Lease options Image by Paragon Apartments via Flickr

What are Lease Options?

Lease options is short for “Lease with the Option to Purchase”. As the name suggests, two events are expected to take place – the lease and purchase of a property, where the latter action is at the discretion of the buyer/tenant. In this contract, you as the seller are bound to sell, but the buyer/tenant is not bound to buy.

How Do Lease Options Work?

By paying a valuable consideration upfront, the buyer/tenant gets an option to buy a property at an agreed price at the end of an established period of lease, typically one to three years for residential properties, but could get longer due to the present credit environment. The consideration, which is often nonrefundable, is usually at two to three percent of the market value of the home. This is preferable for buyers compared to paying a lump sum of five to 20 percent of the value of the property as down payment. In the event that the buyer defaults in his rental, he can be evicted from the property. However, if he makes good with his payments and finally decides to make use of his option, he can buy the property at the end of the set rental period.

Advantages of Lease Options For Landlords

1. Protects the Property from Vandalism. Your tenant will take care of your property like it is their own home already, after all, they are intending to buy it in the near future. Gone are the days when you wince at the sight of a clogged sink, stained carpets, vandalized walls, and other similar scenarios.

2. Highly Negotiable Terms. You can set your own terms when you offer lease options to suit both your tenant’s and your needs. You can raise the consideration a little if he negotiates for a slightly lower monthly rental fees. You can extend the period of the term, you can pass on the responsibility of maintenance and repairs to the tenant, and so on.

3. Gets Rid of the Hassles of Maintaining the Property. As mentioned earlier, you can make the tenant shoulder the cost of maintenance and repairs depending on what you agree on. Even without this agreement, maintenance may not be as costly since he will take care of the property, may even make improvements, since he is planning to be officially making it his home.

4. Motivates Tenants To Pay on Time. A default in payment can cost the tenant his future home, or at least, the consideration he put upfront. This is good reason enough to make him pay on time.

5. No More Periods of Vacancies. With your tenant intending to buy the property within one to three years, there is a lesser chance of vacancy.

6. Non-Refundable Deposit. The consideration that the buyer pays upfront is your protection in the event that he defaults and your property becomes vacant and you have to go back to marketing the property to other buyers.

7. Cushions Against Falling Home Values. Since you have locked in the selling price of your property to the agreed amount, you are protected in the event that values of properties fall within the given period. However, this could also work against you in the event that the value of your property goes up, you may incur an opportunity loss for having to sell it at the agreed price even if you could have sold it for more.  But this is the hook for the tenant in order to get them to agree to your proposal.  The tenants have potential upside depending of how the market appreciates.

Lease options are a great exit strategy for real estate investors: it protects their property from vandalism, vacancies, falling values of properties, saves them from the hassles of maintenance, and motivates tenants to pay on time and take care of the property.

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Make Money from Real Estate Investing Image by AMagill via Flickr

There are numerous opportunities in real estate investing, but you have to have a skilled eye at identifying them. Inexperienced investors pass up on great opportunities because they lack the know-how to spot the gold from the seemingly uninteresting properties. Discussed below are five ways you can profit from real estate.

Retailing – Buy, Fix, and Profit

Retailing, in three words, is buy, fix, profit. Many newbie investors enter the real estate trade using this strategy. I’m sure you already know all about this strategy. You buy handyman specials at great prices, rehab them, and sell them for profit. One costly mistake a handful of fledglings commit is underestimating the cost of repairs. Savvy rehabbers already have a network of contractors and a checklist of repairs to watch out for and their estimated costs. They do not rely on the sellers saying that the repairs do not cost much. If they do not cost much, why don’t they do it themselves? To be on the safe side in retailing, you have to use the higher estimates to cushion you from errors, and then add another 10 percent to serve as contingency fund. Better safe than sorry.

Wholesaling – Find, Assign, and Profit

In this strategy, you look for a property offered at great deals, arrange this property under contract from the seller, then you look for an end buyer or another investor interested in the property and you assign your contract to him for a higher price. You earn from the assignment fee you get from the strategy. Ideally, assignment fees range between $3,000 to $20,000, contingent on the particular deal. If you are assigning the contract to another investor, do not forget to leave room for him or her to make a profit. This is a great strategy for newbie investors because it does not require much capital, thus entails less risk, and is easy to execute. For a more elaborate discussion, refer to our previous post, Kick Start Your Real Estate Investing Business Through the Assignment of Contract.

Subject To Investing – Buy and Sell In Many Ways

There are a number of advantages when buying a property that is subject to existing financing. First, you do not have to obtain a new financing from a bank or anywhere. This means that your credit standing does not count here, and is also not at risk. So if you have a failing score, don’t worry. You do not need to have a substantial amount of money to fund the deal. You can obtain financing for down payment from a private money lender. Through this strategy, you can speed up building your real estate portfolio without the need for your credit or your own money. Also, you do not have to sell the property entirely for cash.

If you know how to attract prospective deals, you get all sorts of deals including sellers who are more interested in relief from debt rather than profit. These are homeowners who are motivated to sell because they are having a hard time paying for mortgage. For this type of deals, experienced investors do not promise anything to homeowners when they take a property subject to. When you buy a property with this type of deal, you can sell it in many ways.

In this strategy, you acquire a property from a seller and allow the seller on title until you get to sell it at some time. With this acquisition, you can dispose and profit from it by selling it all cash, rent it out, or lease/option it to a tenant buyer. If you like, you can make it your personal residence.

Before you acquire and make money from the property though, you have to do your due diligence and ask about its current financing. If you locate a property subject to a fixed rate loan with low interest, you may be in for a good deal. However, if the mortgage is adjustable, you must have a clear exit strategy before you take the property. Find out how much are the monthly payments, ask if they are current, and how much equity is on the property. Get to know the estimated cost of repairs needed for the property. Look at your database of buyers and see if there is anyone interested to buy a property within the area where the property is.

You can delegate the paperwork needed for closing to an attorney. This includes a purchase and sales contract and an authorization to release the lending information. You also need to set insurance on the property and secure title insurance.

Lease Options – Buy, Lease, Get Cash and Cash Flow

An exit strategy for the property you have acquired through Subject To is via Lease to Own, where you get a non refundable deposit which ranges between $ 2,000 to $10,000 depending on the market. Tenant buyers who pay higher down payment tends to pay you till the end. However, beware of tenant buyers who pay little down payment. Since they are not risking anything here, they could afford to just abandon the property and cause you headache. So choose your tenant buyer well.

Lease To Own has several advantages: you receive a non refundable deposit in advance; tenant buyers tend to treat the property as their own so they do not vandalize it; and if they default, you can expel them from the property and you can start looking for another tenant or tenant buyer.

Options – Pay Option Fee, Sell And Profit

In this strategy, you have a seller who agrees to sell the property at a set price for a particular period of time. When you are not able to sell it within the set time, then you lose nothing save for the $10-Option deposit. With this minimal risk, options are great when dealing with upscale properties.

As an illustration, say, a seller who is relocating would like to sell a property that has $850,000.00 in mortgage, and the property is valued at $1,000,000. By just paying the Option deposit, you can option the property for the remaining $750,000 for 90 days. If you can sell it for more than this amount, you get to keep all the proceeds.

Knowing these five great ways of making money in real estate gives you an upper hand in evaluating deals, allows you to pick those with great potential, and protects you from opportunity losses.

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Image by thinkpanama via Flickr

Property Flipping – The Good

These days, the term “property flipping” or “house flipping” carries illegal or fraudulent undertones. It used to just innocently mean buying a property or house below market value or at a discounted price from a motivated seller and selling it quickly with little to no renovations done on the property, thus, quickly generating profit. This real estate game plan includes wholesaling, contract assignment and fix and flip schemes. Property flipping is a good starting point for real estate investors as they can generate quick cash using this strategy with little to no money required.

Property Flipping – The Bad and the Ugly

Then unscrupulous and greedy individuals enter into the already topsy-turvy realm of the real estate market and sullied the innocence of the term through their twisted schemes. They buy a house below market value and overprice them when they sell to make huge profits. Some even go to the extent of quickly “selling” the property to an accomplice at a bloated price, then to another accomplice (sometimes the same person but using a different name), and so on, in a short span of time to further inflate its value. Thus, allowing them to rake in heftier profits. In many cases, these scheming individuals couple property flipping with mortgage fraud. Their usual victims are naive first time homebuyers in low income urban housing markets.

Sprucing Up the Defaced Real Estate Market Due To Property Flipping

The government has taken measures to put a stop to this subterfuge and prosecute perpetrators through the Financial Fraud Enforcement Task Force. To counter this epidemic in Baltimore, a joint task force with HUD was created and a 90-day foreclosure moratorium as imposed. Although numerous offenders have already been put on trial, some are concerned that the risk of facing prosecution may be dwarfed by the whopping pay dirt that property flipping fetches.

Brand Yourself As Real Estate Investor, Not As Property Flipper

If you have just joined the pool of real estate investors, eager to make some fast buck by flipping or wholesaling, do not forget to moderate your greed. Thriving in a world where capitalism is king, there is nothing wrong with being involved in gainful undertakings, such as real estate investing. In real estate investing and in most, if not all, industries, creativity is rewarded. Sometimes, our desire to get what we aim for trick us into thinking that some of our strategies can be called creativity, when in fact, it is already crossing the line. Just get a grip of yourself, steer clear of market manipulation and tread the legal path of buying from motivated sellers, renovating and truly adding value to the property, and respecting the existing market trends in dictating your asking price and profits. Sure, you can buy houses for less than its market value. This is why you look for motivated sellers. Just remember to pass on the good fortune of finding a bargain to your buyers by offering it below market value (if you really got a steal) and still make profit. In this way, you are not just summoning good karma, you can also quickly find a buyer, sell it and move on to your next deal. This is applying the real estate investing mantra of “Make profit when you buy, not when you sell.

When you get into property flipping, stay good and steer clear of the bad and the ugly.

What is Foreclosure Defense?

Foreclosure defense is a legal strategy in which a homeowner retains the services of an attorney to complete a forensic loan audit of all the documents associated with the mortgage. The attorney is looking for fraud and predatory lending violations than can then be used to aggressively counter sue the bank for damages and in return force the bank to negotiate with the homeowner or investor.  This process can typically take 12-24 months depending on the severity of the findings.  Remarkably, on average over 80% of all residential loans since 2003 contain such violations.  During the housing boom, banks could not push new mortgages through their system fast enough to satisfy the appetite for profits by Wall Street.

In the midst of this frantic churning of mortgages, many T’s were left uncrossed and many I’s were left undotted.  There is a long list of items than an experienced foreclosure defense attorney will pursue in order to delay the foreclosure process or in some cases even completely rewrite the actual terms of the note.  Just a the few of those items include: chain of title issues, backdating of documents when deadlines were missed, loss of original paperwork including the note, good faith estimate (GFE) numbers not adding up, unauthorized individuals signing paperwork, strict pooling and servicing agreement (PSA) guidelines not being followed, and on and on.

In the worst-case scenario, the attorney is able to delay the foreclosure 1-2 years while the homeowner or investor does not make a single mortgage payment during that time. This allows an individual the time needed to get back on their feet and regroup prior to the foreclosure occurring.  In the best scenario, the attorney is able to delay the foreclosure process 1-2 years and settle with the lender for a reduction in principle, lower interest rate and in many cases a brand new loan. There are even cases where the bank has not been able to produce the original note and the case goes into extended limbo or even the note is forgiven since the is no legal proof that the owner owes that money.

Is Foreclosure Defense Ethical?

Everything being performed here in legal, but is it ethical?  First of all, banks don’t make decisions based on emotions; the words in the contract are all their attorneys stand by.  In the majority of cases, investors and homeowners did not take out mortgages in order to defraud an institution.  Most individuals approached their banks looking for a forbearance, a loan modification, or a short sale once they realized the trouble they were in.  The problem is that the majority of the requests were denied or ignored according to the statistics.  Foreclosure defense is a viable and effective way to force the banks to actually take notice of your case and work with you.

Foreclosure Defense Costs

According to Adam Ackerman, one of the managing partners at www.foreclosuredefense.com, the initial forensic audit of the mortgage documents costs approximately $750 per property.  Then after that, there is a monthly $750 retainer fee that is charged per property.  So given these costs, this option isn’t for everyone.  If your a homeowner or investor with a monthly mortgage in this range to start with, it may be better to just save all your money and ride out the process until the property is sold at auction.  But for the many homeowners out there with much larger mortgages, in many cases a $750 monthly retainer would be more than a 50% reduction in the monthly payment while the attorneys fight on your behalf.

Applications for Real Estate Investors

During the interview, Ackerman detailed several examples of how real estate investors struggling with under performing rental properties asked the banks for help in the form of a loan modification or a short sale and were turned down or ignored.  Now these investors are using foreclosure defense techniques to force the banks to negotiate with them.

Banks are not set-up to deal with aggressive countersuits when they foreclosure on someone.  Foreclosure attorneys working for the banks earn a flat fee based on the minimum work required to process a foreclosure.  So when requests for detailed information, proof of documentation and countersuits start coming in, most of the time the banks don’t want to deal with this kind of headache and magically become receptive to the investor’s request for a loan modification or a short sale.

In one case, an investor with a two multi-unit buildings purchased during the boom was struggling to pay his mortgage due to the reduced rents from his struggling tenants.  The bank refused to work with him and in turn he hired a foreclosure defense attorney to represent him.  Even after paying $1500 per month (2 properties) for the defense, this investor is still taking home $3500 per month in rents. Even if the foreclosure defense fails, after two years of delaying the foreclosure process, the investor will have collected $84000 in rents.

Short Sale Investors

Foreclosure defense can also be a good tool for those real estate investors working with homeowners to either buy or flip their property after the banks approves a short sale.  Deals with large profit margins may be well worth saving using foreclosure defense techniques in order to buy the added leverage needed to help the bank change its mind.

Special thanks goes to Adam Ackerman at www.foreclosuredefense.com for contributing to the information in this article.  Their network of attorneys work with investors and homeowners across the country in all 50 states.  Please feel free to contact them for more information and a free consult.

FHA Admits They are Hindering the Real Estate Recovery

The FHA has finally come to the realization that many investors buying and fixing foreclosures are taking much less than 90-days to rehab their homes.  Good rehabbers can actually have an ugly house ready for occupancy less than 30 days after its purchase.  So beginning February 1, 2010, the FHA is suspending the 90-day resale restriction imposed on sellers selling to buyers using FHA insured financing.

In order to re-sell a home to a FHA buyer in under 90 days, the following conditions must be met.

This chart was created using the information listed in the Waiver of Requirements of 24CFR 203.37a(b)(2) which is located on the HUD website at http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf.

Here are two more points not listed in the chart.

1. The 90-days flip restriction waiver will expire one year from February 1, 2010.  If the program is successful with minimal fraud, it can be extended by the FHA.

2. If the FHA discovers a significant increase in mortgage defaults and insurance claims attributable to insured mortgages obtained through this waiver, then this waiver may be canceled immediately.

Now let’s analyze the following four key points

.

1. Title must be held be the seller

I know many investors including myself were thinking that simultaneous closings would now be possible.  A to B and B to C all in the same day, where C is the FHA insured buyer.  Unfortunately that’s not the case since the seller must hold title.  In many area across the country it takes about 30 days for title to be recorded assuming your county is not backed up in red tape bureaucracy.  I guess it’s still less painful to pay for 30 days of transactional funding  instead of 90 days, so there’s an improvement.

2. No pattern of previous flipping activity

There has been a lot of fraud and properties changing hands multiple times in the past several years.  So we can’t just assume that the property we are going to sell has not been flipped in the past 12 months.  I see zero tolerance on this policy.

3. If the sales price is greater than 20% above the sellers purchase price

A second appraisal will be needed to justify the increase in value through the repairs performed.  Anytime you have to deal with appraisers now a days it can be hit or miss.  Make sure to cross your T’s and dot your I’s and keep everything in a nice folder to prove your rehab work later.  But now, what if your purchase price was $300,000 and you are trying to sell for $350,000?  No second appraisal required per the guidelines since that’s less than a 20% increase in value.

4.  Repairs not needed to justify a sale price increase

Good news for wholesalers.  Repairs are not required to justify selling at a greater than 20% increase in value above the original purchase price even a day after your purchase.  All that’s required is that the appraiser justifies the sale price and hands the home buyer a home inspection report performed by a third party.

The true investor impact of the 90-day flip waiver

This isn’t the holy grail that will jump start economy and turn small investors into millionaires, but it’s a step forward. This change will help investors save some money on holdings costs and minimize their risk of vandalism since FHA buyers can now buy immediately once a project is complete and not at the end of a 3-month waiting period.

The #1 rule is to actually be there!  If you, as the real estate investor, cannot make it to the appraisal, then send your partner, construction manager, or reschedule if permissible.  A bad appraisal or a failed inspection can be the difference between a transaction closing or falling apart or weeks of delays being incurred while waiting for another home inspection from the section 8 inspector.  A section 8 tenant will not always wait around for a failing property to pass its inspection when there are a handful of other rehabbed homes readily available for rent.  Similarly, a bad appraisal may scare off potential buyers or reduce the amount funds available for an investor’s cash out refi.

Bring Favorable Comps to the Appraisal

Rehabbed Foreclosures

Whether the property needs to appraise high or low, find the three most favorable comps that support your price and bring them with you.  Make sure these are reasonable comps that can support your case and present them to the appraiser during the walk through.  New government regulation has changed the way appraisers are chosen and in some cases the appraiser may live and work two to three hours away from the house they have been assigned to appraise.  Real estate investors, especially rehabbers, know that neighborhoods can change drastically within a short distance in any direction.  Your appraiser will not know this, so it is your job to make this clear.

Find the Non-MLS Comps for your Appraiser

The goal here is not to try and pull a fast one on the appraiser, but to present all the pertinent data that presents your case in the best, or worst, light.  Appraisers, like most individuals, will choose the path of least resistance to generate their report.  This means that all comps will come from the MLS and typically will not include the tedious review of non-MLS real estate transactions.  In this day and age, all of this data can be obtained on-line with some diligent research.  If there are sales here that strongly support your case that cannot be found on the MLS, gather as much pertinent information as possible, including pictures, and present this the appraiser.  On some borderline valuations, this could mean the difference between eating at McDonalds versus the best steak house in town.

List of Repairs Needed or Repairs Performed

If goal is to get the highest appraisal possible after rehabbing a foreclosed home, bring the details of all the repairs performed to the appraisal.  Gently guide the appraiser through the house detailing everything that was upgraded and repaired.  This is huge – don’t let the appraiser guess as to what work was performed.  On the flip side, if this is a short sale BPO, make sure to have detailed estimates of ALL the work necessary to make the house saleable.  Use phone book GC rates for the repair estimates, but don’t get carried away.  Again make sure to gently explain how much work is needed and how soft the market is.

Smell Counts

When shooting for the best appraisal possible, prepare the house as if it was being shown to prospective buyers or tenants.  Make sure all the shades are open, all the lights are on, the place smells good, and the air temperature is comfortable.  Now when shooting for a low appraisal, do just the opposite.  Make sure the place stinks, don’t open the shades, and don’t make it comfortable.

A Dead Battery can Cause a 2-4 Week Delay

As far as home inspections are concerned or more likely section 8 inspections, all of the above ideas apply for showing the home in its best possible light.  Section 8 inspectors can fail a house for a loose toilet, a non-working smoke detector, or any other minor repair.  One small item like this requires a re-inspection that can be another 2-4 weeks away depending on the city.  This could mean a lost tenant, greater chances for break-ins while the house sits vacant and greater holding costs.

Make Repairs on the Spot

Always have your construction manager or handy man present during the section 8 inspection.  Any items that can be fixed during the inspection will be marked off as compliant prior to the inspector leaving.  This could be fixing a wobbly toilet, installing a handrail, or adjusting a window so it properly opens and closes.  There will be very little that cannot be fixed on the spot during a section 8 inspection especially after a quality rehab.  It is much more cost effective to have a couple guys present to perform repairs rather than schedule a re-inspection.  Also, there may a minor item that can be explained away when someone is present with the inspector.

Finally, don’t underestimate the power of a little personal charm combined with low pressure sale tactics.  This can subconsciously steer the appraiser in your favor.  Through discussions with many investors, rehabbers, and mortgage brokers, the simple approach outlined in this article can raise a 50-50 situation to a 95% chance of obtaining a favorable outcome.

So the take here away is: never let anyone evaluate your investment property without someone being there to steer them in the right direction.

Real estate investors across the country are acquiring foreclosed properties for pennies on the dollar, rehabbing, refinancing, and renting them out for incredible cash flows. So what’s holding you back? Is it the lack of funds? Or is it no interest in being a landlord? If dealing with tenants has you scared of starting your own million real estate portfolio, hire a good property management company to handle those headaches. If it is for lack of funds, then you haven’t looked hard enough. Hard money, private money, local community bank money is available. The deals that are out there right now are too good to pass up.

Here are real world numbers of a rehab near Chicago, IL.

• Bank Foreclosure – 4 bedroom, 2 bath, brick home
• Purchase Price: $26,000
• Buyers are brokers and made $2,700 in commission from the bonus being offered
• Actual Rehab Cost: $32,150
• All in costs: $59,500 after a full cash-out refinance
  • Lenders cash-out refi criteria allowed for a full cash out up to 65% ARV
• After repaired value: $120,000
• Loan obtained was for $59,500 at 6.5%, 15 year amortization, 5 year balloon
• Section 8 rent is $1,500 per month plus one month’s security deposit– all utilities paid by tenant
• Monthly Cash Flow after PITI (principle, interest, taxes, insurance) is $603
• Amount of time to payoff mortgage if the ENTIRE cash flow is applied to the monthly mortgage payment:

5 YEARS AND 3 MONTHS!!!

Quick Cash Flow Calculator Details

Lather, rinse, and repeat as needed.

No Property Management Fees

Notice that that the property management expenses are zero. The investment group purchasing this property does their own property management. Their keys to successful property management are to address maintenance concerns immediately and collect rent aggressively. In this case, rent collection is easy since it is directly deposited into their bank account from the local housing authority. Property maintenance is easy due to the quality rehab performed.

Vacancy Factor

The vacancy factor is zero since happy section 8 tenants in quality homes do not move very often.

Property Taxes

Notice that the property taxes are very high for such inexpensive housing. The high property taxes are a cost worth dealing with since the crime rate is much lower and the neighborhood is much better than most areas with housing this cheap. Many neighborhoods with foreclosed homes selling for $20,000 are typically rough areas with higher crime rates. It takes some research to find the right balance between cheap home prices and reasonable crime rates.

Cap Rate

Notice the ridiculous capitalization rate of 22.6%. That is almost unheard of when comparing rental properties. Most good cap rates are between 10 – 13% on rental properties that are considered cash cows. The cap rate is typically calculated by dividing the purchase price by the NOI. In this case the cap rate was calculated by dividing the end loan amount by the NOI.

No Money Down

Notice that the cash on cash and total return cannot be calculated since the initial cash investment is ZERO after the cash out refinance. The returns are infinite when you are making money with no money down.

Debt Service Coverage Ratio (DSCR)

Most banks like to see this number be at least 1.2. This indicates that the property’s income after expenses is 20% greater than the mortgage payment required. In this case the DSCR is 2.16 which is incredible. DSCR is calculated by dividing the NOI by the monthly mortgage payment to generate a ratio.

The Senate has passed a bill to give homebuyers another three months to close on their homes and receive tax credits up to $8,000. The Tax Extenders Bill would apply to homebuyers who met the April 30, 2010 deadline with a signed contract to purchase a new or existing primary residence. The amendment would extend the deadline to September 30, 2010 for homebuyers to close on their real estate transaction. The previous deadline was June 30, 2010. The bill now goes to the House of Representatives, where it is expected to pass.

The National Association of Realtors estimates that as many as 180,000 homebuyers have qualified for the tax credit and met the contract deadline of April 30, 2010, but might not be able to close their transaction by the June 30, 2010 deadline due to the sheer volume of loan applications in the pipeline.

Seller Financing and the home Buyer Tax Credit

Anyone looking to provide seller financing to first time home buyers should use this as a marketing tool to help sweeten the deal.  Just remember that this tax credit expires on April. 30, 2010.

The IRS has recently changed its mind on this issue.  Here’ the link:

http://www.irs.gov/newsroom/article/0,,id=206291,00.html

Question:

Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (as in the case of a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer’s payment obligations?
Answer:

If the taxpayer obtains the “benefits and burdens” of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.