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.