Got Offered A 10K Assignment Fee (unsolicited)....

[John Thedford]

Hello all...my friends, haters, new people,...everyone:)
I often get comments on other threads about how I "hate" etc....so here I am...posting in the unlicensed broker forum! Here's what I tell new people about investing...the why or why not to play the assignment game. Others may disagree...this post is only my personal experience on ONE property.

I ran into a deal on CL. When I saw the property and what the asking price was I knew I was going to buy it before I even looked at it. As it turned out, it was someone playing the assignment game that had put a homeowner in a bind. The owners had a grandbaby being born and wanted to be there. Due to them being under contract with a dishonest operator, they were still tied to the property, he had disappeared, and they missed the birth. They were very disappointed as was their daughter. 

When I talked to them on the phone they asked repeatedly: "How do we know we can TRUST you". I wasn't aware at the time why they were leery. My answer was: IF I signed a contract I WILL close. 

So, I go to see the property. When I pulled up outside, I KNEW I was going to buy it before I walked in. Nice house, great area, good floor plan, etc...at a very good price. They wanted to keep showing me the house and all I wanted to do was sign and go home. It was late on a weekday. They signed..I went home.

My next step was to take the title company earnest money. Not only did I do that, I called the seller to reassure them and told them to feel free to contact the title company. At the time, i was a little short on cash. We all know that feeling. Called a good buddy that had loaned me money many times. He said come get a check. Why was he so easy? I always kept my word and he saw someone of integrity standing in front of him. Not bragging, just making a point of building relationships built on trust..and keeping your word. That goes far.

OK, I had this nice house under contract. Casually mentioned it to a friend. Showed him the deal. He said "I will bring you 10K IN CASH in the morning for the contract". I said no thanks. I could have taken the money and run BUT I knew the power of wealth building buy and hold real estate.

Had I taken the 10K, it would have been ordinary income taxed at the highest level and I would not make another dime on the property. I closed instead. Here is what I got:
$40K purchase price
$925 per month gross rents...ongoing
Taxes under 1K a year
Insurance too expensive...self insured on this one
Maintenance: avg about 1K a year
CapEx: estimated at $800 per year
Vacancy: $880

So bottom line is $11,000 gross rents
NOI approximately $7320
I also get tax breaks and the home has appreciated nicely.

I could have taken that quick 10K, but holding this property will net me about $7300 a year EACH AND EVERY YEAR. I have had this particular property about four years. For those that think assigning a contact is great, that is fine but I maintain that buy and hold, built up over time, will give you financial freedom. You don't have to start big. You don't have to start with a lot of money. Read "the millionaire real estate investor" and "hold". These are excellent reading on how to start building YOUR empire. 

[Steve Vaughan]

Excellently explained and great job on a beautiful win-win @John Thedford !

I will never understand why people look past ongoing rental income, appreciation, tax benefits and the pride of ownership for one-time little paydays.  Only so they can try and hussle up another deal.  Usually at any cost.

Throw in the shady operators that leave sellers hanging, and I'm double confused.  

Nicely done!  I do the same!