5 Figure Assignment Fees may be hard for some people to believe in today’s Real Estate Market. Believe it or not, they are still out there for the active, persistent and methodical real estate investors, even the first-timers!
Wholesaling is the art of finding and assigning properties. It can be so appealing to new investors because there is very little cash required to support these types of deals and credit is not an issue. A new investor requires only a small amount of cash to cover earnest money deposits, advertising, etc.things like this.
Discover your mission, vision, or purpose in life.
Spend some time envisioning the type of lifestyle that fits your family and personality traits. Then begin to realistically set your goals based upon the vision.
Remember the basics about goals – they should be SMART GOALS.
Aim for what really matters to you. Discover your mission/vision/purpose. and teach yourself how to set and persist to achieve your goals. To manage time effectively track your tasks consistently, so that you don’t waste time on non income producing activities. Visualize and focus on your goals daily to ensure that your actions reflect that which pertains to your goals.
What tools do you need?
The basic tools that you will need as a new wholesale investor are these:
* Cell phone – (preferably a PDA) with unlimited minutes, you’ll need them! This will help you to organize your tasks, records, phone numbers and synchronize with your computer.
* Computer – researching data comps and for marketing your wholesale deals
* Printer – print out contracts, contracts and any documents
* Camera – this is an absolute must have for creating your e-flyers to mail our to your database to sell your deal
* Contracts / Agreements
* Fax Machine
* Filing Cabinet – you’ll need this too.
As your business evolves, you’ll reach a point where you will find other tools and gadgets that increase your productivity and your profits.
How to find deals:
There are many places to you can locate deals and here is a list a few of them:
* Vacant Houses
* Title Companies
* Home Inspectors
* REIA Clubs
* Bankruptcy Attorneys
* Homeowners Associations
* Burned out Landlords
* Bail Bondsmen
* Code Enforcers
* Hard Money Lenders
* Meter Readers
* Waste Management
* Divorce Attorneys
* Tax Offices
* Garage Sales
* Estate Sales
** Every time you go for a ride, take a different route to get to know your neighborhood, the properties, comps, vacants and utility workers.
Once you’ve made contact with a truly motivated seller- you’ll make them an offer on that property based on the comps, repairs and your desired profit.
Quick Calculation of the Maximum Acceptable Offer: (MAO)
MAO = (ARV x.65) – RC – CC – AF
ARV = After Repair Value
RC = Repair Cost
CC = Carrying Costs
AF = Assignment Fee
Assigning The Contract
The most important thing to do here….in the money step is to be very clear that you’ve contracted to purchase the property as “your name….and/or assigns”: By placing and/or assigns after your name, you’ve ensured your ability to assign the deal to an end buyer. Although a contract is usually assignable unless otherwise stated, I would hate for you to fall down on the money step by leaving it to happenstance. Once you have an executed purchase agreement with the motivated seller that contacted you and you’ve negotiated a hot, smoking deal with your and/or assigns on that top line…you are ready to find your buyer.
Note: In my contracts, “and / or assigns” is a part of the agreement along with the following clause.
Buyer shall receive a key within 48 hours and be granted access to the property to allow partners and contractors to evaluate it as needed. If the seller is still living in the house, I request access on pre-arranged days and times. When they won’t be there and this allows me to get my investors in to see the property.
How to help your buyers see the value in your deal
I try to make it as easy as possible for my buyers to access, evaluate and purchase my wholesale deal by doing the following. By having my contractor to come out and submit an estimate on the needed repairs (on his professional letterhead) can save my buyer/investor a great deal of time and guesswork and I also ask my real estate agent for some accurate comps on the subject property. Even though I encourage every buyer/investor to pull their own comps, perform their own due diligence, I’ve found that by doing these things, they are steps that aid in the process of assigning the deal.
So at this point, you’re so close to that meeting with your bank teller right?…hang on!
At this stage, you have the property under contract, you’ve got your estimate(s) for the repairs, comparables, photos, and you’ve got access to the property and your blank assignment of contact in your hot little hands. You’ve done a lot and you’re close.
How to Find a Buyer for your Deal
During this point, time is certainly of the essence and you’ve got to get your e-flyer made and sent out to your database, your craigslist ads, your for-sale-by-owner posts, directional arrows and a hard copy to bring to your local real estate investor club.
In my experience, they are many, many “want to-be” investors that read book after book, attend seminars and invest within the confines of their minds. My advice to my students is to weed out the tire kickers from the decision makers, early on before they have a deal. Create a performing database. It doesn’t have to include many, many names…. just the ones that know a hot, smoking deal when they see one and that will perform when the times comes to do so.
What day is it? Now it’s payday!
Your end buyer / investor will be exchanging a signed assignment of contract with you for a fee. They are paying for the right to step into your place and fulfill the obligations that you and the seller have set forth.
Collect a deposit from your buyer as you hand over the purchase agreement and obtain a signed assignment of contract. This will help you to separate the decisive, action taking investors from those that have a case of paralysis of analysis. If your buyer is serious about moving forward, they will have the wherewithal to hand over a deposit in good faith thereof.
Since it’s your deal, you would be using your title company who is most knowledgeable and skilled in the art of wholesaling properties and the manner in which you operate your business. You will provide your title agent with instructions about the remaining funds that will be released to you upon settlement. If your title company is not able to release those funds to you at that time, it’ll be necessary to execute an addendum with your buyer.
An addendum attesting to the fact that you will be both be at the closing and the buyer ( your assignor) must pay you in the lobby immediately following the closing, along with a Notarized Memorandum of Agreement would help to protect your interest.
Assignment fees can be very lucrative in certain markets. On my very first wholesale deal- the assignment fee was $7,000 and I had never done it before….so not bad right? My third wholesale deal allowed for a $40,000 fee because it was a hot, smoking deal. The buyer, a contractor was thrilled to get that property so that he could rehab it and make his profit.
Hot, Smoking deals are out there….if you’re not paying attention, you’ll bump right in to one of them!
So, with that- see your vision, steady yourself, prepare with vigor and head in that direction with renewed energy, confidence and persistence…and remember to enjoy the journey.