Assignment is by far the easiest of the lease buy strategies and requires the least amount of investment and risk to get the deal done and profit up front. Instead of taking the property and subletting it with an option or sandwich lease, you can actually sell the lease to someone else. You have created a valuable marketable product! You can also sell and even create a note financing the sale of the lease purchase agreement.
An assignment is when we negotiate the deal with the owner of a property and it contains all the terms of the transaction within the specialized written contract. We can then assign (which means sell) the contract to a third party. It can be the Tenant/Buyer or another investor. This is typically a lease-to-purchase agreement that contains a specific assignment clause with the right to sublease, transfer or assign any rights in the original agreement with the owner to another principal party.
Example: I found a property in a good neighborhood/school district. The landlord had tried to sell it, he had put up a rent sign since he was moving to a new state and didn’t want to be stuck with two mortgage payments. The property was worth $100,000 and the seller had a $95,000 mortgage. His payments were $1000 per month PITI (principal, interest, taxes, insurance). The real estate agents did not put the house up for sale because there was not enough profit to pay a 6% commission. I offered to lease the house with the right to assign and buy for the balance of the mortgage. You would also pay $1000 per month with a five year contract and be responsible for any monthly maintenance/repairs less than $100. I would pay $1,000 as option money and the first month’s rent 20 days in advance before the payments began.
The landlord agreed and I started calling all of my previous listing tenants/buyers. A renter/buyer (with children) had just filed for bankruptcy, but was looking for a house in a good school district and safe neighborhood. She knew that he would need at least 2 years before he could get a new mortgage and save the down payment. It was perfect for this house. I told him that he could move into the house, buy it for the balance of the mortgage, and that I would sell him the contract (assignment) for $6,500. He only had $3,500, but he really wanted the house. I told him that I would take the balance of the assignment fee as a personal note (no guarantee) at 0% if he paid on the first of the month. He could pay me $250 a month and pay off the note in 12 months. He accepted. I got my $1000 back, made a $5500 profit ($3500 cash and a $3000 note) and was out of the deal. Assignments are great for remodeling houses without buying them. As usual, everyone wins in a lease buyout.
