Just Paid a $300k Assignment Fee on my Biggest Deal to Date

[Daniel Moore]

A $300k assignment fee may not be the largest in the history of investing, but it sure was the largest in my history of investing. I was at a trade show as a vendor when a local investor that knew of me walked up promoting a contract he recently received on a light industrial complex. One of the biggest things I tell people is I do not by properties, I buy numbers, so if the numbers fit I will buy it.

The opportunity was a light industrial complex with approximately 60,000 sq ft of rentable sq footage spread across 16 acres and 7 buildings. The buildings are solid metal construction with minimal differed maintenance to correct. The opportunity in this deal was repositioning the asset through a stronger management team. The owner was in his late 70's, not enforcing rents, and had the building leased at less than half of market value.

So the wholesaler had this beauty locked up at $1.3mm owner financed with 20% down, 6 year note on $520k at 3.5% and the remaining $520k due on a 6 year balloon with 0% interest. If those terms were not sweet enough, we were able to renegotiate to get an additional 6 months payments differed so we could reduce our negative amortization during the stabilization of the asset.  This deal was being offered out with an assignment fee of $300k and I jumped all over it. Here is why:

$1,300,000 Purchase Price

$300,000 Assignment Fee

$260,000 Anticipated Stabilization Costs

$1,860,000 Total Costs

$360,000 Annual Rents on NNN

$54,000 Annual Expenses

$306,000 Net Operating Income

$120,000 Annual Debt Service

$186,000 Annual Cashflow

If we value the property at a 9 cap (conservative) puts the estimated resale value at $3.4mm for an equity capture of approximately $1.5mm in just a short 12-18 months. Now, we could turn around and sell this in a few years and make a nice fat payday, but who wants to give up $180k a year in passive income just to trade it for a nice tax bill. What we intend to do is do a Cash out Refi and take a non-taxable gain to reinvest into acquiring more assets.

I became a full time investor six years ago after deciding a 9-5 was just not cut out for me, started with no capital, no knowledge, and zero network. Resources like Bigger Pockets has helped me to grow, and thanks to the knowledge earned I am proud to say that I will never be an employee again.

Thanks Bigger Pockets!