An assignment is when we negotiate the deal with the owner of a property and it contains all the terms of the transaction within the specialized written contract. We can then assign (which means to sell) the contract to a third party. This can be either the Tenant/Buyer or another investor. This is normally a lease purchase agreement which contains a specific assignment clause with the right to sublet, transfer or convey any rights within the original contract with the owner to another principal party.

Example: I found a property in a good neighborhood/school district. The owner had tried to sell it, had put up a for rent sign since he'd be moving to a new state and didn't want to get stuck with two mortgage payments. The property was worth $100,000 and the seller had a mortgage for $95,000. His payments were $1000 per month PITI (principal, interest, taxes, insurance). The real estate agents wouldn't list the home because there was not enough profit to pay a 6% commission. I offered to lease purchase the home with the right to assign and purchase for the balance of the mortgage. I would also pay the $1000 per month with a five year contract and would be responsible for any monthly maintenance/repairs under $100. I would pay $1000 down as option money and the first month rent with a 20 day lead before payments were to begin.

The owner agreed and I began calling all my tenant/buyers from previous ads. One tenant/buyer (with kids) had just files a bankruptcy, but was looking for a home in a good school district and safe neighborhood. He knew that he would need at least 2 years before he would be able to get a new mortgage and save the down payment. He was perfect for this home. I told him he could move into the home, purchase it for the balance of the mortgage and that I will sell him the contract (assignment) for $6500. He only had $3500, but he really wanted the home. I told him that I would take the balance of the assignment fee as a personal note (unsecured) at 0% if he paid on the first of the month. He could pay me $250 per month and pay off the note in 12 months. He agreed. I recovered my $1000, made a $5500 profit ($3500 cash and a $3000 note) and I was out of the deal. Assignments are great for flipping homes without buying them. As usual, everyone wins in a lease purchase.

Posted by Kathi Olmstead on December 13, 2008 at 12:00 AM

About Kathi Olmstead
Kathi Olmstead is affliated with RE/MAX of Eagle River, which is located in Eagle River, AK. For further assistance please use the contact information located on the right.




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