Since this house could be subdivided, or converted into six smaller apartments, the owner/owners could be compensated with two fully renovated apartments, whose combined value would be equal to or more than the price the owner was asking for the house.
Tom persuaded the owner that he would not have to move a muscle to get the apartments; he would get to choose which two out of the six available apartments he wanted for himself, and the best part, he would get to stay in the same neighborhood, a neighborhood he knew and loved.
So, literally, he wouldn't have to move a muscle. No need to move to a new neighborhood, no need to give up on the house which had given him all those wonderful memories.
They shook hands and made the agreement.
Tom crossed off the second important premise of his idea: finding a seller who is willing to be compensated in apartments instead of money.
Now, Tom had to fulfill his part of the agreement: renovate the house and convert it into six self-contained flats.
The only problem was that Tom didn't have that kind of money. In fact, Tom didn't have a single dollar in savings.
Now comes the interesting part: how do you convert a house into six apartments no money, construction skills or experience?
Tom inquired with several local construction companies about the costs of building or renovating six apartments at that specific location.
The construction companies sent him their offers and he started doing his homework. He also inquired with a local real estate agent who informed him of the market price of a fully renovated apartment at the location Tom had in mind.
When Tom was finished with the calculations, he concluded that the construction costs were equal to the market value of two and a half fully renovated apartments at the same location as the old house.
Tom decided to start working on the second most important point in his plan: find a property developer who is willing to be compensated for his services with three apartments, instead of money.
Do you know why Tom was sure someone would decide to take him up on this offer?
Because the market value of the three apartments would exceed the construction and renovation costs when paid in cash.
So, all Tom had to do now was find a property developer. He made appointments with many developers, and finally found one who could clearly see Tom's vision.
A fully renovated, 600-square-foot apartment at an attractive location is much better than a fixed payment. This is true because the developer can sell the apartment for a much higher price than his construction and renovation costs! And he will get three of these apartments, which he can keep, sell or rent.
Now, Tom's dream of owning an apartment was a getting dangerously close to become a reality.
The owner of the house gets two apartments. The developer will get three apartments. And Tom gets one apartment. His apartment!
But, to secure the deal, Tom had to do one more thing: find a lawyer and draft two legal contracts, one that Tom would sign with the owner of the house, and another that Tom would sign with his developer.
With a legal contract, no party can get cold feet and find a way out of the deal.
Shaking hands is gentlemen's agreement, but in this day and age, a legally binding contract is smart men's agreement.
As a smart man who believes in the "pay it forward" philosophy, I have prepared two legal contracts which you can easily access and fill out with your name and the names of the homeowner and the developer. Completely free of charge!
You won't need to spend even a dime on legal fees, and you will still have legal protection.
You can read all about the importance of the legal contracts and legal protection in the other posts.