Are A/O Deals Worth it?

On an Assign Out Deal (A/O) we only receive the first Payday instead of all three. So are these deals still worth it?

We talk about a number of different terms deals on this column, but today we're going to take a look at "Assign Out" deals, or A/O deals for short. While most of our deals result in 3 Paydays®, A/O deals only result in one.

This might seem like a downside, but it's important to understand that an A/O deal also involves a lot less work and risk from our side. This is a quick and easy deal for us, and there's always the potential to turn it into a larger deal down the road. This is a great pathway to use if the seller needs or wants all the spread, all the principal paydown and/or you just don’t see profits in it other than an AO.

So, long story short—A/O deals are absolutely worth your time. Let's take a look at one deal in particular to see why.

Doing remote deals in Alaska

This deal is from an Associate of ours who lives in Alaska. The property itself was in Seattle, but he structured everything remotely while staying in Alaska. So, to people who say they can't do terms deals in their area… Think again!

With Zoom meetings and Docusign becoming commonplace, there is no better time to start doing deals. You can easily find deals all around the country, it's just a matter of whether or not you're willing to put in the time and effort.

Our Associate found this deal through a seller that he was already working with on another deal. She's a realtor and had another property to sell. She liked what he was doing, so she sent it his way.

But as a realtor, she also wanted to get as much profit out of this deal as possible and she was very comfortable with the hands-on management aspect. In cases like this, an A/O deal is perfect. It also fits with landlords who don’t want to give up profits and don’t mind dealing directly with our buyer who we assign (Assign Out - aO).

When we do A/O deals, we set them up just like a traditional sandwich lease purchase. The main difference is that once we find a qualified tenant buyer and get them in the home, our job is done. The seller then takes over the rest of the deal, managing it through to the end of the term and acquiring all the profit from Paydays #2 and #3.

This type of deal allows the seller to put in some more work (and risk) to get as much profit on their end as possible. It also means that we don't have to put in nearly as much effort and we face no risk. As soon as the tenant buyer is in the property, we remove ourselves from the deal and all liabilities that may come out of it. (This is all written into our agreements, we are legally not responsible for anything as soon as our part of the deal is over—it's all on them.)

The numbers (Payday #1)

Since there's only one Payday on this deal, this will be quick and easy.

The purchase price on this property was $349,900 and the sale price was $389,900. Our Associate settled on a down payment of $38,000—right around 10%—and negotiated that he would get 66% of that while the seller would take the remaining 34%.

That means he's getting $25,000 while she gets $13,000. Not bad for simply finding a qualified tenant buyer!

We love A/O deals because they are a quick Payday, but it's always important to keep in mind that these can (and often do) turn into bigger deals. The seller might get busy a few months down the road and realize she doesn't have time to deal with this property or doesn't enjoy doing it—in which case, our Associate could take it over for himself and manage it through the rest of the term.

In that case, he would recoup those remaining two Paydays and potentially turn this into a six-figure deal. This is very common!

But no matter how you slice it, $25,000 is a great Payday for a quick deal. This was also our Associates second deal ever, and he closed his first deal within 42 days of getting into real estate.

There's no secret sauce to what we do—he just followed the system and put in the effort. You can do the same!

So, what do you think? Are A/O deals worth it? We certainly think so, but I'd love to hear your thoughts in the comments below.