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This is an actual contract I used a few years ago when I bought two duplexes and a lot for $16,500. Now, you can see the buyer is my LLC at the top and the seller was whoever the motivated seller was.
You just list the property, the addresses, the price. The earnest money deposit is straight up $50. You might write $10. I always say, “between $10 and $50.” And the right to assign is really important. It says, very simply, “Contract can be assigned to the buyer’s partner. If assigned, all rights, privileges, and responsibility will be assigned, and the buyer will be relieved of the same.” That gets you the ability to resell that house to another investor.
Number two here is the second page of this contract. This provides you with your parachute so that the contract is risk free. The way we do that is by using a really strong contingency.
Contingency means if this happens, you’ll close on the house. If it does not happen, you will not close on the house. It’s that simple. If you need to get out of the contract, you have a parachute to pull instead of going over the cliff crashing and burning and having risk--you can pull the parachute and you can land safely.
Think of it that way: This is buying houses with a parachute, and it’s a very simple contingency. See where it says, “This contract is contingent upon the buyer’s partner’s inspection and partner’s approval of the subject property.” So who are your partners? Think of them as your end buyers. Those are your partners. If they don’t want to buy the house from you, then they’re not going to approve of the subject property prior to settlement, and you don’t have to close.
It isn’t like a formal incorporated-type relationship with partners. Think of the buyer’s partners as your end buyers. Those are the people you’re going to go out resell the house to off your buyer’s list.
If you find somebody who wants to buy the house, then you proceed to closing. If you don’t, you just go back to the seller and say, “Hey, I’m really sorry. We’ve got to break this thing up because my partners would not approve of your property.” And it also goes on to say, “The seller agrees to provide access to the subject property to the buyer’s representatives and contractors prior to settlement.” That’s how you’re going to get them inside the house, put the lock box on the front door and be ready to go. That is buying houses with a parachute and it works very well.