So I’m getting ready to close on my FIRST DEAL EVER next Friday.
It is a co-operative assignment deal, which I only learned about a couple of weeks ago. It’s an easy, no risk type deal. Basically it works like this:
Find/prospect for motivated sellers willing to do a lease-option on their house
Find/prospect for tenants looking for a “rent-to-own” opportunity
Put the 2 together and collect the option fee (or 1/2 of it) as your profit!!
Very easy it seems and the profits are pretty good…not as much as a normal wholesale type deal, but easier to do and can happen more frequently–I don’t see 3 of these a month as being impossible to do!!
I realize some investors already know about this, just thought I’d share it with the newbies who might not know about it…I didn’t until 2 weeks ago! Good luck.
You put the home under option first so you can legally look for tenants; you also need to sign a lease at the same time, delaying the time first payment is due to give yourself time to find a tenant. Then you just simply assign your option for your fee, have all 3 parties sign the assignment and you are done with the deal; on to #2.
This strategy seems a bit under the radar; I know it’s out there and has been mentioned before…I just don’t think it’s talked about enough. GREAT for a beginner.
Like nsu said, I plan to focus on this a LOT this year.
1.How long do you give yourself on the option time to find a tenant?
2.Do you pay an option fee up front and if so how much?
3.And the seller doesn’t mind you assigned your option to someone?
4.How much should one charge for an assignment fee for the opton?
I make the option length 2-3 months. That’s plenty of time to find a tenant who can put down some $; and if for some reason you can’t, just make it a clause in the lease you sign that you can cancel this agreement anytime prior to the start of the lease term or prior to the first payment being due.
I pay $1 to have the option…most people do $10, but $1 will suffice.
No the seller won’t mind…you are finding them a qualified tenant and doing all the paper work…and remember, they’re motivated. Obviously they have had no luck finding anyone.
Depending on whether you split the option fee with the seller or collect the whole thing yourself…the option fee is typically like a down payment…anywhere from 3-5% of the purchase price. So if you have a 200k home and you require 3% option fee…that’s 6k.
So much money can be made doing this and there’s hardly ANY competition. That’s what you call a niche. These deals can happen so much more often than wholesale deals too. Like my friend nsu said…3 or more these isn’t out of the question each month; especially after you’ve been doing them for a while. Anywhere from 6k-12k profit per month is do able after a while if you’re really getting out there and have a system down.
I’ve ONLY used craigslist thus far and am currently working with 3 motivated sellers willing to lease-option their home; 1 is supposed to sign papers next Friday and I’ll make $1500…not the greatest deal, but I only marketed the place for 12 days…and I’ve had TONS of people wanting to see the place/looking for a rent-to-own opportunity. I’ve been using craigslist to try and generate leads for about 6 months now and almost gave up hope that it was useful…then all of a sudden I’ve had TONS of leads from both buyers and sellers willing to lease option in the past couple of weeks.
I write to FSBO’s and FRBO’s just a simple " would you be willing to lease option your property?"…if they respond and say “yes, tell me more” then I get into details about how I can help them…I wouldn’t try to throw it all on them in one email, likely to push them away. If they write and say “yes, tell me more” and then you explain…you get rid of the tire kickers that way as well. Once you find a tenant for a particular property, don’t throw out the leads you still get for the place…use these for your future deals!! Finding a seller willing to do this is a little bit harder than finding tenants/buyers…but it’s still quite simple. I plan to target houses between the 300k-500k range…a 3-5% down payment would make you a nice profit on something you can have occupied in a matter of weeks…
I’m signing the papers and getting my check from a tenant next Friday; this will be my first deal. I just learned about CA’s 2 weeks ago though. That’s why I’m already in love with them. I’ve been trying to complete any kind of deal for the past 6 months and just learned about this 2 weeks ago and didn’t even really try too hard and now I’m about to close on Friday. First deal ever in real estate…I don’t want to jinx it yet because nothing is final until I get that check, BUT it feels pretty darn good. It’s nothing too brag about either! $1500…but I feel good more for completing a deal than getting the $.
I’m homing to learn the ins and outs and hopefully can get a good system down for constantly getting leads from both sellers and buyers.
Yeah, that’s great…even if you just made $500 dollars it’s still a profit and you still came out on top. One thing I learned early about this game is that it’s easy to get greedy. Alot of investors gotten greedy and tainted the game. Make money but don’t get greedy doing it. Then you will find yourself being controlled by money and it will have become your passion. Yes, I want to make money but I don’t let the money or the passion of it control me.
I don’t remember exactly how I got here, but I love real estate investing forums and this one, along with another one that has contributed to my recent success --the naked investor. I was just reading posts one day and stumbled across this thread:
It opened my eyes and I started doing research on the term (co-operative assignment). I then found quickly that a guy named Michael Carbonare had a great site to talk about such things. Any question I had I just asked and was given good advise; that’s one thing that’s hard to find out there these days…no one wants to just give good advise without wanting $$$ for it. The positives just out weigh any other strategy I see out there…it’s quick, easy, low risk, zero competition, and possibilities for GREAT profits. Like kdcinvestments mentioned earlier about a 1.8 million dollar house…3% pays a nice little profit.
Another good thing is you can literally do this all over the country without even leaving your house; all you need is a computer, fax, and phone. The only time I’ve seen the seller was to take pictures of the home and place a sign in the yard. I’ve sent all possible tenants directly to the seller to show the place. As long as I reiterate to the seller that they can not go around me, I won’t have a problem sending tenants straight to the seller. At least I’ll do it this way until I get screwed!
I’d like to do a few co-op assignments in California or New York before the year is over.
Alex, What are you doing to protect the buyer in these deals? What are you doing to make sure any underlying Mortgage is being paid? How long do you make the Lease term for and if the buyer doesn’t qualify for a Mortgage after that what do you do? Herbster
My job is to find a well qualified tenant and match them with a seller; once I have done this, I assign my interest and I am DONE with the deal. I don’t have to make sure anything is paid…I have nothing to do with the deal as soon as I sign that assignment contract ( and have the other 2 parties sign it as well) and get my check. That’s why these deals are so good…you can do one in just a matter of weeks.