The assignment is by far the easiest of the Lease Purchase strategies and requires the least
amount of investment and risk in order to do the deal and profit upfront. Instead of taking the
property and subletting with an optionor sandwich leasing you can actually sell the contract
to another. You have created a valuable marketable commodity! You can sell and even create a
note by financing the sale of the lease purchase agreement, too.
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 to sell) the contract to a third party. This can be either the Tenant/Buyer or another
investor. This is normally a lease purchase agreement which contains a specific assignment
clause with the right to sublet, transfer or convey any rights within the original contract with
the owner to another principle party.
Example: I found a property in a good neighborhood/school district. The owner had tried to sell
it, had put up a for rent sign since he'd be moving to a new state and didn't want to get stuck
with two mortgage payments. The property was worth $100,000.00 and the Seller had a mortgage
for $95,000.00. His payments were $1000.00 per month PITI (principle, interest, taxes, insurance).
The real estate agents wouldn't list the home because there was not enough profit to pay a 6%
commission. I offered to lease purchase the home with the right to assign and purchase for the
balance of the mortgage. I would also pay the $1000.00 per month with a five year contract and
would be responsible for any monthly maintenance/repairs under $100.00. I would pay $1000.00 down
as option money and the first month rent with a 20 day lead before payments were to begin.
The owner agreed and I began calling all my tenant/buyers from previous ads. One tenant/buyer
(with kids) had just filed a bankruptcy, but was looking for a home in a good school district and
safe neighborhood. He knew that he would need at least 2 years before he would be able to get a new
mortgage and save the downpayment. He was perfect for this home. I told him he could move into the
home, purchase it for the balance of the mortgage and that I will sell him the contract (assignment)
for $6500.00. He only had $3500.00, but he really wanted the home. I told him that I would take the
balance of the assignment fee as a personal note (unsecured) at 0% if he paid on the first of the
month. He could pay me $250.00 per month and pay off the note in 12 months. He agreed. I recovered
my $1000.00, made a $5500.00 profit ($3500.00 cash and a$3000.00 note) and I was out of the deal.
Assignments are great for flipping homes without buying them. As usual everyone wins in a lease
This was not a home that had a great margin/spread as in previous strategies and there was no rent
credit either, however, it did move quickly. Why? Many Tenant/Buyers need terms such as the length
of contract more than price or generous rent credit. This home moved because of the financial
circumstances of the tenant/buyer. He needed a few years to save a downpayment and repair his
credit history. The reward was to be able to have five years and purchase the home for the balance
of the principle.
Final Analysis: Don't always focus on the price when looking for creative deals, but rather in
gaining control of a good home and re-marketing the contract to another. The secret of Success,
financial security and freedom is to develop multiple streams of income. This can be accomplished
by specializing in a niche like Lease Purchasing.
Diamond Consulting Group
Success, One Person at a Time !
Claude W. Diamond J.D.