Hi to Everybody: I'm going to try to answer & comment on the posts so far. If I miss someone, it's not intentional! I've used a bunch of initials throughout - here's a quick index PMI - private mortgage insurance COCR - cash on cash return RTO - Rent to Own I/S - Installment sale LTV - Loan to Value REO - Real estate owned (typically by a foreclosing bank) Patrick: WOW! What a terrific deal....that should be an exercise for some newbies. What would be the cash on cash on Patrick's deal? What other information do you need to know? (I love throwing those out when I do the smaller seminars. When people can actually do an analysis on real numbers, they see it's possible.) Glen: Regarding exercising on the option, our philosophy is a little different. We do NOT want them to exercise. Our option program is written so that they must exercise in 2 (or 3) years or, if all payments have been on time and the place passes 'broom clean' condition, we will agree to re-negotiate. Everyone has different goals. We are looking for passive income - the more passive, the better. I just heard a terrific idea from a friend. When he has someone that is behind and he's about ready to evict, he finds out what the problem is. Generally, it's that the house is too expensive. So, he buys another property that is cheaper and smaller and moves them into it. He forgives the past rent and he has a very loyal renter now. Of course, that doesn't work if they haven't maintained the property and you don't want anything to do with them. We don't price to our tenant/optioners based on rent. We sell it as if they were buying it. In fact, we'll run an amortization schedule, after we've got buy-in on the price, and show them how much would apply to principal. As we all know, that's maybe $20 a month in the beginning and so when we tell them that $50 or $75 will apply toward the eventual exercise of the property - just like the principal only much, much more - they are happy. Then, we tell them if they increase their payment by $100 per month, we'll, give them $150 additional credit. Pretty soon they're trying to figure out how much they can possibly pay us out of their budget...and our COCR just keeps climbing. The tenant is responsible for taxes and insurance. We're struggling with the maintenance issue a little because, as Ken says in his post, you have to be very careful that this doesn't look or feel like an I/S sale. And, one of the factors regarding a sale versus rent has to do with who takes care of the property. So, we've added some wording in an agreement that says that we're responsible for anything up to $500, and then the tenant is responsible. I've done a pretty indepth analysis of the differences (for tax and accounting) on I/S method versus RTO by looking at the case law in this area in my new book Easy Accounting for Real Estate Investors. It also as a real estate glossary for creative real estate investors. I'm certain it doesn't have ALL of the terms used by the creative guys, but there were 4 of us going through every course we could get our hands on to review techniques. The accounting and tax consequences for those are covered in this book. It's only going to be available through my website and Amazon, because it's a very specialized book - not mass market. It was going to be out at the end of June, but we pulled it from production to update for the new Tax Act. I think it will be done within 2 weeks now. (taxloopholes com) On the 10% down financing - we have been succesful at negotiating out of of PMI with REO's where the bank/FNMA/etc is financing us on the property they currently own. Otherwise, on a straight purchase, we generally find that the additional leverage is worth the cost of PMI. We can get that dropped after 12 months for the cost of an appraisal in an appreciating market. The value goes up so the LTV goes down. There are some really great comments from peop