Hello everyone!

I recently purchased, received, and read the Naked Investor - Lease/Purchase manual. Very good stuff.

Maybe I'm just a thick-headed numbskull but I don't really understand the difference between an assignment and a cooperative assignment. Can someone please enlighten me?

Also, when assigning a contract to a tenant/buyer for a fee, does that fee count towards the option price on the seller's contract? If I assign my contract with the seller to a tenant-buyer, and the tenant-buyer pays me a fee of $4500, is that just a contract assignment fee or is it an option fee? Am I making sense?

By the way, this discussion board is great. It is nice to see everone contributing so freely.

Thanks up front for any information you can provide.

Hello, Mark, and welcome to The Naked Investor! Glad you joined us, and thanks for the kind words about the book and this board.
Well, I'll try........
Think of a Cooperative Assignment as you working for the homeowner. You are putting together a lease purchase deal by providing the tenant/buyer for the homeowner. That tenant/buyer is agreeing to the same terms you would be getting if you were in the middle of a sandwich lease, looking for a tenant/buyer for yourself to sublet the property to. Your payday comes from keeping all, or some of, the option money the t/b puts down. The papers are signed, the money is paid, and you're out of the loop, ready to move on to your next deals. It's a great and effective technique for getting deals done with sellers who are not motivated to the degree where they are willing to turn over control of their property to you. Perhaps they want a say in who moves into their property, or they are unwilling to drop their price. We then would work with them, and use the Cooperative Assignment to still profit on a deal that many other investors would walk away from because they didn't have the tools to do what you do.
The option money that is put down by the t/b, by the way, is credited in full toward the purchase price.
An Assignment is a different technique, Mark. Here, you are negotiating good terms on a sandwich lease type deal. But, instead of you remaining in the middle, for any reason you decide you just want to assign, or sell, your interest in the deal you just negotiated. You do just that. It could be to another investor, or to the end user. That is, to the tenant/buyer who will actually be living in the property. Whatever assignment fee you receive is a negotiable amount. But, whatever amount that ultimately is, the assignment fee does not apply toward the purchase price. An assignment fee is not option consideration.
Does this help?

Michael,

Yes, this helps a lot.

Let me make sure I am clear on a couple of points though:

Cooperative Assignment:
Any option money paid by the potential tenant/buyer is fully credited towards the purchase price....even if I happen to receive all of it? I guess what I wondering here is will a seller be willing to give the tenant/buyer credit for option $$$ that I received instead of them?

Straight Assignment:
Here we are talking about an assignment fee rather than option consideration. This makes perfect sense to be. I'm just charging what I can to assign the contract over to another investor or directly to a tenant/buyer.

Mark

This is correct.
Possibly. Possibly not. I always try to keep it all, of course. If a homeowner squawks too much, and I want the deal, I'm not opposed to negotiating a split of that money. Certainly never less than 50%, however. (I'll also try and then negotiate a split of any monthly cash flow, too. Why not?) I have made it very clear to the homeowner that my "fee" is built into the purchase price of the property. In other words, the homeowner may have been asking, say, $159K. Well, knowing that by offering terms I can receive $169K from the tenant/buyer, the rent credits and the option money are rarely a problem. The homeowner is made to see that he/she will be receiving a higher net price because we have increased the price, and they are paying no Realtor's commission and no closing costs. It usually is not a difficult sell, Mark.
Yes. You've got it.

Ok, I get it now Michael but it does bring up one more question:

At what time in the negotiation process do you pull out the the alternatve options, such as a cooperative assignment or a consulting agreement?

Do you just lay it all out there for the seller at the beginning saying "here are 3 or 4 ways we can work together....you choose your favorite"?

OR

Do you always lead with a sandwich type lease/purchase, and bring up the other options as needed? If so, what are the triggers with the seller that tell you to discuss the CA? Is it price or usually more of a control issue?

Im just wondering how your typical negotiation strategy flows.

Thanks again! The couse and this discussion board are wonderful.

Mark

There are a variety of factors involved in which technique I want to use.
For example, the property value is one. A bread and butter property that can be readily turned over, combined with a motivated seller who is willing to discount the terms, lends itself very well to a sandwich lease.
On the other hand, a very high end property with $4,000 per month payments is not one I would want to be on the hook for. This would be a CA.
Another factor would be the homeowner's mindset. They may be open to getting something done quickly, and are open to a lease purchase. However, they may be astute and refuse to budge from their terms. Well, if we can offer them everything they want via a CA, and still make a buck ourselves in the process, then that's the way I would go in this case.
I do not like to offer choices to homeowners. I find that in so doing, they become confused. This can mean you'll hear the ol' "I need to think about this. I'll get back to you." I know what technique I'll be taking early on in the process based on the numbers involved and my conversation with the homeowner. If it turns out I misjudged the deal and it is in my interest to switch tactics to get the deal done, so be it. Be light on your feet, change hats, and reach into your bag of tricks. That's another advantage to having a flexible tool at your disposal.

Thanks Michael. Makes much more sense now.

Michael,

The majority of the time you assign everything back to the seller, yes?

Have you personally ever assigned to the T/B, instead of the seller?
What are your thoughts on doing this as oppossed to the other method?
Of course this would give the T/B better terms and a lower price. All ya would have to do is ask for more consideration $$$ down....

Thanks,
Jason

I'm not quite sure what you driving at here, Jason. What type of deal are you referring to? A Cooperative Assignment? Or a straight assignment? I always assign my deal over to the tenant/buyer. Maybe I'm missing something here?