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Prologue: Does Investing in Real Estate Still Make Sense? | |
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Why Real Estate Offers Your Best Route to a Prosperous Future | |
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A Dependable and Growing Flow of Income | |
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Property versus Stock | |
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What about Bonds? | |
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Don't Fall for the Annuity Sales Pitches | |
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Are Rent Collections Dependable? | |
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Why Rents Will Continue to Increase | |
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From Baby Bust to Echo Boom | |
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New Construction Can't Keep Pace | |
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More Good News for Property Appreciation | |
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But First, the Reckoning | |
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The Relevance to Property Appreciation | |
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The Interest Rate Kicker | |
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Reason, Not Faith | |
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You Can Still Win with Properties (for Now) | |
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Financing: Borrow Smart, Build Wealth | |
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The Birth of "Nothing Down" | |
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Should You Invest with Little or No Cash or Credit? | |
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What's Wrong with "No Cash, No Credit"? | |
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Leverage: Pros and Cons | |
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What Are Your Risk-Return Objectives? | |
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Maximize Your Leverage with Owner-Occupancy Financing | |
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Owner-Occupied Buying Strategies | |
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Homeowners, Too, Can Use This Method | |
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Why One Year? | |
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Where Can You Find High-LTV Owner-Occupied Mortgages? | |
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What Are the Loan Limits? | |
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High Leverage for Investor-Owned Financing | |
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High Leverage versus Low (or No) Down Payment | |
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Creative Finance Revisited | |
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Are High-Leverage Creative-Finance Deals Really Possible? | |
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What Underwriting Standards Do Lenders Apply? | |
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Collateral (Property Characteristics) | |
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Amount and Source of Down Payment and Reserves | |
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Capacity (Monthly Income) | |
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Credit History (Credibility!) | |
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Character and Competency | |
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Compensating Factors | |
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Automated Underwriting (AUS) | |
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Appraisal: How to Discover Great Properties | |
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Make Money When You Buy, Not Just When You Sell | |
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What Is Market Value? | |
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Sales Price Doesn't Necessarily Equal Market Value | |
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Lenders Loan Only against Market Value | |
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The Three Approaches to Value | |
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Property Description | |
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Subject Property Identification | |
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Neighborhood | |
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Site (Lot) Characteristics | |
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Improvements | |
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The Cost Approach | |
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Calculate Cost to Build New | |
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Subtract Depreciation | |
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Lot Value | |
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Estimate Market Value (Cost Approach) | |
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The Comparable Sales Approach | |
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Select Comparable Properties | |
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Adjusting for Differences | |
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Explaining the Adjustments | |
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The Income Approach | |
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Income Capitalization | |
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Net Operating Income | |
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Estimating Capitalization Rates (R) | |
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Comparing Cap Rates | |
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The Paradox of Risk and Appreciation Potential | |
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Always Compare Relative Price | |
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Valuation: Final Words | |
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Appraisal Limiting Conditions | |
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Valuation versus Investment Analysis | |
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Maximize Cash Flows and Appreciation | |
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Will the Property Yield Good Cash Flows? | |
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Arrange Alternative Terms of Financing | |
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Decrease (or Increase) Your Down Payment | |
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Buy at a Bargain Price | |
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Should You Ever Overapy for a Property? | |
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The Debt Coverage Ratio | |
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Numbers Change, Principles Remain | |
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Will the Property Yield Above-Average Appreciation? | |
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Low-Involvement versus High-Involvement Investing | |
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Compare Relative Prices of Neighborhoods (Cities) | |
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Undervalued Neighborhoods and Cities | |
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Beverly Hills versus Watts (South Central Los Angeles) | |
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Demographics | |
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Accessibility (Convenience) | |
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Improved (Increased) Transportation Routes | |
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Jobs | |
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Taxes, Services, and Fiscal Solvency | |
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New Construction, Renovation, and Remodeling | |
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Land-Use Laws | |
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Civic Pride | |
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Sales and Rental Trends | |
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Summing Up | |
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How to Find Bargains | |
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Why Properties Sell for Less (or More) than Market Value | |
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Owners in Distress | |
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The "Grass-Is-Greener" Sellers | |
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Stage-of-Life Sellers | |
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Seller Ignorance | |
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List Your Screening Criteria | |
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Bargain Sellers | |
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Networking | |
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Newspapers and Other Publications | |
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Cold Call Owners | |
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Agent Services | |
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World Wide Web | |
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Seller Disclosures | |
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The Disclosure Revolution | |
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Income Properties | |
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Summary | |
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Profit From Foreclosures | |
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The Foreclosure Process | |
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Lender Tries to Resolve Problem | |
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Filing Legal Notice | |
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The Foreclosure Sale | |
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REOs | |
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Buy Preforeclosures from Distressed Owners | |
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Approach Owners with Empathy | |
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The Difficulties of Dealing Profitably with Owners in Default | |
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Prequalify Homeowners and Properties | |
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Finding Homeowners in Default (Prefiling) | |
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Networking | |
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Mortgage Collections Personnel | |
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Driving Neighborhoods | |
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Finding Homeowners (Postfiling) | |
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Meeting the Property Owners | |
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Two More Drawbacks | |
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Vacant Houses | |
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Satisfy Lenders and Lien Holders | |
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All Parties Are Better Off | |
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Sometimes Losing Less Is Winning | |
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Profit from the Foreclosure Auction | |
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Why Foreclosures Sell for Less than Market Value | |
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Make the Adverse Sales Efforts Work for You | |
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How to Arrange Financing | |
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The Foreclosure Sale: Summing Up | |
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Profit From Reos and Other Special Sales | |
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Buy Direct from a Mortgage Lender | |
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Buy Safely | |
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Why a Lower Price? | |
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Finding Lender REOs | |
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Follow Up with Lenders after Foreclosure Sales | |
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Locate Specialty Realtors | |
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HUD Homes and Other HUD Properties | |
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Homeowners versus Investors | |
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"As-Is" Condition | |
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Potential Conflict of Interest | |
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Buyer Incentives | |
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The Bid Package | |
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Department of Veterans Affairs (REOs) | |
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Big Advantages for Investors | |
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Fannie Mae and Freddie Mac REOs | |
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Agent Listings | |
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Investors Accepted | |
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Federal Government Auctions | |
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Buy from Foreclosure Speculators | |
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Probate and Estate Sales | |
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Probate | |
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Estate Sales | |
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Private Auctions | |
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How to Find Auctions | |
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Quick Profits Through Fix and Flip | |
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Fix, Flip, Profit! | |
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Looking for "Fixers" | |
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The Browns Create Value in a Down Market | |
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Research, Research, Research | |
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Improvements to Consider | |
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Thoroughly Clean the Property | |
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Add Pizzazz with Color Schemes, Decorating Patterns, and Fixtures | |
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Create More Usable Space | |
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Create a View | |
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Capitalize on Owner Nearsightedness | |
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Eliminate a Negative View | |
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Enhance the Unit's Natural Light | |
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Reduce Noise | |
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Required Repairs and Improvements | |
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Plumbing | |
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Electrical System | |
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Heating and Air-Conditioning | |
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Windows | |
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Appliances | |
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Walls and Ceilings | |
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Doors and Locks | |
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Landscaping | |
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Storage Areas | |
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General Cleaning | |
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Safety and Health Factors | |
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Roofs | |
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Major Improvements and Alterations | |
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Can You Improve a Location? | |
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The South Beach Example: From Derelicts to Fashion Models | |
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Community Action and Community Spirit Make a Difference | |
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Many Neighborhoods Offer Potential | |
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What Types of Improvements Pay the Greatest Returns? | |
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How Much Should You Budget for Improvements? | |
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Beware of Overimprovement | |
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Other Benefits | |
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No-No Improvements | |
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Budgeting for Quick Resale Profits | |
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Estimate the Sales Price First | |
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Estimate Costs | |
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Sales Price Less Costs and Profit Equals Acquisition Price | |
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Comply with Laws and Regulations | |
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Should You Buy a "Fixer"? | |
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Too Little Time? | |
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Put Your Creativity to Work | |
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More Techniques for High Yields and Fast Profits | |
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Lease Options | |
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Here's How Lease Options Work | |
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Benefits to Tenant-Buyers (An Eager Market) | |
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Benefits to Investors | |
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The Lease Option Sandwich | |
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How to Find Lease Option Buyers and Sellers | |
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A Creative Beginning with Lease Options (for Investors) | |
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Lease Purchase Agreements | |
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"Seems" More Definite | |
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Amount of the Earnest Money Deposit | |
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Contingency Clauses | |
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Conversions | |
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Condominium Conversion | |
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Tenants in Common | |
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Converting Apartments to Office Space | |
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Master Leases | |
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Assignments: Flipping Purchase Contracts | |
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Summary | |
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Negotiate A Win-Win Agreement | |
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Win-Win Principles | |
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The Purchase Contract | |
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Names of the Parties | |
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Site Description | |
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Building Description | |
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Personal Property | |
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Price and Financing | |
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Earnest Money Deposit | |
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Quality of Title | |
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Property Condition | |
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Preclosing Property Damage (Casualty Clause) | |
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Closing (Settlement) Costs | |
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Closing and Possession Dates | |
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Leases | |
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Contingency Clauses | |
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Assignment and Inspection | |
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Public Records | |
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Systems and Appliances | |
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Environmental Hazards | |
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No Representations | |
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Default Clause | |
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Summary | |
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Managing Your Properties to Increase Their Value | |
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The 10:1 Rule (More or Less) | |
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Think First | |
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Know Yourself | |
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Know Your Finances | |
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Know Your Capabilities | |
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Smart Strategic Decisions | |
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Local Markets Require Tailored Strategies | |
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Craig Wilson's Profit-Boosting Market Strategy | |
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How Craig Wilson Used Market Information to Enhance the Profitability of His Property | |
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Overall Results | |
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Cut Operating Expenses | |
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Energy Audits | |
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Property Insurance | |
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Maintenance and Repair Costs | |
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Property Taxes and Income Taxes | |
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Increasing Value: Final Words | |
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Develop the Best Lease | |
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The Mythical "Standard" Lease | |
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Your Market Strategy | |
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Search for Competitive Advantage | |
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Craft Your Rental Agreement | |
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Names and Signatures | |
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Joint and Several Liability | |
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Guests | |
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Length of Tenancy | |
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Holdover Tenants (Mutual Agreement) | |
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Holdover Tenants (without Permission) | |
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Property Description | |
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Inventory and Describe Personal Property | |
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Rental Amounts | |
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Late Fees and Discounts | |
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Multiple Late Payments | |
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Bounced Check Fees and Termination | |
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Tenant "Improvements" | |
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Owner Access | |
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Quiet Enjoyment | |
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Noxious Odors | |
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Disturbing External Influences | |
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Tenant Insurance | |
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Sublet and Assignment | |
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Pets | |
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Security Deposits | |
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Yard Care | |
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Parking, Number, and Type of Vehicles | |
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Repairs | |
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Roaches, Fleas, Ants | |
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Neat and Clean | |
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Rules and Regulations | |
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Wear and Tear | |
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Lawful Use of Premises | |
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Notice | |
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Failure to Deliver | |
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Utilities, Property Taxes, Association Fees | |
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Liquid-Filled Furniture | |
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Abandonment of Property | |
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Nonwaivers | |
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Breach of Lease (or House Rules) | |
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No Representations (Full Agreement) | |
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Arbitration | |
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Attorney Fees (Who Pays?) | |
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Written Notice to Remedy | |
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Tenants Rights Laws | |
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Tenant Selection | |
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Property Operations | |
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Evictions | |
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Landlording: Pros and Cons | |
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Possibilities, Not Probabilities | |
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Professional Property Managers | |
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Sell for Top Dollar | |
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Agent Services | |
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Obstacles to By-Owner Sales | |
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Cost of Brokerage Services | |
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Listing Contracts | |
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Obligations of the Sales Agent | |
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Obligations to Your Agent | |
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Prepare the Property for Top Dollar | |
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Compliance Issues | |
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"As-Is" Sales Still Require Disclosures | |
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Attract Buyers | |
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Advertising and Promotion | |
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Negotiate The Sales Contract | |
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Pay Less Tax | |
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The Risks of Change and Complexity | |
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Homeowner Tax Savings | |
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Capital Gains without Taxes | |
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Rules for Vacation Homes | |
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Mortgage Interest Deductions | |
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Credit Card Interest | |
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Rules for Your Home Office | |
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Depreciation Expense | |
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Land Value Is Not Depreciable | |
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Land Values Vary Widely | |
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After-Tax Cash Flows | |
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Passive Loss Rules | |
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Taxpayers in the Real Property Business (No Passive Loss Rules) | |
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Alternative Minimum Tax | |
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Capital Gains | |
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A Simplified Example | |
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The Installment Sale | |
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What's the Bottom Line for Sellers? | |
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Implications for Buyers | |
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Tax-Free Exchanges | |
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Exchanges Don't Necessarily Involve Two-Way Trades | |
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The Three-Party Exchange | |
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Exchanges Are Complex but Easy | |
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Are Tax-Free Exchanges Really Tax Free? | |
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Section 1031 Exchange Rules | |
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Reporting Rental Income and Deductions | |
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Tax Credits | |
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Complexity, Tax Returns, and Audits | |
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Use a Tax Pro | |
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Property Taxes | |
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Summary | |
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New Trends and Developments | |
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Lower-Priced Areas | |
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What about Property Management? | |
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Tenant-Assited Management | |
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Property Management Companies | |
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Emerging Growth Areas | |
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The Creative Class | |
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Implications for Investing in Real Estate | |
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Right Place, Right Time | |
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Emerging Retirement/Second-Home Areas | |
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Where to Invest | |
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Income Investing | |
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Commercial Properties | |
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Property Management | |
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The Upside and Downside | |
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Opportunity for High Reward | |
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Commercial Leases Create (or Destroy) Value | |
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Self-Storage | |
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Mobile Home Parks | |
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Profitable Possibilities with Zoning | |
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Tax Liens/Tax Deeds | |
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Localities Differ | |
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Are Tax Liens/Tax Deeds an Easy Way to Make Big Profits? | |
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Discounted Paper | |
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What Is Discounted Paper? | |
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Here's How It Works | |
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Broker the Note | |
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Do Such Deals Really Occur? | |
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Due Diligence Issues | |
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Should You Form an LLC? | |
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Different Strokes for Different Folks | |
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Insufficient Court Rulings | |
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One Size Doesn't Fit All | |
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An Income for Life | |
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Less Risk | |
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Personal Opportunity | |
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Internet Appendix | |
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Index | |