 DCR

Strong Cash Flow

$157,000 NOI ÷ $100,000 Debt Service = 1.57 DCR

Part 6 - Using Software to Help You Evaluate Deals

Using Software to Help You Evaluate Deals

In order to help you evaluate properties easily, efficiently and accurately, we have created an

“Opportunity Evaluator” software package. Our “Opportunity Evaluator” software package is

the most complete commercial real estate evaluation package that I am aware of. We

designed this specifically for our use, and it has been used by tens of thousands of our students

across the world to successfully evaluate commercial real estate.

We have even had brokers, bankers and countless attorneys request a copy of our software

to evaluate their own properties once they have seen how impressive it is. We typically hear

that our software is better than the software that these brokers and bankers have at their

disposal.

Our software takes the guesswork out of evaluating a property. Our software tells you what

the property is truly worth by plugging in the correct numbers in the appropriate formulas. It

allows you to project what the property will be worth and what kind of profit it will turn in the

future, as well as showing you what will happen if you gain or lose tenants along the way. With

our software, you will find a field for every expense that you will incur while operating the

property.

For example, let’s say someone submits an income and expense statement to you that is

missing management charts. Our software will remind you that it is impossible to operate a

property without any clause for management - so where is it? You can take this information

back to the seller, call them on the carpet, and say, “Look, I need to see what the

management expenses are. If you do not have accurate records of this, I am going to plug an

estimated value into my software. Understand that this will reduce the value of your

property in my calculations.”

By using the “Opportunity Evaluator” software, we constantly find ourselves in a position of

authority and competence in our negotiations. We are able to present accurate numbers to

the seller, broker, bank or whomever in black and white, so they can see how we are justifying

our offer. We do not simply send the parties an offer based on an analysis that we pulled from

thin air.

Instead, these are the numbers that they gave us, coupled with the rate of return that is

prevalent in the property’s area - or that we demand as an investor. Based on this authoritative

analysis, we submit an appropriate and profitable offer. Again, utilizing the “Opportunity

Evaluator” software affords us an extremely credible position in our negotiations.

Here is another thing: Do not believe anything you are told because most sellers know

beforehand that they are going to sell the property, prior to putting it on the market. What

this means is that the sellers have already begun to clean up the numbers to make sure that

the property looks as good as it possibly can.

Next, consider this: What if the seller augmented income figures or detracted from reported

expenses? What if the seller added $2,000 to each income figure that shouldn't be there? In

that case, the numbers would reflect $270,000 in grants; when in reality, it is only $268,000 in

grants. Instead of $5,000 in operating expense reimbursement, the real figure is $3,000. Instead

of $11,000 in real estate tax escalation, it is $9,000. Instead of $4,000 in property insurance

reimbursement, it is $2,000.

Instead of $26,000 for water and sewer reimbursement, it is $24,000. And other income should

only be $200 instead of the $2,000 that is reflected by the seller. If the seller augments each

income figure by $2,000 that is $12,000 more income reflected than you will actually receive.

Let us now talk about expense categories. What if the seller dishonestly omitted $1,000 from

each of nine expense categories? Instead of the $7,000 figure reflected as an expense in the

repairs and maintenance category, the real figure is actually $8,000. Contract labor is actually

$4,000 instead of the reported $3,000. Instead of $2,000 for electric utilities, it is really $3,000.

Instead $24,000 for water and sewer expenses, it is $25,000. Instead of $21,000 for gas, it is. In

the insurance expense category, the seller reports $11,000 when it is $12,000. And for real

estate taxes, the expense is actually $26,000 instead of $25,000. That is $9,000 in additional

expenses that you would experience and had not accounted for.

Now consider those two numbers together: $12,000 more in income, as it was overstated, and

$9,000 more in expenses that would have to pay, with no money to offset it. Next, take into

account that $21,000 swing, and, at a 10 percent return, this means that you would overpay

$210,000 for this property – if you did not know any better. That is an expensive lesson in

anybody's book, and there is no reason to make it.

I will make certain that you understand what these figures represent and what the real

numbers are. And if someone tries to misrepresent the figures to you, you will be able to

figure it out. This will allow you to discuss it in an educated and professional manner, so you

are certain that you are making the right deal with the right information.

That is where our “Opportunity Evaluator” comes in; it helps you sift through the seller’s

smokescreen in minutes. Not hours, not days and certainly not weeks, as it takes most bankers

-- who do this every day. You will be able to do this in minutes. Also, once you have figured out

in which direction you want to go, we will help you project things forward. Finally, for those of

you who are going to take your education to the next level with the Commercial Property

Academy, we will be there to help you evaluate your deals through our coaching program,

which I'm so excited to tell you about at the end of this program.

Part 7 - Crucial Questions to Consider During Your

Evaluation

Several things you should take into account when evaluating a potential deal are:

What type of property is it?

What year was it built?

Where is it located?

How many units or square feet (depending on the type of property)?

How many stories is the building?

What type of construction? Is the building constructed out of brick, wood or concrete blocks?

What is the present occupancy?

Does the present occupancy pose too large a challenge for your skill level based on the size of the property?

Does the present occupancy pose too large a challenge based on the size of the building from a cash flow standpoint?

Does the present occupancy present a reasonable opportunity to turn the property around based on likely and achievable management changes?

Within what timeframe do you believe that this turnaround could be made?

What is the expense ratio?

If the property type and occupancy is a good match for your skill level, cash flow and time frame for turn-around, does the increased value warrant committing to this project over others that you are considering?

Does the expense ratio match what is considered to be reasonable for this type of property?

If the expense ratio appears to be high for this type of property, would bringing it down to reasonable levels create the values necessary in the property to warrant acquisition?

What is the gross potential rental income?

What is the asking price of the property?

What is the net operating income?

Does the asking price of the property represent a reasonable return based on the net operating income?

Does the property’s asking price indicate that the seller has reasonable expectations for the value of the property?

Is this property located in an area in which you choose to own properties?

Is this property one that you would be proud to have in your portfolio?

Is this property one that you wish to pursue further?

Recognizing Ways to Increase Value When Evaluating a Deal

Next, you need to know what questions to ask yourself when you look at the numbers. There

are several questions you must ask. The first question is what is the current income of the

property? And, more importantly, what is the potential income? There are several ways to

increase the property’s value.

For instance, you can increase the property’s income, which will, in turn, increase the value.

An increase in income also gives you a better chance to turn the property around. That having

been said, however, you do not want to pick up 500,000 square-foot vacant buildings because it

is a lot of work to turn a building of that size around. But, a 5000, 10,000 or even 15,000

square-foot building that is 50 to 60 percent occupied gives you plenty of opportunities to turn

it around.

Additionally, it does not put you at such risk that it will take 10 years to turn it around. Then

you have to ask yourself what the current expenses of the property are. What are the

expenses that occur with the property now, and is this property being managed as efficiently

as it could be? If the answer is no, the property is not being managed as efficiently as

possible, then that gives you another way to improve the property immediately. This is yet

another way to create more value and force quick and exciting appreciation.

Case Studies and Checklists at Live Events

In our live seminars, Boot Camp events and videos, I show you very detailed case studies. I also

give you all the specific tools you need, such as:

* Due Diligence Checklists

* Rental Surveys

* Financial Due Diligence Documentation

Please visit MakingMoneyWithCommercial.com for more information on live events in your

area.

Student Testimonial – With a creative offer, we obtained an amazing

mixed-use property at a great price – and cash back at closing.

I located this property because we own another 38-unit apartment building in Willard, Ohio.

This particular apartment complex is within five miles of the one we currently own. This is a

mixed-use property with a total of 56 apartment units and office spaces combined. There are

50 apartments and six office suites in the building.

We used creative offers that we learned from Scott. We initially wanted a 20 percent seller

carry-back, so we wouldn’t have to use any cash out of pocket. However, the sellers didn’t want

to carry a full 20 percent. So I came back with an increase in purchase price and taking a 10

percent consulting fee because I’m a real estate agent, which would ultimately be credited to

my side at close and go directly toward the down payment. The sellers are to hold the other 10

percent for five years with a 30-year amortization. At close, we should walk away with

$35,000. This will be used toward prorated rents, deposits and taxes.

Off this deal, we should make a $7,000-$8,000 in monthly positive cash flow. And we are

starting with $200,000 in equity. Our future plan for property is to hold it and let it continue

to provide cash flow. Also, it is currently rented under market rents. Therefore, over the next

12 to 24 months, we can increase rents to increase net cash flow on monthly basis.

Additionally, the office spaces have been leased to the same tenants for 10 years, so we have

the ability to increase their rent, as well.

Renee Miller

Seville, OH

Chapter 4

Funding

Part 1 - Traditional Banks

Bank Financing

In addition to providing a down payment, you will most likely need to obtain funding for the remaining price of the property you wish to purchase. There are many ways to obtain funding for a commercial real estate deal. One way is to have a bank finance a large portion of the funds needed to purchase a commercial property.

Advantages of Bank Financing:

Competitive Rates

Favorable Terms

Relationships

1. They know you.

2. They know your project.

3. Bankers network with other bankers.

4. Transaction stays with the banker.

5. Face-to-face contact

Also, it is important to familiarize yourself with the basics of the loan process. Underwriting of income-producing commercial loans largely depends on the income generated by the property and should include the following:

Value determination by current and projected NOI for income properties.

Marketability and/or discounted cash flow projections for unimproved land acquisition, as well as for acquisition and development loans.

Sponsorship of experience, stability and financial strength of project.

Estimation of the project's future viability should include consideration of location, competition and the success of other projects in the area.

Past experience with the borrower and his or her principals.

Loan-to-Value (LTV) determination by current underwriting standards.

Debt Service Coverage Ratio (DSCR) for the property.

Part 2 - Seller Financing

Seller Financing

This is where the seller pays part of the equity back in the form of a loan, and you make

payments to them over time, rather than having to come up with a total sum of money all at

once, right up front. In this case, you will take over the seller’s property, which is still subject

to any loan that is already tied to the property. This means that you will take over the

servicing of the mortgage note already in place.

Let us say that a seller has a property worth $2 million, but the seller still owes $1 million on a

loan. If the seller owes $1 million, it means that they still have $1 million in equity; however,

they also have an outstanding loan from some institution. That $1 million loan will still get

serviced; you are not going to pay it off. Instead, you were should leave it in place and pay the

seller according to the amount of equity in the property. This is how to take over loans that

are subject to the existing note.

Another important factor to understand is that 80 percent of mortgages are fully assumable

in the commercial real estate sector. Loans used to be assumable in residential real estate, as

well, but that is no longer the case. However, 80 percent of loans are still assumable in

commercial real estate today.

Advantages of Seller Financing:

Lower interest rates and smaller payments

No closing costs

No loan points

No application fee

Do not have to deal with banks

Invisible on your credit report

You can always change the deal

Reduce or eliminate personal liability

Addresses cash flow issues on long-term holds

No due-on-sale clause or balloons

Excellent profit potential through discounting or substitution of collateral

Can close quickly

Recourse if problems not disclosed

Part 3 – Partners

Partners are people who come in and take a cut of the deal to help complete a transaction.

You can also take on “Debt Partners,” which are people who simply lend you money for a return. In this scenario, however, you control the property itself once you have paid back the funds including return.

There are so many individuals out there who have hundreds of thousands or millions of dollars in their personal IRAs or 401(k) s that they lend out for real estate transactions. The private money pool is huge, and it was one of my best strategies and sources for raising the money that I needed for down payments in the beginning of my career, when I did not have personal funds available.

What to know about working with partners:

Three things can be brought to any deal: Time, Money & Expertise.

Risk vs. Reward

Make sure your partners bring something to the table that you do not.

Have the difficult conversations up-front.

Equity Partners

They own a piece of the deal – the profits AND losses. If you take a loss, they share in that loss.

They are there for the paychecks, not the payroll.

Ask yourself: What do they offer in the deal?

Split responsibilities.

Draw up proper legal agreements.

Debt Partners

Determine the rate of return - the interest rate on the money they are lending to the deal.

Draw up proper legal agreements.

Determine payment or accrual method.

Consider how to approach debt partners with prospects or issues.

Ask yourself: What can they provide in a deal?

They are non-owners.

Make sure to include your exit strategies in legal agreements.

Come to an agreement between the partners.

Consider how to attract partners.

Part 4 - Hard Money

When I say “hard money,” I am talking about an industry in which outside parties give you money for the transaction. There is an entire industry within commercial real estate for hard money investments.

With this mode of funding, realize that amount of money they are willing to loan you tends to be low, while the fees for the loan tend to be high. However, I can tell you that hard money or private money is a far cheaper way to raise funds than taking a partner who then puts in a couple of bucks and get back 50 percent of the deal.

With hard money lenders, you may have to pay them 15 percent or 18 percent interest, but they do not get a cut of the transaction; and that is where the big money is.

Part 5 - Private Money

For real estate investors, there are numerous benefits and advantages to utilizing private real

estate money (instead of hard money loans or mortgage loans) to fund your real estate

investing business. Knowing the advantages can mean the difference between making a real

estate deal work and losing a good deal to your competitors.

As the credit bubble continues to unwind, traditional sources of real estate financing are drying

up; and real estate investors need to find alternative sources of capital, such as private real

estate money.

Advantage #1: Speed and Cash Flow

The ability to close a real estate deal in less than two weeks is a huge advantage over having to

wait weeks or even months for a typical bank loan approval. The importance of speed cannot

be overstated in a competitive market, and quick cash gives you a big edge over other

investors.

Imagine that you are the seller. Which prospective buyer would you choose to sell your

property to: one who needs a two or three month escrow period in order to close, along with

several financing contingencies, or an investor who can close in two weeks with no

contingencies? It is not hard to tell which offer the seller will accept. In addition, the seller may

accept a lower-priced offer in order to close quickly without any contingencies; that is the real

power of utilizing private money. By utilizing private money, not only do you win the deal over

other prospective investor, but you pay a lower price. The power of private real estate money is

the ability to close quickly and, in turn, drive better deal terms for your advantage.

Advantage #2: Simple Paperwork

Have you ever been to a traditional mortgage closing and had to sign two inches of paper

work? Now imagine going to a transaction closing and only having to sign two or three

documents - No, that is not misprint!

Private real estate money deals are incredibly simple. The total paperwork required is normally

less than 10 pages and includes two or three simple documents. In a private real estate money

transaction, the documents are: a mortgage document (Deed of Trust), an installment note and

possibly a disclosure statement. The only other paperwork requirement is to name the lender

on your property insurance, as you would in any normal loan situation.

Advantage #3: You Control Terms and Conditions

One of the incredible advantages of a private real estate money transaction is that you

control the terms of the loan. For example, you can request a very short-term loan of only 6

months if you know you are going to flip the property for quick profit. Or, you can offer a 5 or

10-year term if you plan on holding the property as a long-term rental.

You can also control the conditions of the loan, such as refusing a prepayment penalty for

early prepayment. Most normal mortgages and hard money loans require a 1 to 10 percent

prepayment penalty if you want to pay a loan off early. With private lending transactions, you

control the conditions and can simply add a clause that allows an early prepayment without a

penalty. That can mean a huge savings down the road!

Advantage #4: Reduced Fees and Costs

Private real estate money is less costly than mortgage loans or hard money loans. For

example, most hard money loans can ultimately have a total interest cost of 20 percent or

greater by the time you factor in all the fees, points, interest and other costs. Even mortgage

loans can be very costly with fees and upfront points factored in, not to mention the high

interest rates that most investors have to pay versus home owners, who typically get relatively

lower interest rates. Compare that to loans funded by private real estate money sources,

which usually have no points and very few costs. The total cost of most private loans is

somewhere between the 9 to 15 percent range with little up-front or back-end fees.

Advantage #5: Flexibility

Private real estate money provides tremendous flexibility for both you, the borrower, and

also for the private lender. The private lender can invest small amounts of $5,000 or less in

deals or large amounts to fund larger apartment or commercial property purchases. You can

also work with a lender to structure a term that fits the lender’s needs.

Part 6 - City, State and Federal Grants City, State and Federal Grants:

EVERYBODY likes free money, and that is what grants are. Grants are funds that are available from the city, state and federal government to fix the properties that you want to buy. You never need to pay back these grant funds! To find out how to get these grants, go to the community where your building is located and talk to the local development director. Ask the director what programs apply to the property that you are buying, based on the area in which is located. Voila! Now these grants are available to you, and you never have to pay them back. Again, this is free money. Utilizing grants is a very powerful strategy that allows many developers and investors to turn properties around. Some properties would be impossible to turn around without the aid of grants.

City, State and Federal Grant Programs at Live Events

In our live seminars, Boot Camp events, and in our videos, I review available City, State and

Federal Grant programs with you. Please visit MakingMoneyWithCommercial.com for more

information on live events coming to your area.

“How to Talk to Lenders” at Live Events

At this point in our live seminars and Boot Camp events, as well as in our videos, I also show

you how to talk to lenders when you are taking advantage of available grant programs. Again,

please visit CommercialAcademy.com for more information on live events coming to your area.

Student Testimonial - $592,000 in 5 Months

Tommy Sirianni and Mark Arnella

Massapequa, NY

“Dear Scott, my partner and I bought your system on commercial real estate in early October.

When we bought the program, we were very excited and did exactly what you said. We found a

property and sent the owner one of the letters to find deals. He called back, and within a few

weeks, we struck a deal. There were two retail locations on the bottom of the property and an

office space on the top. The space was vacant and needed about $80,000 worth of repair work.

So, we made an offer and ultimately settled on a price of $407,500. We closed on March 17, so

your system worked within five months. We renovated the property and rented it out. Based

on the new rent rule, the property brings in over $9,000 per month and is now worth $1.08

million. That's a profit of $592,500. Not a bad profit, for five months of work! We will keep this

property for the $6,000 per month passive cash flow that it generates, and we plan on doing

many more deals in the future. Thank you, Scott!”

-Tommy Sirianni and Mark Arnella, Long Island, NY

Chapter 5

Developing Your Exit Strategy

Part 1 - Quick Turn

Quick Turning Apartments

1. Evaluate for cash flow.

2. Evaluate for appreciation.

3. Evaluate for equity gain at acquisition.

4. Create a Non-Disclosure/Non-Compete agreement.

5. Establish a network of investors looking to “Pull the Trigger.”

6. Write the contract, including assignable clauses that release your liability.

7. Negotiate your finding “fee,” with investors and make sure you get it up-front. Do not wait for deals to close to get paid.

8. Collecting your fee is your best bet for generating quick cash flow when you first enter the business and need it most.

9. The two basic ways to quickly turn an apartment building are to flip the property to someone else who can close the deal or to immediately begin remarketing the property if you are able to close the deal yourself.

Part 2 - Reposition

Reposition

When you reposition a property, you are trying to change its perception within

the marketplace. In order to do this, it usually takes some major renovations to

change the outward appearance of the property from the street.

Change the name of the complex.

Put up new signage and change the landscaping around the entry.

Place banners announcing new management.

Make upgrades to the common areas.

Upgrade the lighting.

Upgrade the suites.

Put in modern appliances.

Make some form of change to the color of the property.

Utilize our systems for efficient management.

Effectively manage the contractors that make improvements.

These strategies are pretty straightforward. The funny part is that some people try to concoct a course study of this overall strategy that they can sell for $5,000 or more! It is not rocket science; it is straightforward business prudence.

Part 3 - Keep the property

KEEP THE PROPERTY

Sometimes keeping a property is actually an exit strategy. The reason I consider keeping a

property an exit strategy is because it affords you one of the “Paths to Profit.” A “Path to Profit”

is any way that you are able to put money in your pocket and not have to pay it back. If you

were to sell a property, any loans or funds that need to be repaid, are paid through the amount

netted by the sale of the property. However, if you keep the property instead of selling it, any

money that needs to be repaid gets paid by the tenants in the property. Additional “Paths to

profit” include quickly turning the property or exchanging it.

The bottom line: You must always think creatively. Understand that keeping, selling or

exchanging properties are the primary colors of commercial real estate. Take these three exit

strategies and combine them any which way to create nearly limitless ways of deriving profit

from a deal.

Part 4 - Keep the Property Then Refinance It

KEEP THE PROPERTY THEN REFINANCE IT

Since you most likely made a significant down payment when you purchased your commercial

property, you automatically have equity in the property. For example, if you made a 20 percent

down payment on a property with a purchase price of $1 million, you already have $20,000 in

equity.

Now, if you are able to raise the value of the property shortly after you purchase it by any of

the ways we have discussed, you are raising your amount of equity in the property. At a certain

point, you will be able to qualify to refinance this property if you want to. If you decide to keep

the property then refinance it to a 65 percent loan-to-value ratio, your refinance proceeds in

this particular property would be $585,000 in tax-free cash, right in your pocket.

Why are the refinance proceeds tax-free? They are tax-free because technically, these proceeds

indicate there is a loan tied to the property, and the loan funds must be paid back to the lender.

But who will be the ones to pay the loan funds back? Your tenants, that’s who. Now, realize

that once you pull out $585,000 from the refinance proceeds, your debt will increase.

This means that you must receive more monthly income in order to pay off the loan. Even if you

refinance the property and take the proceeds of $585,000, the cash flow only drops from

$134,000 to $95,000. And I imagine that you would be able to survive with $95,000 a year,

especially if you have $6,000 of tax-free cash in your pocket.

Refinance

10. Manage in order to increase NOI.

11. Interview lenders.

12. Interview appraisers.

13. Get loan proposal.

14. Recourse vs. Non-recourse

15. WARNING: Do not over leverage.

Part 5 - Exchange and Refinance the Property

EXCHANGE AND REFINANCE THE PROPERTY

When you sell a property whose value has increased since you purchased it, you are obligated

to pay capital gains tax on the net monetary amount that you gained. This can be a significant

ding to your profits! However, there is a legitimate way to avoid paying capital gains tax, which

is to do a 1031 exchange. With a 1031 exchange, “No gain or loss shall be recognized if the

property held for productive use in a trade or business or for investment is exchanged solely for

property of like-kind.”

For example, let’s say that you paid $1 million for an apartment building, and it is now worth

$1.25 million. If you sold the property, you would have to pay taxes on the $250,000 you

earned on the property (less selling costs and the like). However, you could also use a 1031

exchange to trade your property for a similar one at a similar cost. With this newly exchanged

property, you do not have to pay capital gains tax, and now you can refinance it, pulling tax-

deferred cash out.

If you were to sell the property outright, you would net approximately $1.16 million after the

cost of sale. Assuming you made a down payment of 20 percent, you would couple that figure

with the $1.16 million that you netted from the sale and realize that selling the property

allowed you to acquire $5.8 million worth of undervalued commercial real estate.

Next, you will fix up the property and refinance it, pulling out millions of tax-deferred dollars in

the process. Who out there likes millions of tax-deferred dollars? Well, I can tell you that it is

one of my favorite strategies, and it has worked time and time again for many of our students.

1031 Exchange

If an investor sells an appreciated property, he or she pays taxes on the financial gain. However, a property that qualifies for preferential tax treatment under Internal Revenue Code Section 1031 (IRC§1031) is treated quite differently.

IRC§1031 states:

“No gain or loss shall be recognized if the property held for productive use in a trade or business or for investment is exchanged solely for property of like-kind.”

Therefore, an investor using IRC Section 1031 can exchange raw land for a rental home, an apartment complex for a shopping center, or rental houses for an office building.

The use of the property is a key factor in determining the tax treatment.

IRC§1031 remained substantially unchanged for the prior 50 years until it was clarified with Treasury Regulations in 1991

The regulations redefined the “Starker” or delayed exchange, including implementing 45-day identification requirements for the replacement property.

These regulations also encourage the use of a qualified intermediary, deeming it a "Safe Harbor”

A “Safe Harbor” is a term which defines acceptable guidelines so a transaction will be regarded defensible

1031 Exchange (cont.)

Example: The Benefit of Exchanging vs. Selling

Assume an investor sells a fully-depreciated property, and the capital gain is $1 million, which is subject to taxation.

Federal tax brackets can reach as high as 25 percent for capital gains from depreciation. State taxes can be as high as an additional 10 percent. Assuming a total tax bracket of approximately 35 percent, the capital gains tax would be: $1,000,000 x 35% = $350,000

Example

Sale Exchange

Proceeds $1,000,000 $1,000,000

Taxes Owed - 350,000 -0-

Cash to Reinvest $650,000 $1,000,000

New Property (20% Down) $3,250,000 $5,000,000

In a single transaction, the investor who exchanged properties has $1.75 million more in properties than the investor who sold the property!

Part 6 - Sell the Property

When you sell a property, you dispose of it outright; you take your funds directly from the

closing table, pay your taxes and move on. It is different from an exchange.

Let us go back to discussing that first property. Even though I hold most of my properties in my

portfolio long-term, I want to return to a discussion regarding my first transaction. Since we

have spent so much time talking about my first transaction already, I want to show you how

that deal worked out.

In your guidebook, you will see a check for $147,203.24; this is the check I received when I sold

that very first apartment building. Think about that: On the very first deal that I ever did, I got

$147,000 in cash when I sold it. I had also taken out $848,000 when I refinanced it, so that is a

total cash amount of almost $1 million. Additionally, I got $360,000 in the form of positive cash

flow: $6,000 per month for 60 months. I had $115,000 in mortgage reduction over the five year

ownership period. In addition to that, I had an extra $70,000 in tax savings from depreciation in

my pocket, and I got $80,000 additional cash in my pocket within two weeks of closing.

On this first small deal, I bought the property incorrectly; I mismanaged the property; I overpaid

for the property, and I took too long complete the deal. I had no clue what I was doing when I

started in this industry. I had no money. In fact, not only was I broke, but I was half a million

dollars in the hole. I had terrible credit, which I had destroyed completely, and I had no

experience. Despite all these pitfalls, however; I had total farming profits of $1.62 million from

this first deal alone.

Student Testimonial - Timothy Owens, Dana Point, CA

$1.5 Million with No Money Out-of-Pocket

Timothy Owens

Dana Point, California

I located a 100-unit apartment complex through my property manager. It was a pocket listing that was not on the

market yet.

I picked it up for $2.8 million, which was considerably below market. We were able to structure the purchase for

$3.6 million and get a loan for $2.8 million. Because I recently got my broker’s license, I was able to collect

$75,000 at the closing table as a broker fee.

I'm going to make approximately $800,000 in equity from this property, and as soon as I bring the rents up to

market, I will be able to pull out another $700,000. So, at the end of this deal, I will be able to pull out close to $1.5

million with no money out of my pocket.

My future plans for my investment career are to purchase between two and three properties per year. At this point in

my life, it is just nice to know that I have the lifestyle I have always dreamed about.

When I started looking for a commercial coach, I was surprised that there weren’t many high-quality coaches out

there. Scott’s teachings are so far above everyone else’s. I know he doesn't have to do this, but I'm very grateful he

does.

Scott, thank you very much for doing this.

-Timothy Owens, Dana Point, CA

Chapter 6

Presenting Your Offer

Part 1 - Construct & Present Offers

Construct & Present Offers

You cannot buy a building unless you make an offer. The problem is that many

people experience “paralysis of analysis”: They sit there, break down a deal, and

chew on it and chew on it; but they do not ever pull the trigger and make an

actual offer. Remember that you don’t commit to anything simply by making an

offer. Even once someone accepts your offer, you still have many exits to get out

of purchasing the property - without putting a single penny at risk. And if you do it

the way we show you, you will be able to control properties for months at a time,

without having anything at risk, literally. However, since you control the

properties, you are in the driver's seat. Therefore, by getting offers out there, you

will be able to start breaking down the deals. This is where you get yourself in the

game. But if you do not pull the trigger and present an offer, none of this will

happen.

Now, you need to recognize a couple of things. The first, and most important,

thing about constructing and presenting an offer is to make an offer based on

what the property is actually worth; what the property is currently worth, not

what it will be worth in the future. Many brokers and real estate agents are

trained to get you to buy a property based on what is called “Pro Forma," which

means how a property could perform if it were fully occupied. However, this

often does not take into account how the property is actually performing

currently. A broker, realtor or seller may say, “If the building was 100 percent

occupied, it would be worth $5 million. However, since it is only 10 percent

occupied, we think the property is worth $4.7 million.” That is not a good

discount. Make sure that you purchase the property for a price that reflects the

amount of income that the property is generating TODAY. Remember: this is an

income-generating property; the value of the property is created by the amount

of income that it generates. Again, make an offer based on what the property IS

worth, not what it might be worth somewhere down the road.

Finally, it is really important to know how to value commercial property and

understand how it is financed. Once you know these two things, the offer will

create itself. You cannot overpay for commercial real estate when you understand

how it is valued and how it is financed. Do you know what the sad truth is? The

sad truth is that so many people overpay every single day because they do not

take the time to learn how to make millions of dollars in a business in which one

deal, one time will change their lives forever. Do not find yourself in the same

position of overpaying for a property or not even making an offer on a property,

simply because you do not have the right skills, tools or support that you need.

Again, in the commercial real estate industry, it only takes one deal, one time. If I

had prevented myself from pulling the trigger and writing that first offer, there is

absolutely no way that I would be here today, instructing you on how to create

your future. Do not let other people get in the way, and certainly, do not let all

your fears prevent you from taking action.

If you get involved with us in the Commercial Property Academy, I am going to

make certain that we are there with you every step of the way. These are the

essential ingredients that you need to succeed because no man or woman is an

island in this business. We all rely on other people. I rely on attorneys, bankers,

brokers, architects, appraisers and many, many more. You must do the same, and

we are going to help you build an essential and reliable team.

real estate agents

Part 2 - Creating a Letter of Intent

Elements to Use When Creating Your Letter of Intent:

The Letter of Intent (LOI) is the document that most commonly begins the

negotiation on a commercial transaction. Simply put, the LOI is what its name

indicates; it communicates the intentions of the buyer to the seller.

The form of an LOI is simple, although LOIs can provide a lot of detail. The idea is

to outline the most important details upfront: price, terms and a few other issues.

The specific details and legal elements will be contained in the Purchase and Sales

agreement.

An LOI should contain the following:

Property address and legal description when available. When dealing with vacant land, make sure to include all permanent parcel numbers, as well as the name of the entity in which title will be taken (The entity can be reflected as “to be formed”).

High-level details of your offer including the following:

Purchase price

Earnest money deposit

Down payment (terms, if any, regarding the down payment)

Terms of the overall offer (including any seller participation, loan assumptions, rebates, anticipated closing date, etc.)

Due diligence elements, terms and timeframes

Contract creation provisions

Be certain to state that this is a non-binding proposal

One final note on the LOI: Get all the big stuff out in the open now. Make sure you address the issues you believe will be central to the success of the deal. This is the time to present the need for seller financing or other creative offers.

Part 3 - Example Letter of Intent

Letter of Intent

Buyer: Mr. Bucks

Seller: Mrs. Equity

The “Buyer” proposes to purchase from the Seller the following real estate property:

Property Address: 123 Main Street

Cleveland, OH44114

Legal Description: To be provided later

Purchase Price: $1,000,000

Down Payment: $10,000

Deposit: $1,000

Financing: Buyer to secure a new first mortgage of $500,000, giving the Seller $500,000 at

closing. The Seller to carry back a second mortgage for the balance of the

equity ($490,000) with interest only payments of $2,000 per month starting 60

days after closing. The entire principle balance of the Seller’s second mortgage

shall be due in full within 60 months of closing.

This Letter of Intent is subject to the following terms and conditions:

1. Approval of books and records, physical inspection reports, loan documents, rental

agreements and service contracts, or any other information requested by Buyer

within _______ working days from the receipt of this information by Buyer from the

Seller.

2. Buyer to have final approval of any rental agreements, service contracts or leases

negotiated during escrow period.

3. Seller warrants that, at the close of escrow, all heating, cooling and electrical,

appliances and mechanical apparatuses are to be in working order; and the roof (s)

is (are) to be in good repair and free of any leaks.

4. Buyer’s rights hereunder may be assigned to the partnership, corporation or other party,

and any such transfer shall have all the benefits and rights that the Buyer has under

this agreement.

5. Seller to deliver marketable title and warranty deed at closing, and that to the best of

Seller’s knowledge, no part of the property is in violation of any existing code, health

or safety regulations and is not involved in any governmental or judicial proceedings.

6. Buyer has the right to extend the date of closing of escrow by releasing to the Seller

through escrow a cut equal to one-quarter of one percent of the purchase price for

each 30 day extension requested, to be applicable to the purchase price, with Buyer

to maintain at all times the current deposit account for this Letter of Intent, in

escrow.

7. Seller is not aware of any structural defect or adverse geological or environmental

conditions affecting the property and its value.

8. Evidence of Title is to be in the form of an owners ALTA (American Land Title

Association) policy.

9. Any unresolved disputes arising out of this Letter of Intent will be submitted to binding

arbitration through either the American Arbitration Association or the Judicial

Arbitration and Mediation Service.

10. Upon acceptance of this Letter of Intent, both parties agree to effect the creation of a

mutually agreeable Purchase and Sales Agreement within 10 (ten) business days.

ESCROW PERIOD:

_______ days or sooner by mutual consent. Escrow shall open without any contingencies.

ACCEPTANCE PERIOD:

This Letter of Intent is valid for 10 (ten) working days after date of this offer. Unless acceptance

is signed by Seller and delivered to Buyer, either in person or by first class mail to address

below within this period, this offer shall be deemed revoked. Buyer acknowledges receipt of a

copy hereof.

______________________ _________ _____________________ __________

Seller Date Buyer Date

Part 4 - Sample Contract Contingencies

Sample Contract Contingencies & Clauses

Earnest Money:

The Earnest Money shall be applied against the Purchase Price or shall be

immediately refunded to Buyer in the event that any of the conditions stated in this

Agreement are not satisfied.

$250,000.00 Promissory Note to be paid one year from Closing at –0 percent–

interest rate.

Twenty-Five Thousand and 00/100 Dollars ($25,000.00) earnest money deposit,

which shall be deposited with the Escrow Agent.

Earnest Money – After Contingency Period:

Fifty Thousand and 00/100 Dollars ($50,000.00) additional earnest money deposit,

which shall be deposited with the Escrow Agent within five (5) days after the

satisfaction or waiver of Buyer’s activities during the Inspection Period and the

Financing Period.

[NOTE: You want to make sure that you study fees. If you are not familiar with

the different settlement statements, I certainly recommend that you sit down

with the title company that you are using and go through every line item on

that contract. The vast majority of the fees that you are going to find there are

negotiable. Certain ones are not, like your taxes. Also, if you repeatedly use

the same people/companies for different transaction, you can get those fees

reduced.]

The balance of the Purchase Price, plus or minus the additional adjustments

hereinafter set forth, shall be deposited into escrow on or before the Closing Date.

[NOTE: You are going to start to see that we build layer upon layer of protection,

escape hatches and mechanisms for buying additional time to evaluate a

property.]

You Get What You See:

All of the foregoing assets and properties to be acquired by Buyer hereunder are

collectively referred to in this Agreement as the "Property.”

Assignment of Lease:

An assignment of the Tenant Leases: assigning of all Seller's rights, title and

interest as lessor, under Tenant Leases to Buyer.

Liabilities Assumed:

Except as otherwise expressly provided in this Agreement or as hereafter, buyer

shall not, by the execution or performance of this Agreement and/or any instrument

or agreement pursuant hereto, assume, become responsible for or incur any liability

or obligation, of any nature, of Seller.

Zoning:

Buyer’s ability to obtain appropriate zoning.

Seller will cooperate and assist buyer, at no cost to seller, in obtaining all necessary

zoning, permits, and approvals required to satisfy the conditions precedent to

Closing.

Representations and Warranties:

Survive Closing

The Seller makes the following representation and warranties, which shall survive

the Closing.

Proper Authority

The Seller and Seller’s partner shall have authority to enter into this Agreement.

The Seller is the owner of the Property, in fee simple, subject only to the Permitted.

No Other Leases

There are no leases, options, purchase agreements, tenancies, land contracts or

other agreements affecting the Property or any part thereof, except for those set

forth on Exhibit __, attached hereto and incorporated herein.

Seller represents and warrants that there are no leases or contracts affecting the

Property which are not cancelable at Closing.

No Defaults

Seller represents: (i) there are no known defaults of any of the terms and conditions

of the leases upon the Property; (ii) all tenants are current in their rent obligations

under their leases; and (iii) Seller has not received notice of any default or claim of

default of Seller as landlord by any tenant under said leases.

No New Leases without Consent

Furthermore, Seller shall not sign any leases or agreements without prior consent of

Buyer.

No Condemnation

No condemnation, appropriation or eminent domain proceedings affecting the

Property exist or, to the best of Seller’s knowledge, are contemplated.

No Environmental use

The Property has not been used as a sanitary landfill, dump, industrial waste

disposal area or any other similar usage during their time of ownership. Seller has

no knowledge of any underground storage tanks, asbestos, toxic or hazardous

wastes located, or having been located, on the Property, except as disclosed.

Buyer Held Harmless

Seller shall indemnify, defend and hold Buyer harmless from and against any and all

losses, claims, causes of action, damages, liabilities, expenses and costs, either

before or after the Closing Date, from (i) any inaccurate or incomplete

representation or any breach of any warranty or covenant of Seller under this

Agreement or under any document furnished hereunder; any failure of Seller to duly

perform and observe any term, provision, covenant, agreement or condition under

this Agreement on its part to be performed or observed.

Valid Entity

Seller is, and will be on the Closing Date, a limited liability company duly organized

and validly existing under the laws of the State of ________, and will be duly

qualified to do business in the State of ________; and Seller has, and will have on

the Closing Date, all necessary power and authority to enter into this Agreement and

to perform its obligations under this Agreement.

Correct Financials

The financial statements and other economic information for the Property provided

to Buyer are true and correct and accurately represent all of the income received

from, and expenditures incurred for, the Property during the periods covered by

such statements.

The Property and the operation thereof by Seller conform with all applicable laws,

ordinances, regulations and directives of governmental or quasi-governmental

authorities, including, without limitation, those relating to zoning.

All necessary permits, licenses and approvals, with respect to the use and occupancy

of the Property, have been issued by the appropriate governmental agencies and are

in full force and effect.

Violations

No notice or citation for the violation of any zoning, building or other law, ordinance,

regulation or directive of any governmental or quasi-governmental authority have

been received by Seller, which has not been corrected; and Seller has no knowledge

of any fact or condition which may result in the issuance of any such notice or

citation.

No Litigation

There is no litigation, proceeding or action pending or threatened against or relating

to the Property or to Seller which could adversely affect the Property or the

operation thereof or Buyer, or which questions the validity of this Agreement or any

action taken, or to be taken, by Seller or Buyer pursuant hereto.

Boundary Disputes

Seller has had no boundary or water drainage disputes with the owners of any

surrounding property.

No Encroachments

The building(s) and all other improvements of the Property are entirely within the

boundaries of the Land and do not encroach upon any other property.

True and Correct Rent Roll

Exhibit "__” accurately lists the name of each tenant occupying any portion of the

Real Property or any party having a right to occupy any portion of the Real Property,

whether pursuant to a written lease or otherwise, the location of such tenant's

space, the commencement and termination dates of said tenancy, options to renew,

the monthly rental with respect to such tenancy, rental delinquencies, defaults,

security deposits, if any, the amount, if any, of all other charges paid or payable to

the landlord by such tenant, all concessions, allowances or other liabilities to each

tenant, and any and all work that Seller is obligated to perform to improve such

tenant's space.

Accurate Leases

Complete, true and correct copies of all written leases disclosed on Exhibit "__",

including all modifications or amendments thereof or thereto and any guarantees

for which no written agreements exist; neither Seller nor any tenant under any

Tenant Lease is in default under any Tenant Lease.

Condition of Property

The Property (including, without limitation, all gas and electric systems, lighting,

heating and air conditioning equipment and systems, roof, elevators, radiators,

ventilating equipment, incinerators, furnaces, hot water heaters, water, sewage and

plumbing systems, fire protection and security systems) is in good operating order

and repair.

Architectural Drawings

Seller is in possession of true and correct copies of both the original "as built" plans

and specifications, and any subsequent "as built" plans and specifications, for all

building(s) located on and constituting a part of the Real Property (the "As Built

Plans").

Storage Tanks

There are no tanks, gas wells or other wells, whether capped or uncapped, on or

about the Real Property. If any such tanks or wells are discovered, whether before

or after the Closing Date, then at Buyer’s option, upon notice to Seller, Seller shall, at

Seller's sole cost and expense, cause the same to be removed (in the case of tanks)

and capped (in the case of wells) and shall repair all damage to the Property

resulting there from.

Municipal Improvements

Seller has no knowledge of contemplated improvements to or adjoining the Real

Property by public authority; the cost of which is to be assessed as special taxes

against the Real Property.

EPA

No toxic or hazardous waste, substance or material of any kind or nature (including,

without limitation, lead-based paint, asbestos, asbestos containing material or mold)

has been stored at, disposed of, or is located in, at, on or about the Property; and (ii)

no permit is required from the ______ Environmental Protection Agency, the

Federal Environmental Protection Agency or any other governmental authority, for

the use or maintenance of any improvement or facility in, on or about the Real

Property.

No Flood Plain

No portion of the Real Property is located within a special flood plain.

Structural Defects

There are no structural defects or defects in building components in or to the Real

Property.

Service Agreements

Exhibit “__” accurately lists all Service Contracts.

Special Assessments

There are no planned or commenced public improvements by governmental authorities which

may result in special assessments.

Part 5 - The Contract

1. Buyer.

1.1 , ( "Buyer") hereby offers to purchase the real property, hereinafter described, from the

owner thereof ("Seller") (collectively, the "Parties" or individually, a "Party"), through an escrow

("Escrow") to close 30 or days after the waiver or expiration of the Buyer's Contingencies,

("Expected Closing Date") to be held by ("Escrow Holder") whose address is, Phone No. ,

Facsimile No. upon the terms and conditions set forth in this agreement ("Agreement"). Buyer

shall have the right to assign Buyer's rights hereunder, but any such assignment shall not relieve

Buyer of Buyer's obligations herein unless Seller expressly releases Buyer.

1.2 The term "Date of Agreement" as used herein shall be the date when by execution and

delivery (as defined in paragraph 20.2) of this document or a subsequent counteroffer thereto,

Buyer and Seller have reached agreement in writing whereby Seller agrees to sell, and Buyer

agrees to purchase, the Property upon terms accepted by both Parties.

2. Property.

2.1 The real property ("Property") that is the subject of this offer consists of (insert a brief

physical description) is located in the City of , County of ,State of , is commonly known by the

street address of and is legally described as: (APN ).

2.2 If the legal description of the Property is not complete or is inaccurate, this Agreement shall

not be invalid and the legal description shall be completed or corrected to meet the

requirements of ("Title Company"), which shall issue the title policy hereinafter described.

2.3 The Property includes, at no additional cost to Buyer, the permanent improvements

thereon, including those items which pursuant to applicable law are a part of the property, as

well as the following items, if any, owned by Seller and at present located on the Property:

electrical distribution systems (power panel, bus ducting, conduits, disconnects, lighting

fixtures); telephone distribution systems (lines, jacks and connections only); space heaters;

heating, ventilating, air conditioning equipment ("HVAC"); air lines; fire sprinkler systems;

security and fire detection systems; carpets; window coverings; wall coverings; and

(collectively, the "Improvements").

2.4 The fire sprinkler monitor: is owned by Seller and included in the Purchase Price, � is leased

by Seller, and Buyer will need to negotiate a new lease with the fire monitoring company, �

ownership will be determined during Escrow, or � there is no fire sprinkler monitor.

2.5 Except as provided in Paragraph 2.3, the Purchase Price does not include Seller's personal

property, furniture and furnishings, and all of which shall be removed by Seller prior to Closing.

3. Purchase Price.

3.1 The purchase price ("Purchase Price") to be paid by Buyer to Seller for the Property shall be

$ , payable as follows: (a) Cash down payment, including the Deposit as defined in paragraph

4.3 (or if an all cash transaction, the Purchase Price): $ (Strike if not applicable) (b) Amount of

"New Loan" as defined in paragraph 5.1, if any: $ (c) Buyer shall take title to the Property

subject to and/or assume the following existing deed(s) of trust ("Existing Deed(s) of Trust")

securing the existing promissory note(s) ("Existing Note(s)"): (i) An Existing Note ("First Note")

with an unpaid principal balance as of the Closing of approximately: $ Said First Note is payable

at $ per month, (Strike if not including interest at the rate of % per annum until paid (and/or

the applicable) entire unpaid balance is due on ) . (ii) An Existing Note ("Second Note") with an

unpaid principal balance as of the Closing of approximately: $ Said Second Note is payable at $

per month, including interest at the rate of % per annum until paid (and/or the entire unpaid

balance is due on ) . (Strike if not (d) Buyer shall give Seller a deed of trust ("Purchase Money

Deed of Trust") on the applicable property, to secure the promissory note of Buyer to Seller

described in paragraph 6 ("Purchase Money Note") in the amount of: $ Total Purchase Price: $

3.2 If Buyer is taking title to the Property subject to, or assuming, an Existing Deed of Trust and

such deed of trust permits the beneficiary to demand payment of fees including, but not limited

to, points, processing fees, and appraisal fees as a condition to the transfer of the Property,

Buyer agrees to pay such fees up to a maximum of 1.5% of the unpaid principal balance of the

applicable Existing Note.

4. Deposits.

4.1 � Buyer has delivered to Broker a check in the sum of $ , payable to Escrow Holder, to be

delivered by Broker to Escrow Holder within 2 or business days after both Parties have

executed this Agreement and the executed Agreement has been delivered to Escrow Holder, or

� within 2 or business days after both Parties have executed this Agreement and the executed

Agreement has been delivered to Escrow Holder Buyer shall deliver to Escrow Holder a check in

the sum of $ . If said check is not received by Escrow Holder within said time period then Seller

may elect to unilaterally terminate this transaction by giving written notice of such election to

Escrow Holder whereupon neither Party shall have any further liability to the other under this

Agreement. Should Buyer and Seller not enter into an agreement for purchase and sale, Buyer's

check or funds shall, upon request by Buyer, be promptly returned to Buyer.

4.2 Additional deposits: (a) Within 5 business days after the Date of Agreement, Buyer shall

deposit with Escrow Holder the additional sum of $ to be applied to the Purchase Price at the

Closing. (b) Within 5 business days after the contingencies discussed in paragraph 9.1 (a)

through (k) are approved or waived, Buyer shall deposit with Escrow Holder the additional sum

of $ to be applied to the Purchase Price at the Closing.

4.3 Escrow Holder shall deposit the funds deposited with it by Buyer pursuant to paragraphs 4.1

and 4.2 (collectively the "Deposit"), in a State or Federally chartered bank in an interest bearing

account whose term is appropriate and consistent with the timing requirements of this

transaction. The interest there from shall accrue to the benefit of Buyer, who hereby

acknowledges that there may be penalties or interest forfeitures if the applicable instrument is

redeemed prior to its specified maturity. Buyer's Federal Tax Identification Number is . NOTE:

Such interest bearing account cannot be opened until Buyer's Federal Tax Identification

Number is provided.

5. Financing Contingency. (Strike if not applicable)

5.1 This offer is contingent upon Buyer obtaining from an insurance company, financial

institution or other lender, a commitment to lend to Buyer a sum equal to at least % of the

Purchase Price, on terms reasonably acceptable to Buyer. Such loan ("New Loan") shall be

secured by a first deed of trust or mortgage on the Property. If this Agreement provides for

Seller to carry back junior financing, then Seller shall have the right to approve the terms of the

New Loan. Seller shall have 7 days from receipt of the commitment setting forth the proposed

terms of the New Loan to approve or disapprove of such proposed terms. If Seller fails to notify

Escrow Holder, in writing, of the disapproval within said 7 days it shall be conclusively

presumed that Seller has approved the terms of the New Loan.

5.2 Buyer hereby agrees to diligently pursue obtaining the New Loan. If Buyer shall fail to notify

its Broker, Escrow Holder and Seller, in writing within days following the Date of Agreement,

that the New Loan has not been obtained, it shall be conclusively presumed that Buyer has

either obtained said New Loan or has waived this New Loan contingency.

5.3 If, after due diligence, Buyer shall notify its Broker, Escrow Holder and Seller, in writing,

within the time specified in paragraph 5.2 hereof, that Buyer has not obtained said New Loan,

this Agreement shall be terminated, and Buyer shall be entitled to the prompt return of the

Deposit, plus any interest earned thereon, less only Escrow Holder and Title Company

cancellation fees and costs, which Buyer shall pay.

6. Seller Financing (Purchase Money Note). (Strike if not applicable)

6.1 If Seller approves Buyer's financials (see paragraph 6.5) the Purchase Money Note shall

provide for interest on unpaid principal at the rate of % per annum, with principal and interest

paid as follows: The Purchase Money Note and Purchase Money Deed of Trust shall be on the

current forms commonly used by Escrow Holder, and be junior and subordinate only to the

Existing Note(s) and/or the New Loan expressly called for by this Agreement.

6.2 The Purchase Money Note and/or the Purchase Money Deed of Trust shall contain

provisions regarding the following (see also paragraph 10.3 (b)): (a) Prepayment. Principal may

be prepaid in whole or in part at any time without penalty, at the option of the Buyer. (b) Late

Charge. A late charge of 6% shall be payable with respect to any payment of principal, interest,

or other charges, not made within 10 days after it is due. (c) Due On Sale. In the event the

Buyer sells or transfers title to the Property or any portion thereof, then the Seller may, at

Seller's option, require the entire unpaid balance of said Note to be paid in full.

6.3 If the Purchase Money Deed of Trust is to be subordinate to other financing, Escrow Holder

shall, at Buyer's expense prepare and record on Seller's behalf a request for notice of default

and/or sale with regard to each mortgage or deed of trust to which it will be subordinate.

6.4 WARNING: CALIFORNIA LAW DOES NOT ALLOW DEFICIENCY JUDGEMENTS ON SELLER

FINANCING. IF BUYER ULTIMATELY DEFAULTS ON THE LOAN, SELLER'S SOLE REMEDY IS TO

FORECLOSE ON THE PROPERTY.

6.5 Seller's obligation to provide financing is contingent upon Seller's reasonable approval of

Buyer's financial condition. Buyer to provide a current financial statement and copies of its

Federal tax returns for the last 3 years to Seller within 10 days following the Date of Agreement.

Seller has 10 days following receipt of such documentation to satisfy itself with regard to

Buyer's financial condition and to notify Escrow Holder as to whether or not Buyer's financial

condition is acceptable. If Seller fails to notify Escrow Holder, in writing, of the disapproval of

this contingency within said time period, it shall be conclusively presumed that Seller has

approved Buyer's financial condition. If Seller is not satisfied with Buyer's financial condition or

if Buyer fails to deliver the required documentation then Seller may notify Escrow Holder in

writing that Seller Financing will not be available, and Buyer shall have the option, within 10

days of the receipt of such notice, to either terminate this transaction or to purchase the

Property without Seller financing. If Buyer fails to notify Escrow Holder within said time period

of its election to terminate this transaction then Buyer shall be conclusively presumed to have

elected to purchase the Property without Seller financing. If Buyer elects to terminate, Buyer's

Deposit shall be refunded less Title Company and Escrow Holder cancellation fees and costs, all

of which shall be Buyer's obligation.

7. Real Estate Brokers.

7.1 The following real estate broker(s) ("Brokers") and brokerage relationships exist in this

transaction and are consented to by the Parties (check the applicable boxes): � represents

Seller exclusively ("Seller's Broker"); � represents Buyer exclusively ("Buyer's Broker"); or �

represents both Seller and Buyer ("Dual Agency"). The Parties acknowledge that Brokers are the

procuring cause of this Agreement. See paragraph 24 regarding the nature of a real estate

agency relationship. Buyer shall use the services of Buyer's Broker exclusively in connection

with any and all negotiations and offers with respect to the Property for a period of 1 year from

the date inserted for reference purposes at the top of page 1.

7.2 Buyer and Seller each represent and warrant to the other that he/she/it has had no dealings

with any person, firm, broker or finder in connection with the negotiation of this Agreement

and/or the consummation of the purchase and sale contemplated herein, other than the

Brokers named in paragraph 7.1, and no broker or other person, firm or entity, other than said

Brokers is/are entitled to any commission or finder's fee in connection with this transaction as

the result of any dealings or acts of such Party. Buyer and Seller do each hereby agree to

indemnify, defend, protect and hold the other harmless from and against any costs, expenses

or liability for compensation, commission or charges which may be claimed by any broker,

finder or other similar party, other than said named Brokers by reason of any dealings or act of

the indemnifying Party.

8. Escrow and Closing.

8.1 Upon acceptance hereof by Seller, this Agreement, including any counteroffers

incorporated herein by the Parties, shall constitute not only the agreement of purchase and

sale between Buyer and Seller, but also instructions to Escrow Holder for the consummation of

the Agreement through the Escrow. Escrow Holder shall not prepare any further escrow

instructions restating or amending the Agreement unless specifically so instructed by the

Parties or a Broker herein. Subject to the reasonable approval of the Parties, Escrow Holder

may, however, include its standard general escrow provisions.

8.2 As soon as practical after the receipt of this Agreement and any relevant counteroffers,

Escrow Holder shall ascertain the Date of Agreement as defined in paragraphs 1.2 and 20.2 and

advise the Parties and Brokers, in writing, of the date ascertained.

8.3 Escrow Holder is hereby authorized and instructed to conduct the Escrow in accordance

with this Agreement, applicable law and custom and practice of the community in which

Escrow Holder is located, including any reporting requirements of the Internal Revenue Code. In

the event of a conflict between the law of the state where the Property is located and the law

of the state where the Escrow Holder is located, the law of the state where the Property is

located shall prevail.

8.4 Subject to satisfaction of the contingencies herein described, Escrow Holder shall close this

escrow (the "Closing") by recording a general warranty deed (a grant deed in California) and the

other documents required to be recorded, and by disbursing the funds and documents in

accordance with this Agreement.

8.5 Buyer and Seller shall each pay one-half of the Escrow Holder's charges and Seller shall pay

the usual recording fees and any required documentary transfer taxes. Seller shall pay the

premium for a standard coverage owner's or joint protection policy of title insurance. (See also

paragraph 11)

8.6 Escrow Holder shall verify that all of Buyer's contingencies have been satisfied or waived

prior to Closing. The matters contained in paragraphs 9.1 subparagraphs (b), (c), (d), (e), (g), (i),

(n), and (o), 9.4, 9.5, 12, 13, 14, 16, 18, 20, 21, 22, and 24 are, however, matters of agreement

between the Parties only and are not instructions to Escrow Holder.

8.7 If this transaction is terminated for non-satisfaction and non-waiver of a Buyer's

Contingency, as defined in paragraph 9.2, then neither of the Parties shall thereafter have any

liability to the other under this Agreement, except to the extent of a breach of any affirmative

covenant or warranty in this Agreement. In the event of such termination, Buyer shall be

promptly refunded all funds deposited by Buyer with Escrow Holder, less only Title Company

and Escrow Holder cancellation fees and costs, all of which shall be Buyer's obligation. If this

transaction is terminated as a result of Seller's breach of this Agreement then Seller shall pay

the Title Company and Escrow Holder cancellation fees and costs.

8.8 The Closing shall occur on the Expected Closing Date, or as soon thereafter as the Escrow is

in condition for Closing; provided, however, that if the Closing does not occur by the Expected

Closing Date and said Date is not extended by mutual instructions of the Parties, a Party not

then in default under this Agreement may notify the other Party, Escrow Holder, and Brokers, in

writing that, unless the Closing occurs within 5 business days following said notice, the Escrow

shall be deemed terminated without further notice or instructions.

8.9 Except as otherwise provided herein, the termination of Escrow shall not relieve or release

either Party from any obligation to pay Escrow Holder's fees and costs or constitute a waiver,

release or discharge of any breach or default that has occurred in the performance of the

obligations, agreements, covenants or warranties contained therein.

8.10 If this sale of the Property is not consummated for any reason other than Seller's breach or

default, then at Seller's request, and as a condition to any obligation to return Buyer's deposit

(see paragraph 21), Buyer shall within 5 days after written request deliver to Seller, at no

charge, copies of all surveys, engineering studies, soil reports, maps, master plans, feasibility

studies and other similar items prepared by or for Buyer that pertain to the Property. Provided,

however, that Buyer shall not be required to deliver any such report if the written contract

which Buyer entered into with the consultant who prepared such report specifically forbids the

dissemination of the report to others.

9. Contingencies to Closing.

9.1 The Closing of this transaction is contingent upon the satisfaction or waiver of the following

contingencies. IF BUYER FAILS TO NOTIFY ESCROW HOLDER, IN WRITING, OF THE DISAPPROVAL

OF ANY OF SAID CONTINGENCIES WITHIN THE TIME SPECIFIED THEREIN, IT SHALL BE

CONCLUSIVELY PRESUMED THAT BUYER HAS APPROVED SUCH ITEM, MATTER OR DOCUMENT.

Buyer's conditional approval shall constitute disapproval, unless provision is made by the Seller

within the time specified therefore by the Buyer in such conditional approval or by this

Agreement, whichever is later, for the satisfaction of the condition imposed by the Buyer.

Escrow Holder shall promptly provide all Parties with copies of any written disapproval or

conditional approval which it receives. With regard to subparagraphs (a) through (m) the pre-

printed time periods shall control unless a different number of days is inserted in the spaces

provided. (a) Disclosure. Seller shall make to Buyer, through Escrow, all of the applicable

disclosures required by law (See standard form entitled "Seller's Mandatory Disclosure

Statement") and provide Buyer with a completed Property Information Sheet ("Property

Information Sheet") concerning the Property, duly executed by or on behalf of Seller in the

current form within 10 or days following the Date of Agreement. Buyer has 10 days from the

receipt of said disclosures to approve or disapprove the matters disclosed. (b) Physical

Inspection. Buyer has 10 or days from the receipt of the Property Information Sheet or the Date

of Agreement, whichever is later, to satisfy itself with regard to the physical aspects and size of

the Property. (c) Hazardous Substance Conditions Report. Buyer has 30 or days from the receipt

of the Property Information Sheet or the Date of Agreement, whichever is later, to satisfy itself

with regard to the environmental aspects of the Property. Seller recommends that Buyer obtain

a Hazardous Substance Conditions Report concerning the Property and relevant adjoining

properties. Any such report shall be paid for by Buyer. A "Hazardous Substance" for purposes of

this Agreement is defined as any substance whose nature and/or quantity of existence, use,

manufacture, disposal or effect, render it subject to Federal, state or local regulation,

investigation, remediation or removal as potentially injurious to public health or welfare. A

"Hazardous Substance Condition" for purposes of this Agreement is defined as the existence

on, under or relevantly adjacent to the Property of a Hazardous Substance that would require

remediation and/or removal under applicable Federal, state or local law. (d) Soil Inspection.

Buyer has 30 or days from the receipt of the Property Information Sheet or the Date of

Agreement, whichever is later, to satisfy itself with regard to the condition of the soils on the

Property. Seller recommends that Buyer obtain a soil test report. Any such report shall be paid

for by Buyer. Seller shall provide Buyer copies of any soils report that Seller may have within 10

days of the Date of Agreement. (e) Governmental Approvals. Buyer has 30 or days from the

Date of Agreement to satisfy itself with regard to approvals and permits from governmental

agencies or departments which have or may have jurisdiction over the Property and which

Buyer deems necessary or desirable in connection with its intended use of the Property,

including, but not limited to, permits and approvals required with respect to zoning, planning,

building and safety, fire, police, handicapped and Americans with Disabilities Act requirements,

transportation and environmental matters. (f) Conditions of Title. Escrow Holder shall cause a

current commitment for title insurance ("Title Commitment") concerning the Property issued

by the Title Company, as well as legible copies of all documents referred to in the Title

Commitment ("Underlying Documents"), and a scaled and dimensioned plot showing the

location of any easements to be delivered to Buyer within 10 or days following the Date of

Agreement. Buyer has 10 days from the receipt of the Title Commitment, the Underlying

Documents and the plot plan to satisfy itself with regard to the condition of title. The

disapproval by Buyer of any monetary encumbrance, which by the terms of this Agreement is

not to remain against the Property after the Closing, shall not be considered a failure of this

contingency, as Seller shall have the obligation, at Seller's expense, to satisfy and remove such

disapproved monetary encumbrance at or before the Closing. (g) Survey. Buyer has 30 or days

from the receipt of the Title Commitment and Underlying Documents to satisfy itself with

regard to any ALTA title supplement based upon a survey prepared to American Land Title

Association ("ALTA") standards for an owner's policy by a licensed surveyor, showing the legal

description and boundary lines of the Property, any easements of record, and any

improvements, poles, structures and things located within 10 feet of either side of the Property

boundary lines. Any such survey shall be prepared at Buyer's direction and expense. If Buyer

has obtained a survey and approved the ALTA title supplement, Buyer may elect within the

period allowed for Buyer's approval of a survey to have an ALTA extended coverage owner's

form of title policy, in which event Buyer shall pay any additional premium attributable thereto.

(h) Existing Leases and Tenancy Statements. Seller shall within 10 or days of the Date of

Agreement provide both Buyer and Escrow Holder with legible copies of all leases, subleases or

rental arrangements (collectively, "Existing Leases") affecting the Property, and with a tenancy

statement ("Estoppel Certificate") in the latest form, executed by Seller and/or each tenant and

subtenant of the Property. Seller shall use its best efforts to have each tenant complete and

execute an Estoppel Certificate. If any tenant fails or refuses to provide an Estoppel Certificate

then Seller shall complete and execute an Estoppel Certificate for that tenancy. Buyer has 10

days from the receipt of said Existing Leases and Estoppel Certificates to satisfy itself with

regard to the Existing Leases and any other tenancy issues. (i) Owner's Association. Seller shall

within 10 or days of the Date of Agreement provide Buyer with a statement and transfer

package from any owner's association servicing the Property. Such transfer package shall at a

minimum include: copies of the association's bylaws, articles of incorporation, current budget

and financial statement. Buyer has 10 days from the receipt of such documents to satisfy itself

with regard to the association. (j) Other Agreements. Seller shall within 10 or days of the Date

of Agreement provide Buyer with legible copies of all other agreements ("Other Agreements")

known to Seller that will affect the Property after Closing. Buyer has 10 days from the receipt of

said Other Agreements to satisfy itself with regard to such Agreements. (k) Financing. If

paragraph 5 hereof dealing with a financing contingency has not been stricken, the satisfaction

or waiver of such New Loan contingency. (l) Existing Notes. If paragraph 3.1(c) has not been

stricken, Seller shall within 10 or days of the Date of Agreement provide Buyer with legible

copies of the Existing Notes, Existing Deeds of Trust and related agreements (collectively, "Loan

Documents") to which the Property will remain subject after the Closing. Escrow Holder shall

promptly request from the holders of the Existing Notes a beneficiary statement ("Beneficiary

Statement") confirming: (1) the amount of the unpaid principal balance, the current interest

rate, and the date to which interest is paid, and (2) the nature and amount of any impounds

held by the beneficiary in connection with such loan. Buyer has 10 or days from the receipt of

the Loan Documents and Beneficiary Statements to satisfy itself with regard to such financing.

Buyer's obligation to close is conditioned upon Buyer being able to purchase the Property

without acceleration or change in the terms of any Existing Notes or charges to Buyer except as

otherwise provided in this Agreement or approved by Buyer, provided, however, Buyer shall

pay the transfer fee referred to in paragraph 3.2 hereof. (m) Personal Property. In the event

that any personal property is included in the Purchase Price, Buyer has 10 or days from the

Date of Agreement to satisfy itself with regard to the title condition of such personal property.

Seller recommends that Buyer obtain a UCC-1 report. Any such report shall be paid for by

Buyer. Seller shall provide Buyer copies of any liens or encumbrances affecting such personal

property that it is aware of within 10 or days of the Date of Agreement. (n) Destruction,

Damage or Loss. There shall not have occurred prior to the Closing, a destruction of, or damage

or loss to, the Property or any portion thereof, from any cause whatsoever, which would cost

more than $10,000.00 to repair or cure. If the cost of repair or cure is $10,000.00 or less, Seller

shall repair or cure the loss prior to the Closing. Buyer shall have the option, within 10 days

after receipt of written notice of a loss costing more than $10,000.00 to repair or cure, to either

terminate this Agreement or to purchase the Property notwithstanding such loss, but without

deduction or offset against the Purchase Price. If the cost to repair or cure is more than

$10,000.00, and Buyer does not elect to terminate this Agreement, Buyer shall be entitled to

any insurance proceeds applicable to such loss. Unless otherwise notified in writing, Escrow

Holder shall assume no such destruction, damage or loss has occurred prior to Closing. (o)

Material Change. Buyer shall have 10 days following receipt of written notice of a Material

Change within which to satisfy itself with regard to such change. "Material Change" shall mean

a substantial adverse change in the use, occupancy, tenants, title, or condition of the Property

that occurs after the date of this offer and prior to the Closing. Unless otherwise notified in

writing, Escrow Holder shall assume that no Material Change has occurred prior to the Closing.

(p) Seller Performance. The delivery of all documents and the due performance by Seller of

each and every undertaking and agreement to be performed by Seller under this Agreement.

(q) Brokerage Fee. Payment at the Closing of such brokerage fee as is specified in this

Agreement or later written instructions to Escrow Holder executed by Seller and Brokers

("Brokerage Fee"). It is agreed by the Parties and Escrow Holder that Brokers are a third party

beneficiary of this Agreement insofar as the Brokerage Fee is concerned, and that no change

shall be made with respect to the payment of the Brokerage Fee specified in this Agreement,

without the written consent of Brokers.

9.2 All of the contingencies specified in subparagraphs (a) through (m) of paragraph 9.1 are for

the benefit of, and may be waived by, Buyer, and may be elsewhere herein referred to as

"Buyer's Contingencies."

9.3 If any of Buyer's Contingencies or any other matter subject to Buyer's approval is

disapproved as provided for herein in a timely manner ("Disapproved Item"), Seller shall have

the right within 10 days following the receipt of notice of Buyer's disapproval to elect to cure

such Disapproved Item prior to the Expected Closing Date ("Seller's Election"). Seller's failure to

give to Buyer within such period, written notice of Seller's commitment to cure such

Disapproved Item on or before the Expected Closing Date shall be conclusively presumed to be

Seller's Election not to cure such Disapproved Item. If Seller elects, either by written notice or

failure to give written notice, not to cure a Disapproved Item, Buyer shall have the right, within

10 days after Seller's Election to either accept title to the Property subject to such Disapproved

Item, or to terminate this Agreement. Buyer's failure to notify Seller in writing of Buyer's

election to accept title to the Property subject to the Disapproved Item without deduction or

offset shall constitute Buyer's election to terminate this Agreement. Unless expressly provided

otherwise herein, Seller's right to cure shall not apply to the remediation of Hazardous

Substance Conditions or to the Financing Contingency. Unless the Parties mutually instruct

otherwise, if the time periods for the satisfaction of contingencies or for Seller's and Buyer's

elections would expire on a date after the Expected Closing Date, the Expected Closing Date

shall be deemed extended for 3 business days following the expiration of: (a) the applicable

contingency period(s), (b) the period within which the Seller may elect to cure the Disapproved

Item, or (c) if Seller elects not to cure, the period within which Buyer may elect to proceed with

this transaction, whichever is later.

9.4 Buyer understands and agrees that until such time as all Buyer's Contingencies have been

satisfied or waived, Seller and/or its agents may solicit, entertain and/or accept back-up offers

to purchase the Property.

9.5 The Parties acknowledge that extensive local, state and Federal legislation establish broad

liability upon owners and/or users of real property for the investigation and remediation of

Hazardous Substances. The determination of the existence of a Hazardous Substance Condition

and the evaluation of the impact of such a condition are highly technical and beyond the

expertise of Brokers. The Parties acknowledge that they have been advised by Brokers to

consult their own technical and legal experts with respect to the possible presence of

Hazardous Substances on the Property or adjoining properties, and Buyer and Seller are not

relying upon any investigation by or statement of Brokers with respect thereto. The Parties

hereby assume all responsibility for the impact of such Hazardous Substances upon their

respective interests herein.

10. Documents Required at or Before Closing:

10.1 Five days prior to the Closing date Escrow Holder shall obtain an updated Title

Commitment concerning the Property from the Title Company and provide copies thereof to

each of the Parties.

10.2 Seller shall deliver to Escrow Holder in time for delivery to Buyer at the Closing: (a) Grant

or general warranty deed, duly executed and in recordable form, conveying fee title to the

Property to Buyer. (b) If applicable, the Beneficiary Statements concerning Existing Note(s). (c)

If applicable, the Existing Leases and Other Agreements together with duly executed

assignments thereof by Seller and Buyer. The assignment of Existing Leases shall be on the most

recent Assignment and Assumption of Lessor's Interest in Lease form. (d) If applicable, Estoppel

Certificates executed by Seller and/or the tenant(s) of the Property. (e) An affidavit executed by

Seller to the effect that Seller is not a "foreign person" within the meaning of Internal Revenue

Code Section 1445 or successor statutes. If Seller does not provide such affidavit in form

reasonably satisfactory to Buyer at least 3 business days prior to the Closing, Escrow Holder

shall at the Closing deduct from Seller's proceeds and remit to the Internal Revenue Service

such sum as is required by applicable Federal law with respect to purchases from foreign

sellers. (f) If the Property is located in California, an affidavit executed by Seller to the effect

that Seller is not a ''nonresident" within the meaning of California Revenue and Tax Code

Section 18662 or successor statutes. If Seller does not provide such affidavit in form reasonably

satisfactory to Buyer at least 3 business days prior to the Closing, Escrow Holder shall at the

Closing deduct from Seller's proceeds and remit to the Franchise Tax Board such sum as is

required by such statute. (g) If applicable, a bill of sale, duly executed, conveying title to any

included personal property to Buyer. (h) If the Seller is a corporation, a duly executed corporate

resolution authorizing the execution of this Agreement and the sale of the Property.

10.3 Buyer shall deliver to Seller through Escrow: (a) The cash portion of the Purchase Price and

such additional sums as are required of Buyer under this Agreement shall be deposited by

Buyer with Escrow Holder, by federal funds wire transfer, or any other method acceptable to

Escrow Holder in immediately collectable funds, no later than 2:00 P.M. on the business day

prior to the Expected Closing Date. (b) If a Purchase Money Note and Purchase Money Deed of

Trust are called for by this Agreement, the duly executed originals of those documents, the

Purchase Money Deed of Trust being in recordable form, together with evidence of fire

insurance on the improvements in the amount of the full replacement cost naming Seller as a

mortgage loss payee, and a real estate tax service contract (at Buyer's expense), assuring Seller

of notice of the status of payment of real property taxes during the life of the Purchase Money

Note. (c) The Assignment and Assumption of Lessor's Interest in Lease form specified in

paragraph 10.2(c) above, duly executed by Buyer. (d) Assumptions duly executed by Buyer of

the obligations of Seller that accrue after Closing under any Other Agreements. (e) If applicable,

a written assumption duly executed by Buyer of the loan documents with respect to Existing

Notes. (f) If the Buyer is a corporation, a duly executed corporate resolution authorizing the

execution of this Agreement and the purchase of the Property.

10.4 At Closing, Escrow Holder shall cause to be issued to Buyer a standard coverage (or ALTA

extended, if elected pursuant to 9.1(g)) owner's form policy of title insurance effective as of the

Closing, issued by the Title Company in the full amount of the Purchase Price, insuring title to

the Property vested in Buyer, subject only to the exceptions approved by Buyer. In the event

there is a Purchase Money Deed of Trust in this transaction, the policy of title insurance shall be

a joint protection policy insuring both Buyer and Seller. IMPORTANT: IN A PURCHASE OR

EXCHANGE OF REAL PROPERTY, IT MAY BE ADVISABLE TO OBTAIN TITLE INSURANCE IN

CONNECTION WITH THE CLOSE OF ESCROW SINCE THERE MAY BE PRIOR RECORDED LIENS AND

ENCUMBRANCES WHICH AFFECT YOUR INTEREST IN THE PROPERTY BEING ACQUIRED. A NEW

POLICY OF TITLE INSURANCE SHOULD BE OBTAINED IN ORDER TO ENSURE YOUR INTEREST IN

THE PROPERTY THAT YOU ARE ACQUIRING.

11. Prorations and Adjustments.

11.1 Taxes. Applicable real property taxes and special assessment bonds shall be prorated

through Escrow as of the date of the Closing, based upon the latest tax bill available. The

Parties agree to prorate as of the Closing any taxes assessed against the Property by

supplemental bill levied by reason of events occurring prior to the Closing. Payment of the

prorated amount shall be made promptly in cash upon receipt of a copy of any supplemental

bill.

11.2 Insurance. WARNING: Any insurance which Seller may have maintained will terminate on

the Closing. Buyer is advised to obtain appropriate insurance to cover the Property.

11.3 Rentals, Interest and Expenses. Scheduled rentals, interest on Existing Notes, utilities, and

operating expenses shall be prorated as of the date of Closing. The Parties agree to promptly

adjust between themselves outside of Escrow any rents received after the Closing.

11.4 Security Deposit. Security Deposits held by Seller shall be given to Buyer as a credit to the

cash required of Buyer at the Closing.

11.5 Post Closing Matters. Any item to be prorated that is not determined or determinable at

the Closing shall be promptly adjusted by the Parties by appropriate cash payment outside of

the Escrow when the amount due is determined.

11.6 Variations in Existing Note Balances. In the event that Buyer is purchasing the Property

subject to an Existing Deed of Trust(s), and in the event that a Beneficiary Statement as to the

applicable Existing Note(s) discloses that the unpaid principal balance of such Existing Note(s) at

the closing will be more or less than the amount set forth in paragraph 3.1(c) hereof ("Existing

Note Variation"), then the Purchase Money Note(s) shall be reduced or increased by an amount

equal to such Existing Note Variation. If there is to be no Purchase Money Note, the cash

required at the Closing per paragraph 3.1(a) shall be reduced or increased by the amount of

such Existing Note Variation.

11.7 Variations in New Loan Balance. In the event Buyer is obtaining a New Loan and the

amount ultimately obtained exceeds the amount set forth in paragraph 5.1, then the amount of

the Purchase Money Note, if any, shall be reduced by the amount of such excess.

11.8 Owner's Association Fees. Escrow Holder shall: (i) bring Seller's account with the

association current and pay any delinquencies or transfer fees from Seller's proceeds, and (ii)

pay any upfront fees required by the association from Buyer's funds.

12. Representations and Warranties of Seller and Disclaimers.

12.1 Seller's warranties and representations shall survive the Closing and delivery of the deed

for a period of 3 years, and, are true, material and relied upon by Buyer and Brokers in all

respects. Seller hereby makes the following warranties and representations to Buyer and

Brokers: (a) Authority of Seller. Seller is the owner of the Property and/or has the full right,

power and authority to sell, convey and transfer the Property to Buyer as provided herein, and

to perform Seller's obligations hereunder. (b) Maintenance During Escrow and Equipment

Condition At Closing. Except as otherwise provided in paragraph 9.1(m) hereof, Seller shall

maintain the Property until the Closing in its present condition, ordinary wear and tear

excepted. (c) Hazardous Substances/Storage Tanks. Seller has no knowledge, except as

otherwise disclosed to Buyer in writing, of the existence or prior existence on the Property of

any Hazardous Substance, nor of the existence or prior existence of any above or below ground

storage tank. (d) Compliance. Seller has no knowledge of any aspect or condition of the

Property which violates applicable laws, rules, regulations, codes or covenants, conditions or

restrictions, or of improvements or alterations made to the Property without a permit where

one was required, or of any unfulfilled order or directive of any applicable governmental agency

or casualty insurance company requiring any investigation, remediation, repair, maintenance or

improvement be performed on the Property. (e) Changes in Agreements. Prior to the Closing,

Seller will not violate or modify any Existing Lease or Other Agreement, or create any new

leases or other agreements affecting the Property, without Buyer's written approval, which

approval will not be unreasonably withheld. (f) Possessory Rights. Seller has no knowledge that

anyone will, at the Closing, have any right to possession of the Property, except as disclosed by

this Agreement or otherwise in writing to Buyer. (g) Mechanics' Liens. There are no unsatisfied

mechanics' or material men’s lien rights concerning the Property. (h) Actions, Suits or

Proceedings. Seller has no knowledge of any actions, suits or proceedings pending or

threatened before any commission, board, bureau, agency, arbitrator, court or tribunal that

would affect the Property or the right to occupy or utilize same. (i) Notice of Changes. Seller will

promptly notify Buyer and Brokers in writing of any Material Change (see paragraph 9.1(n))

affecting the Property that becomes known to Seller prior to the Closing. (j) No Tenant

Bankruptcy Proceedings. Seller has no notice or knowledge that any tenant of the Property is

the subject of a bankruptcy or insolvency proceeding. (k) No Seller Bankruptcy Proceedings.

Seller is not the subject of a bankruptcy, insolvency or probate proceeding. (l) Personal

Property. Seller has no knowledge that anyone will, at the Closing, have any right to possession

of any personal property included in the Purchase Price nor knowledge of any liens or

encumbrances affecting such personal property, except as disclosed by this Agreement or

otherwise in writing to Buyer.

12.2 Buyer hereby acknowledges that, except as otherwise stated in this Agreement, Buyer is

purchasing the Property in its existing condition and will, by the time called for herein, make or

have waived all inspections of the Property Buyer believes are necessary to protect its own

interest in, and its contemplated use of, the Property. The Parties acknowledge that, except as

otherwise stated in this Agreement, no representations, inducements, promises, agreements,

assurances, oral or written, concerning the Property, or any aspect of the occupational safety

and health laws, Hazardous Substance laws, or any other act, ordinance or law, have been

made by either Party or Brokers, or relied upon by either Party hereto.

12.3 In the event that Buyer learns that a Seller representation or warranty might be untrue

prior to the Closing, and Buyer elects to purchase the Property anyway then, and in that event,

Buyer waives any right that it may have to bring an action or proceeding against Seller or

Brokers regarding said representation or warranty.

12.4 Any environmental reports, soils reports, surveys, and other similar documents which

were prepared by third party consultants and provided to Buyer by Seller or Seller's

representatives, have been delivered as an accommodation to Buyer and without any

representation or warranty as to the sufficiency, accuracy, completeness, and/or validity of said

documents, all of which Buyer relies on at its own risk. Seller believes said documents to be

accurate, but Buyer is advised to retain appropriate consultants to review said documents and

investigate the Property.

13. Possession. Possession of the Property shall be given to Buyer at the Closing subject to the

rights of tenants under Existing Leases.

14. Buyer's Entry. At any time during the Escrow period, Buyer, and its agents and

representatives, shall have the right at reasonable times and subject to rights of tenants, to

enter upon the Property for the purpose of making inspections and tests specified in this

Agreement. No destructive testing shall be conducted, however, without Seller's prior approval

which shall not be unreasonably withheld. Following any such entry or work, unless otherwise

directed in writing by Seller, Buyer shall return the Property to the condition it was in prior to

such entry or work, including the re-compaction or removal of any disrupted soil or material as

Seller may reasonably direct. All such inspections and tests and any other work conducted or

materials furnished with respect to the Property by or for Buyer shall be paid for by Buyer as

and when due and Buyer shall indemnify, defend, protect and hold harmless Seller and the

Property of and from any and all claims, liabilities, losses, expenses (including reasonable

attorneys' fees), damages, including those for injury to person or property, arising out of or

relating to any such work or materials or the acts or omissions of Buyer, its agents or employees

in connection therewith.

15. Further Documents and Assurances. The Parties shall each, diligently and in good faith,

undertake all actions and procedures reasonably required to place the Escrow in condition for

Closing as and when required by this Agreement. The Parties agree to provide all further

information, and to execute and deliver all further documents, reasonably required by Escrow

Holder or the Title Company.

16. Attorneys' Fees. If any Party or Broker brings an action or proceeding (including arbitration)

involving the Property whether founded in tort, contract or equity, or to declare rights

hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal

thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same

suit or recovered in a separate suit, whether or not such action or proceeding is pursued to

decision or judgment. The term "Prevailing Party" shall include, without limitation, a Party or

Broker who substantially obtains or defeats the relief sought, as the case may be, whether by

compromise, settlement, judgment, or the abandonment by the other Party or Broker of its

claim or defense. The attorneys' fees award shall not be computed in accordance with any

court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably

incurred.

17. Prior Agreements/Amendments.

17.1 This Agreement supersedes any and all prior agreements between Seller and Buyer

regarding the Property.

17.2 Amendments to this Agreement are effective only if made in writing and executed by

Buyer and Seller.

18. Broker's Rights.

18.1 If this sale is not consummated due to the default of either the Buyer or Seller, the

defaulting Party shall be liable to and shall pay to Brokers the Brokerage Fee that Brokers would

have received had the sale been consummated. If Buyer is the defaulting party, payment of said

Brokerage Fee is in addition to any obligation with respect to liquidated or other damages.

18.2 Upon the Closing, Brokers are authorized to publicize the facts of this transaction.

19. Notices.

19.1 Whenever any Party, Escrow Holder or Brokers herein shall desire to give or serve any

notice, demand, request, approval, disapproval or other communication, each such

communication shall be in writing and shall be delivered personally, by messenger or by mail,

postage prepaid, to the address set forth in this Agreement or by facsimile transmission.

19.2 Service of any such communication shall be deemed made on the date of actual receipt if

personally delivered. Any such communication sent by regular mail shall be deemed given 48

hours after the same is mailed. Communications sent by United States Express Mail or

overnight courier that guarantee next day delivery shall be deemed delivered 24 hours after

delivery of the same to the Postal Service or courier. Communications transmitted by facsimile

transmission shall be deemed delivered upon telephonic confirmation of receipt (confirmation

report from fax machine is sufficient), provided a copy is also delivered via delivery or mail. If

such communication is received on a Saturday, Sunday or legal holiday, it shall be deemed

received on the next business day.

19.3 Any Party or Broker hereto may from time to time, by notice in writing, designate a

different address to which, or a different person or additional persons to whom, all

communications are thereafter to be made.

20. Duration of Offer.

20.1 If this offer is not accepted by Seller on or before 5:00 P.M. according to the time standard

applicable to the city of on the date of , it shall be deemed automatically revoked.

20.2 The acceptance of this offer, or of any subsequent counteroffer hereto, that creates an

agreement between the Parties as described in paragraph 1.2, shall be deemed made upon

delivery to the other Party or either Broker herein of a duly executed writing unconditionally

accepting the last outstanding offer or counteroffer.

21. LIQUIDATED DAMAGES. (This Liquidated Damages paragraph is applicable only if initialed by

both Parties). THE PARTIES AGREE THAT IT WOULD BE IMPRACTICABLE OR EXTREMELY

DIFFICULT TO FIX, PRIOR TO SIGNING THIS AGREEMENT, THE ACTUAL DAMAGES WHICH

WOULD BE SUFFERED BY SELLER IF BUYER FAILS TO PERFORM ITS OBLIGATIONS UNDER THIS

AGREEMENT. THEREFORE, IF, AFTER THE SATISFACTION OR WAIVER OF ALL CONTINGENCIES

PROVIDED FOR THE BUYER'S BENEFIT, BUYER BREACHES THIS AGREEMENT, SELLER SHALL BE

ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF . UPON PAYMENT OF SAID SUM TO

SELLER, BUYER SHALL BE RELEASED FROM ANY FURTHER LIABILITY TO SELLER, AND ANY

ESCROW CANCELLATION FEES AND TITLE COMPANY CHARGES SHALL BE PAID BY SELLER.

22. ARBITRATION OF DISPUTES. (This Arbitration of Disputes paragraph is applicable only if

initialed by both Parties.)

22.1 ANY CONTROVERSY AS TO WHETHER SELLER IS ENTITLED TO THE LIQUIDATED DAMAGES

AND/OR BUYER IS ENTITLED TO THE RETURN OF DEPOSIT MONEY, SHALL BE DETERMINED BY

BINDING ARBITRATION BY, AND UNDER THE COMMERCIAL RULES OF THE AMERICAN

ARBITRATION ASSOCIATION ("COMMERCIAL RULES"). ARBITRATION HEARINGS SHALL BE HELD

IN THE COUNTY WHERE THE PROPERTY IS LOCATED. ANY SUCH CONTROVERSY SHALL BE

ARBITRATED BY 3 ARBITRATORS WHO SHALL BE IMPARTIAL REAL ESTATE BROKERS WITH AT

LEAST 5 YEARS OF FULL TIME EXPERIENCE IN BOTH THE AREA WHERE THE PROPERTY IS

LOCATED AND THE TYPE OF REAL ESTATE THAT IS THE SUBJECT OF THIS AGREEMENT. THEY

SHALL BE APPOINTED UNDER THE COMMERCIAL RULES. THE ARBITRATORS SHALL HEAR AND

DETERMINE SAID CONTROVERSY IN ACCORDANCE WITH APPLICABLE LAW, THE INTENTION OF

THE PARTIES AS EXPRESSED IN THIS AGREEMENT AND ANY AMENDMENTS THERETO, AND

UPON THE EVIDENCE PRODUCED AT AN ARBITRATION HEARING. PRE-ARBITRATION DISCOVERY

SHALL BE PERMITTED IN ACCORDANCE WITH THE COMMERCIAL RULES OR STATE LAW

APPLICABLE TO ARBITRATION PROCEEDINGS. THE AWARD SHALL BE EXECUTED BY AT LEAST 2

OF THE 3 ARBITRATORS, BE RENDERED WITHIN 30 DAYS AFTER THE CONCLUSION OF THE

HEARING, AND MAY INCLUDE ATTORNEYS' FEES AND COSTS TO THE PREVAILING PARTY PER

PARAGRAPH 16 HEREOF. JUDGMENT MAY BE ENTERED ON THE AWARD IN ANY COURT OF

COMPETENT JURISDICTION NOTWITHSTANDING THE FAILURE OF A PARTY DULY NOTIFIED OF

THE ARBITRATION HEARING TO APPEAR THEREAT.

22.2 BUYER'S RESORT TO OR PARTICIPATION IN SUCH ARBITRATION PROCEEDINGS SHALL NOT

BAR SUIT IN A COURT OF COMPETENT JURISDICTION BY THE BUYER FOR DAMAGES AND/OR

SPECIFIC PERFORMANCE UNLESS AND UNTIL THE ARBITRATION RESULTS IN AN AWARD TO THE

SELLER OF LIQUIDATED DAMAGES, IN WHICH EVENT SUCH AWARD SHALL ACT AS A BAR

AGAINST ANY ACTION BY BUYER FOR DAMAGES AND/OR SPECIFIC PERFORMANCE.

22.3 NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE

ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION

DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING

UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY

TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO

DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE

"ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER

AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE

AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS

ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING

AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE

"ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.

23. Miscellaneous.

23.1 Binding Effect. This Agreement shall be binding on the Parties without regard to whether

or not paragraphs 21 and 22 are initialed by both of the Parties. Paragraphs 21 and 22 are each

incorporated into this Agreement only if initialed by both Parties at the time that the

Agreement is executed.

23.2 Applicable Law. This Agreement shall be governed by, and paragraph 22.3 is amended to

refer to, the laws of the state in which the Property is located.

23.3 Time of Essence. Time is of the essence of this Agreement.

23.4 Counterparts. This Agreement may be executed by Buyer and Seller in counterparts, each

of which shall be deemed an original, and all of which together shall constitute one and the

same instrument. Escrow Holder, after verifying that the counterparts are identical except for

the signatures, is authorized and instructed to combine the signed signature pages on one of

the counterparts, which shall then constitute the Agreement.

23.5 Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY

JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT OF THIS

AGREEMENT.

23.6 Conflict. Any conflict between the printed provisions of this Agreement and the

typewritten or handwritten provisions shall be controlled by the typewritten or handwritten

provisions.

23.7 1031 Exchange. Both Seller and Buyer agree to cooperate with each other in the event that

either or both wish to participate in a 1031 exchange. Any party initiating an exchange shall

bear all costs of such exchange.

23.8 Days. Unless otherwise specifically indicated to the contrary, the word "days" as used in

this Agreement shall mean and refer to calendar days.

24. Disclosures Regarding The Nature of a Real Estate Agency Relationship.

24.1 The Parties and Brokers agree that their relationship(s) shall be governed by the principles

set forth in the applicable sections of the California Civil Code, as summarized in paragraph

24.2.

24.2 When entering into a discussion with a real estate agent regarding a real estate

transaction, a Buyer or Seller should from the outset understand what type of agency

relationship or representation it has with the agent or agents in the transaction. Buyer and

Seller acknowledge being advised by the Brokers in this transaction, as follows: (a) Seller's

Agent. A Seller's agent under a listing agreement with the Seller acts as the agent for the Seller

only. A Seller's agent or subagent has the following affirmative obligations: (1) To the Seller: A

fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Seller. (2) To

the Buyer and the Seller: a. Diligent exercise of reasonable skills and care in performance of the

agent's duties. b. A duty of honest and fair dealing and good faith. c. A duty to disclose all facts

known to the agent materially affecting the value or desirability of the property that are not

known to, or within the diligent attention and observation of, the Parties. An agent is not

obligated to reveal to either Party any confidential information obtained from the other Party

which does not involve the affirmative duties set forth above. (b) Buyer's Agent. A selling agent

can, with a Buyer's consent, agree to act as agent for the Buyer only. In these situations, the

agent is not the Seller's agent, even if by agreement the agent may receive compensation for

services rendered, either in full or in part from the Seller. An agent acting only for a Buyer has

the following affirmative obligations. (1) To the Buyer: A fiduciary duty of utmost care, integrity,

honesty, and loyalty in dealings with the Buyer. (2) To the Buyer and the Seller: a. Diligent

exercise of reasonable skills and care in performance of the agent's duties. b. A duty of honest

and fair dealing and good faith. c. A duty to disclose all facts known to the agent materially

affecting the value or desirability of the property that are not known to, or within the diligent

attention and observation of, the Parties. An agent is not obligated to reveal to either Party any

confidential information obtained from the other Party which does not involve the affirmative

duties set forth above. (c) Agent Representing Both Seller and Buyer. A real estate agent, either

acting directly or through one or more associate licenses, can legally be the agent of both the

Seller and the Buyer in a transaction, but only with the knowledge and consent of both the

Seller and the Buyer. (1) In a dual agency situation, the agent has the following affirmative

obligations to both the Seller and the Buyer: a. A fiduciary duty of utmost care, integrity,

honesty and loyalty in the dealings with either Seller or the Buyer. b. Other duties to the Seller

and the Buyer as stated above in their respective sections (a) or (b) of this paragraph 24.2. (2) In

representing both Seller and Buyer, the agent may not without the express permission of the

respective Party, disclose to the other Party that the Seller will accept a price less than the

listing price or that the Buyer will pay a price greater than the price offered. (3) The above

duties of the agent in a real estate transaction do not relieve a Seller or Buyer from the

responsibility to protect their own interests. Buyer and Seller should carefully read all

agreements to assure that they adequately express their understanding of the transaction. A

real estate agent is a person qualified to advise about real estate. If legal or tax advice is

desired, consult a competent professional. (d) Further Disclosures. Throughout this transaction

Buyer and Seller may receive more than one disclosure, depending upon the number of agents

assisting in the transaction. Buyer and Seller should each read its contents each time it is

presented, considering the relationship between them and the real estate agent in this

transaction and that disclosure. Brokers have no responsibility with respect to any default or

breach hereof by either Party. The Parties agree that no lawsuit or other legal proceeding

involving any breach of duty, error or omission relating to this transaction may be brought

against Broker more than one year after the Date of Agreement and that the liability (including

court costs and attorneys' fees), of any Broker with respect to any breach of duty, error or

omission relating to this Agreement shall not exceed the fee received by such Broker pursuant

to this Agreement; provided, however, that the foregoing limitation on each Broker's liability

shall not be applicable to any gross negligence or willful misconduct of such Broker.

24.3 Confidential Information: Buyer and Seller agree to identify to Brokers as "Confidential"

any communication or information given Brokers that is considered by such Party to be

confidential.

25. Construction of Agreement. In construing this Agreement, all headings and titles are for the

convenience of the Parties only and shall not be considered a part of this Agreement.

Whenever required by the context, the singular shall include the plural and vice versa. Unless

otherwise specifically indicated to the contrary, the word "days" as used in this Agreement shall

mean and refer to calendar days. This Agreement shall not be construed as if prepared by one

of the Parties, but rather according to its fair meaning as a whole, as if both Parties had

prepared it.

26. Additional Provisions: Additional provisions of this offer, if any, are as follows or are

attached hereto by an addendum consisting of paragraphs through. (If there are no additional

provisions, write "NONE".) ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE

BY SCOTT SCHEEL OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX

CONSEQUENCES OF THIS AGREEMENT OR THE TRANSACTION TO WHICH IT RELATES. THE

PARTIES ARE URGED TO: 1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX

CONSEQUENCES OF THIS AGREEMENT. 2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW

AND INVESTIGATE THE CONDITION OF THE PROPERTY. SAID INVESTIGATION SHOULD INCLUDE

BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING

OF THE PROPERTY, THE INTEGRITY AND CONDITION OF ANY STRUCTURES AND OPERATING

SYSTEMS, AND THE SUITABILITY OF THE PROPERTY FOR BUYER'S INTENDED USE. WARNING: IF

THE PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF

THIS AGREEMENT MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN

WHICH THE PROPERTY IS LOCATED. NOTE: 1. THIS FORM IS NOT FOR USE IN CONNECTION

WITH THE SALE OF RESIDENTIAL PROPERTY. 2. IF THE BUYER IS A CORPORATION, IT IS

RECOMMENDED THAT THIS AGREEMENT BE SIGNED BY TWO CORPORATE OFFICERS.

The undersigned Buyer offers and agrees to buy the Property on the terms and conditions

stated and acknowledges receipt of a copy hereof.

BROKER: BUYER:

Attn:

Title:

Address:

Telephone:( )

Facsimile:( )

Email:

Federal ID No.

Broker/Agent DRE License #:

By:_______________________________________________________

Date:

Name Printed:

Title:

Telephone:( )

Facsimile:( )

Email:

By:_______________________________________________________

Date:

Name Printed:

Title:

Address:

Telephone:( )

Facsimile:( )

Email:

Federal ID No.

27. Acceptance.

27.1 Seller accepts the foregoing offer to purchase the Property and hereby agrees to sell the

Property to Buyer on the terms and conditions therein specified.

27.2 Seller acknowledges that Brokers have been retained to locate a Buyer and are the

procuring cause of the purchase and sale of the Property set forth in this Agreement. In

consideration of real estate brokerage service rendered by Brokers, Seller agrees to pay Brokers

a real estate Brokerage Fee in a sum equal to % of the Purchase Price to be divided between

the Brokers as follows: Seller’s Broker % and Buyer’s Broker %. This Agreement shall serve as an

irrevocable instruction to Escrow Holder to pay such Brokerage Fee to Brokers out of the

proceeds accruing to the account of Seller at the Closing.

27.3 Seller acknowledges receipt of a copy hereof and authorizes Brokers to deliver a signed

copy to Buyer. NOTE: A PROPERTY INFORMATION SHEET IS REQUIRED TO BE DELIVERED TO

BUYER BY SELLER UNDER THIS AGREEMENT.

BROKER: SELLER:

Attn:

Title:

Address:

Telephone:( )

Facsimile:( )

Email:

Federal ID No.:

Broker/Agent DRE License #:

By:_______________________________________________________

Date:

Name Printed:

Title:

Telephone:( )

Facsimile:( )

Email:

By:_______________________________________________________

Date:

Name Printed:

Title:

Address:

Telephone:( )

Facsimile:( )

Email:

Federal ID No.:

NOTICE

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live seminars and Boot Camp events, I review detailed contract case studies with you, so you

are not intimidated when you are negotiating a contract. Visit CommercialAcademy.com for

more information on live events coming to your area.

: Student Testimonial - Jillian Herfurth, Cambridge, ON

The first time I heard Scott speak, it sounded really exciting to me. It sounded very comprehensive, and

it made sense to go the commercial route. That’s what we decided to do: go commercial and skip the

single house route. I used the techniques that I learned from Scott at the Commercial Academy in

several ways. Some of the things I did was to use the letter campaign. I sent out a number of letters to

prospective people I’d be buying properties from. I contacted mortgage brokers and attorneys and

asked them what they knew about possible people looking to sell their properties. I found those

methods very useful. The Opportunity Evaluator helped me a lot. I was able to plug in preliminary

numbers from 7 Steps to Checkmate. If that made sense, I went further on in the Opportunity Evaluator.

It helped me rule out deals quickly, so I didn’t waste my time. It was a great help.

Scott’s training has made a big difference in my life. It has given me the confidence to do this thing I’ve

been thinking about. I’ve been thinking about doing commercial real estate for about two years.

Learning from Scott gave me confidence to go ahead, make a move and take some action - and not just

think about it. My favorite part of Scott’s training and the Commercial Academy is the opportunity to

network with others who are like-minded and that I know I can contact and work on some deals with,

after this event is over. If I was talking to someone, and they said they’re interested in attending Scott

Scheel’s Commercial Academy, I’d say it’s time and effort well-spent. Go ahead. You won’t regret it.

The way we located this property was: Through Scott’s teaching, I became more aware of places to look

for properties. I saw this property in a magazine I located for commercial investors, and in fact, I

subscribe to that magazine now. This is an apartment building with eight units; all are one-bedrooms.

It’s close to the downtown area of the city where I live. When negotiating, we used creative offers as

taught by Scott. We requested a repair credit from the vendors. And through some negotiations, they

agreed, and we got a great price on it. Also, we were able to get some cash back at closing. The total

amount was over $36,000. Our future plan for the property is to hold on to it and continue to get

positive cash flow from it. We have a view to refinance it in a few years, draw out some cash and use

that to further our real estate empire.

The future plan for my investment career is to make this my full-time thing. I want to leave my job

sooner than later. This is my goal. I’m going to free up my time to spend more time with family and

friends, and early retirement is definitely in my future. Scott, thank you so much for including us in your

program and making this available to us. We’re definitely going to spread the word that your program is

the way to go.

Chapter 7

Closing on Deals & Increasing the Value

Part 1 - Closing on the Deal

How will you facilitate the closing of your deal? I am going to tell you the secret to making this

the easiest of all the “Moves.” Use an attorney to close. What type of attorney? A commercial

real estate attorney.

This should be a professional who performs this business every single day. The attorney must

be involved in commercial real estate on daily basis because if he or she is not, then he or she

will not understand all the terms and strategies that we use; he or she will not have his or her

finger on the pulse of what is going on in the commercial real estate marketplace.

If you are having trouble finding an attorney, it may be because most attorneys do not list

themselves as commercial real estate attorneys; instead, they are listed as a “Transactional

Attorney” by discipline. A Transactional Attorney is someone who handles contracts and

agreements, as well as the legal aspect of commercial real estate transactions.

Closing on the Property

When it comes to closing on a property, make absolutely certain that you have all of your agreements reviewed by a qualified professional Commercial Real Estate attorney. This must be someone who does closings every day.

If this is your first project, to the attorneys can direct you as to which elements are going to be necessary to protect you upon taking title.

You will not have to do everything, but remember that your protections need to be situational.

Some of the items to pay specific attention to include the following:

Verify that the terms of any new loan match your commitment letter, specifically:

Interest rate

Whether the loan rate is fixed or adjustable

Adjustment periods

Prepayment penalties

Term in years

If and when a note balloons

Yield spread for any adjusting term

Points charged on the loan

Any automatic renewals

Any floors or ceilings on the interest rates

If you are dealing with seller financing, these things will be equally important. However, it is less likely that attorneys will be as actively involved. Do not be lulled into a false sense of security because the seller is not using legal counsel. You must always use a competent legal professional! No exceptions!

Part 2 - Increasing the Value

This is where the rubber meets the road. From a management perspective, you can step in, find

a property, get in, and specifically take actions to create value where others cannot. Any fool

can look at a building and say, “Hey, it is vacant. If this building were fully occupied, it would be

worth a lot more money.”

The key, however, is being able to choose which buildings can be turned around and which

specific elements of that property make it conducive for our success. Because a lot of these

properties will take you down if you choose the wrong one. But once you start choosing the

right properties, the rest becomes easy. The process becomes systematic and is a formula that

you can apply time and time again to create value where others are simply unable to.

The first thing to do when creating value in a property is to renovate the property. Fix it up both

cosmetically and functionally - speaking. Next, raise rents; this increases income and thereby

causes the value to increase. Also, lower expenses, thus allowing the property to operate in a

more efficient level, which keeps more dollars in your pocket. Every dollar left in your pocket

translates to $10 to$20 of value on the actual sale price of the property.

Additionally, you should improve the financing. By getting better financing on the property, you

lower the interest rate, which means that you lower the amount of debt on the property to pay

each month and each year. Obtaining better financing allows you to put more cash in your

pocket. Furthermore, combining multiple strategies will have a multiplied effect on your profits

Finally, let us discuss the best use for increasing value. An example of the best use of an old

apartment building is to convert them to condominiums and sell the units off, one by one, for a

far higher price than what we acquired the units for when they were considered multifamily

units.

Another example of the best use of a property is to take an old warehouse building

and chop it into smaller components, so that you can lease it out as mini-storage. Or

maybe you knock down the building altogether and create something new in its

place; something better that serves the community at a higher level.

Chapter 8

Managing the Property

Part 1 - Deciding Your Management Structure

Deciding Your Management Structure

The first, and most important, decision is whether or not you will self-manage or

hire managers to do the job for you. In many cases, it will be obvious as to which

choice to make.

If the property is too small, it will not be able to support a manager or management company. Consequently, managing the property is completely to you, your partner or your employees; but in the end, it is still your responsibility.

If the property is extremely large, you will need help, even if you plan on taking an active role in the day-to-day operations.

1. Help can come in the form of hiring employees or outsourcing to a professional property management organization.

2. However, this is something you need to decide up front. The good news is that you can change this at any time.

3. On mid-range sized properties, ranging anywhere from 20 to 100 units, it is your choice as to whether or not you self-manage or outsource management.

4. Working with management companies is an excellent strategy. However, you need to have some knowledge in order to manage the management company.

5. If your property is too small, you will need some alternatives.

Before you make your final choice as to whether or not you will be involved in the

day-to-day management (or outsource), make sure that whatever your choice is,

your investment goals and principles remain intact.

Part 2 - Should you Self Manage

Should You Self-Manage?

This is a critical decision and one that should not be taken lightly. The very success or failure of your investing future depends on getting this right!

These are the variations to choose from:

1. Completely self-manage

2. Delegate some of the responsibilities, such as

i. ♣Tasks you do not like or are not skilled to handle

3. Completely delegate and set an expectation, review and reporting system to maintain control

4. Many successful developers and investors find they are better at locating and creating deals and would be far better off paying someone else to attend to the day-to-day management.

Part 3 - Five Factors for Choosing the Right Property Management Company

Five Factors for Choosing the Right Property Management

Company

1. Too Small, Too Big – Just Right

BEWARE of very small companies.

BEWARE of very large companies.

2. Location

They should have an office in the same area as your property.

They cannot run day-to-day operations remotely.

3. Written Procedures

Formal, WRITTEN procedures are ESSENTIAL.

4. Comparable Properties

The company should have experience managing comparable properties.

5. Conflicts of Interest

The company should not own properties similar to yours in the same area.

NEVER buy or inspect contingent upon signing a management agreement.

Coaching Opportunities

Obviously, there is a lot more for you to learn about commercial real estate investing, and I

have a lot more to teach you! I have reviewed the basics with you, so you can take action

now. However, if you are extremely passionate about this industry and are serious about

making enough money to retire early or travel around the world by following this passion, it

is imperative that you visit CommercialAcademy.com to find out more ways to increase your

commercial real estate savvy. I offer live seminars, Boot Camp events, videos and many

other coaching opportunities to help you reach your goals!

Testimonials

Student Testimonial - Roger Ketchum - Kilgore, TX

The first time I heard Scott speak was in Orlando in February 2007. And right away, I knew that

the guy had integrity. I knew he had knowledge of the business. It got me very excited to focus

and to listen to what he had to say. I knew I could pick up some very valuable knowledge from

him.

I went to Scott’s training with a specific target goal in mind. I lived on a golf course and was

hoping to do something with it. Right away my eyes were open to what I could do. Beforehand,

I just knew something could be done, but I didn’t know what to do. So, the techniques I picked

up, I was actually able to apply right away. And it turned out to be a very fruitful deal.

The Opportunity Evaluator was extremely important to my success. As a matter of fact, on the

first deal I did - again on a golf course where I live - it brought incredible integrity to the deal

and to myself when I actually presented the deal to investors. It showed a breakdown of

expenses, the development costs and the projected income that we could make. Without that, I

wouldn’t have much to present to the guys, so it’s been vitally important to me.

Scott’s training has impacted my life in an unbelievable way. In 21 months, we’ve done three

deals and just amassed a nice amount of monthly income and equity that - on paper - makes

me a millionaire. If I had someone interested in attending the Commercial Academy in my area

and in my market, I would completely discourage them. I do not want any competition because

anyone can go out and do this. In other markets, absolutely, I would encourage them and offer

to help them in any way that I could.

When I think of the Commercial Property Academy training, really, the first things that come to

mind are the live events. I enjoy the live events. I enjoy the networking. This is my third time at

the C.P.A. event. I come back for three reasons: 1. the networking; 2. the new material that he

goes over; 3. just to find out what he’s been up to and how he’s been successful, and what I can

do to realign and refocus because when I get back to the office I get tunnel vision on one

specific project. So when I come back to events, I get my knowledge re-broadened, as far as

different creative techniques to get into new and bigger deals.

The property that I’ve done that I’m most excited about. I actually have a gentleman that I go to

church with. He’s a clinical director of boys’ home. They had a 13-bed facility. They needed a

bigger facility. He didn’t have the funds or the know-how to go out and find a bigger facility. He

had heard I was doing commercial real estate. So, really, just by word of mouth, this gentleman

approached me, and it turned out to be my biggest deal to date.

For this type of property we have bought an expired nursing home. We’re redeveloping the

interior of it to serve as a boys’ home, known as a residential treatment center. With the

amount of money that I’m going to make off this deal, we’re going to hold it long-term. The

tenants have already signed a 12-year lease. The positive monthly cash flow after debt service

is about $12,000. Equity is to the tune of about $2.7 million.

First of all, I am working on some new deals. I’ve got three other deals that I’m currently

evaluating. We’re buying the property that we office out of and an additional building. We got

all the financing. He’s carrying 90 percent of the note. It’s less than a 4 percent interest rate.

I’ve got a 40,000-square-foot office building that I’m looking at buying, which has a tremendous

upside. And then we’ve got another 19 acres that we’re looking to develop.

To Scott, staff, coaching and all the guys involved, it’s an incredible thank you. You guys have

impacted my life in such an amazing way.

- Roger Ketchum

This seminar was better than all others we have attended – it's the only seminar

we've ever felt has been worth repeating. You'll see us again and again. We especially

liked learning how to use owner financing and hard money to structure our deals. We'd

definitely recommend this seminar to others!!

-- Craig & Mirtes Nysven, Lissburg, VA

We felt privileged to be able to attend. We learned how to watch for pitfalls as well as

opportunities, and how not to be intimidated by banks and brokers. The Opportunity

Evaluator™ software is excellent! We're looking forward to the follow-up conference

calls and the opportunity to come back.

-- Warren & Betty Honeycutt, Coldwater, MS

Dear Scott,

It's been just a month since we attended your intensive Academy in Las Vegas. I can't

believe we are writing this thank you letter so soon after taking your seminar!

We returned home to L.A. inspired, motivated, and fearless. A few days later, we learned of

a 51-unit complex in Texas scheduled for foreclosure auction. Before having attended

your Academy, I seriously doubt that we would have actively pursued this lead. We would

have hesitated to work out-of-state, and the size of the project would have seemed an

overwhelming and impractical challenge.

We set about doing the necessary due diligence and research. Step by step, we followed the

methods that you taught us and started plugging our numbers into your (awesome!)

Opportunity Evaluator™ software. Just like we learned in your class, we worked up several

different scenarios to compare a number of different exit strategies.

We won the bid at $855,000, which buys a three bedroom, two bath home where we

live. In our exit strategy, we stand to cash out with a net profit of $3.5 - $4 million.

Wow!

Thank you so much for your inspiration, your guidance, and your support, Scott.

With gratitude,

Cecilia Lascu

Los Angeles, CA