Investing With Assignments
While many investors prefer the benefits of investing passively through a joint venture (letting us do the work), there are still others who have the time and energy to invest on their own.
Many investors try to do everything themselves, including searching for the deal, filling out offers, and negotiating with the seller for the best price. As a result, many investors spend enormous amounts of time trying to learn these skills so they can make a profit. The question most investors don't ask is... "How much is my time worth?"
What if you could have deals brought to you that were already locked up under contract at the best possible price, perhaps with steep discounts? Or better yet, what if you could have deals brought to you that are not yet available on the Multiple Listing Service (MLS) or even For Sale by Owner (FSBO)?
Why would someone offer you deals like these? Two words... time and money. Everyone, even the most successful investor, has limited amounts of these two commodities. There is not enough time in the day to invest in EVERY deal that comes across an investor's desk.
So there we have it... two different investors, two different problems. Investor #1 wants more deals, preferably ones that are 'ready to go', and investor #2 has too many deals. How can these problems be solved?
It can be done with a legal contract called an assignment. What exactly is an assignment? According to the American Heritage Dictionary, it's a legal term defined as "the transfer of a claim, right, interest, or property from one to another." With respect to real estate, it means transferring (or assigning) your rights in a legal contract, such as an Agreement of Purchase and Sale, to someone else. Typically this is done for a fee that varies based on the deal.
What would investor #1 pay for an assignment deal? Perhaps it should be phrased a different way... how much would it be worth to the investor for the following?
- eliminate time wasted searching for deals, including chasing after realtors, searching the MLS, calling FSBOs, advertising for people who want to sell their home, etc.
- eliminate time wasted filling out countless offers
- eliminate time wasted negotiating with sellers, including calling them directly, dealing with their realtor, haggling for price reductions, etc.
Now what if the deal also had one or more of the following?
- great cash flow
- owner financing (vendor take back)
- instant equity due to a below market purchase price
- opportunity to massively increase any of the above through major or minor cosmetic renovations
Since each deal is different, and each investor offering a deal is unique, the fee to 'buy' an assignment can vary. Fees can easily range from several thousand dollars on smaller deals, to tens of thousands of dollars on very large deals. These fees, however, pale in comparison to the profits to be made.
For example, many investors would pay:
- $2,500 assignment fee to buy a property with 100% vendor financing at 5% interest
- $5,000 assignment fee to make a $60,000 profit in instant equity plus $150 monthly cash flow
- $10,000 assignment fee to make a $150,000 profit after renovations
We know investors do this because that's what we did for one of our deals... we paid an investor $4,000 for a deal where we made back our fee in profits many times over. The investor selling the assignment profited, we profited, and the property seller profited and had a fast closing. In the end, everybody won.
While buying assignments from other investors will not replace dealing with a good realtor to finds deals, it can be a great way to find deals that you or your realtor would otherwise not know about.
Great assignment deals like these come along every day, but you need to network with other investors who are offering them. We are currently aligning ourselves with multiple investors for exactly this purpose.
The assignment deals we find will not only provide more opportunities to invest in lucrative joint venture deals, but they will also provide our subscribers direct access to more deals as we pass some of them on through our deal cards.
Watch your Inbox or the Real Estate Deals section of our website for upcoming offerings!
This article is copyright © 2004-2010 Spirepoint Properties. All rights reserved.
Paul Blacquiere and Joanne Beehler are full time real estate investors and have been investing in Ottawa, Ontario, Canada since 2002. They are owners of Spirepoint Properties, a Canadian real estate investing company dedicated to making real estate investing easy.
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