Lease Option Program
Welcome to Pinnacle Asset Management, LLC (“Pinnacle Group”) (“AHP”). We are a real estate brokerage, investment, consulting and holding company that buys, owns, and sells homes for investment purposes, primarily for the benefit of our customers (our “Clients”), who are individuals in need of assistance in purchasing a home. PINNACLE GROUP can provide alternative solutions in addition to ordinary home-buying methods, thereby greatly increasing the chances for ownership for people who are not able to purchase a home in their current financial situation.
Pinnacle’s mission is to assist those who are normally turned down for conventional mortgage financing to purchase a home. We especially want to assist those who have never purchased property before. We can even help individuals who have bad credit, no down payment, or a low income. Whether you are a first-time homebuyer or a repeat buyer, PINNACLE GROUP can help. If you are interested in buying a home but think you will be turned down by a bank, try Pinnacle. We look forward to assisting you with the purchase of your new home.
PINNACLE GROUP is a real estate brokerage, investment and consulting company. Its affiliated company Affordable Homes for Rent, LLC is also a real estate investment and consulting company with access to financial resources including private investors. PINNACLE GROUP administers two private investment trusts. These trusts are formed by private investors with available cash or excellent credit credentials. PINNACLE GROUP uses these trust pools to purchase properties for our Clients.
Use of the trust Partner is only temporary to enable the property to be purchased and the Client to move in. Over a period of time, with the help of PINNACLE the Client will be able to get a mortgage and take ownership in his or her own name, and in many cases, “no-money-down.”
In return, the Partner will receive monetary compensation for the use of his or her cash or credit.
As the administrator, consultant, and manager during the entire process, PINNACLE GROUP also will share in the compensation earned by the investor.
Therefore, everybody benefits from the arrangement, our Client, the investor, and AHP.
How it all works
Other than the initial processing fee of $250.00 to PINNACLE, the typical property will require at least a $1000 security deposit to the Partner (the security deposit amount may exceed the initial $1000.00. This amount may be as little as 2% or as high as 10% depending on the risk factor determined by the Partner during the financial assessment) and sometimes an appraisal fee, there are no other “out-of-pocket” costs to our Clients.
So how will the trust Partner and PINNACLE GROUP make money? Since PINNACLE GROUP is a real estate investment company with expertise in buying property for profit, we only choose properties with profit potential, i.e., below market price and/or below market rents. Therefore, compensation to the trust Partner and to PINNACLE GROUP comes from a combination of the equity in the property itself and the positive monthly cashflow from the monthly payments paid by the Client at the market rate. PINNACLE GROUP and the trust Partner receive most of the benefit of this profit.
How does PINNACLE GROUP help the Client get a mortgage in his or her own name? There are three ways this can happen:
- Although PINNACLE GROUP is not in the mortgage business, we have relationships with mortgage brokers and lenders. With our network of contacts, our Clients can sometimes qualify for a mortgage immediately, and not even realize it. We simply make an introduction to our mortgage contacts on behalf of our Client and let the mortgage person handle it from there. If cash or credit enhancement is still required PINNACLE GROUP can still help as required.
Since qualifying for a mortgage is sometimes a matter of finding a property that the Client can afford, PINNACLE GROUP can find the Client that property. PINNACLE GROUP has access to thousands of homes through its affiliate company PINNACLE GROUP Homes as well as its own inventory.
- If the Client cannot qualify on his or her own through either of these first two methods, PINNACLE GROUP will provide its own financing for the Client by using PINNACLE GROUP Club trust investors. With this option, PINNACLE GROUP purchases the property, in its own name or the name of the trust investor, on behalf of the Client. The Client then enters into a purchase arrangement with PINNACLE GROUP or the Partner via a land contract or lease option agreement. The Client then moves into the property and makes monthly installment payments toward the purchase price to PINNACLE GROUP through its affiliated management company, PINNACLE GROUP Management. The arrangement remains in effect for as long as is necessary for the Client to be able to qualify for his or her own mortgage, but not more than three years. It is these monthly payments that are the key to enabling the Client to qualify for a mortgage on his or her own. They have a powerful double benefit that builds the Client’s creditworthiness. Since the monthly payments paid by the Client will be approximately equal to the monthly payments that will be required for the eventual mortgage the Client will qualify for, they help to generate a “credit history” for the Client, as well as proof that the Client can handle the payment amount. Furthermore, these payments accumulate a credit toward any “down payment” that might be necessary for the Client to qualify for the mortgage. In most cases, as a result of this accumulated credit, the Client will end up with what feels like a “no-money-down” mortgage since all required down payments will already have been paid.
THE FACTS: The Client, John Doe, is currently renting but has stable employment and can afford to make a mortgage payment of $1300 per month. He will also have $5,000 available once he gets his security deposit back from his landlord and his income tax refund. He has poor credit including a bankruptcy, however, and has been turned down for a mortgage several times. PINNACLE GROUP finds John a nice 3-bedroom brick home that he likes for sale at a below market price of $100,000. The property is in need of some cosmetic repairs approximating $7,000.
THE DEAL STRUCTURE: PINNACLE GROUP negotiates a purchase price of $93,000. PINNACLE GROUP purchases the property through one of its trust investors. PINNACLE GROUP pays for and makes the cosmetic repairs. The mortgage payment for PINNACLE GROUP based on the excellent credit of the trust Partner is $700 per month. PINNACLE GROUP knows based on a preliminary review by one of AHP’s mortgage lenders that John should eventually be able to qualify for a mortgage on the property at a payment of approximately $1100 per month. The market rent for the property is also approximately $1100 per month.
Therefore, PINNACLE GROUP enters into a lease-option contract with John. That is, John will be renting the property from PINNACLE GROUP with the right to purchase the property at any time during the lease period at a price that is determined up front. Now that PINNACLE GROUP has made the cosmetic improvements to the property its market value is $120,000. The agreed lease-option is for a purchase price of $120,000 and a monthly payment of $1200. John also makes a deposit towards the lease-option contract of $7,500, which will be credited back to John at the time he decides to exercise his option to purchase. PINNACLE GROUP is also giving John a credit of $225 of the $1200 toward his purchase price of the property. The $1200 per month is slightly above market rent, but since PINNACLE GROUP is giving John a credit of $225 per month toward the purchase price, any above-market rent payments are going right back to John in the form of a down payment on his purchase plus the his original $7,500. Furthermore, it is important to be able to show a prospective mortgage company that might ultimately give John a mortgage, that John has a strong payment history for housing. The higher the better.
BENEFITS TO THE CLIENT: PINNACLE GROUP is giving John a credit of $225 per month toward his purchase price thereby reducing, if not eliminating, the amount of money he has to pay at the time of his purchase. At the time of signing the lease-option agreement with PINNACLE GROUP, John has to pay $7,500 for a security deposit, which is also credited toward the down payment for his purchase, plus the first month’s payment of $1200. Then John moves in. One year later, John applies for his own mortgage and is approved. He has $11,400 credited toward his purchase ($225 per month X 12 months, plus $7,500) and does not have to come up with any more money.
IN GENERAL: While every transaction is unique and may be structured differently, most will have the following basic elements if feasible: 1) Cash or credit assistance by Affordable Homes for Rent I, LLC ; 2) Immediate possession of a property by the Client; 3) Monthly payments by the Client with a credit toward his or her purchase, and some profit to Pinnacle Group; 4) Available equity in the property, some part of which will be a profit to Pinnacle Group; 5) Improved ability of the Client to qualify for his or her own mortgage after some period of time.
Although this example did not require the Client to make a down payment toward his purchase, there are many instances where a down payment will be required. The larger the down payment, the easier the Client will qualify for his or her eventual mortgage, and the lower the interest rate.
IMPORTANT NOTE: This example is only for illustration purposes and shall not be regarded as the way every transaction will be structured. Every transaction has unique characteristics that may allow or disallow certain outcomes.
How To Get Started
The first step in becoming a PINNACLE GROUP Global client is to contact one of our project administrators who can be reached at 708-590-6066 ext 200 or www.pinnacleassetmgmt.com. If no answer, leave a detailed message. Our project administrator will send you an enrollment packet, which includes a Homebuyer Assistance Program Service Agreement and a brief questionnaire/application that will help PINNACLE GROUP to evaluate your real estate needs. Please complete and return these documents to us as soon as possible.
Pinnacle Asset Management, LLC (“Pinnacle Group”)