How an ASSIGN OUT Deal Can Help Create a Win-Win Situation

It was also a duplex, just to make it a little more interesting.

Was it a duplex? Both sides empty?

No, the rear unit was already rented. It was a 1 and 1.

Hit up, are you ready?

Yes.

Let's do a couple of things just to set the tone here. So I just was saying to them, I think you got another deal if I understood your DM right. Um, but let's go back to— I think there's one or two we're gonna do here, right?

Yeah, yeah. So let's, uh, let's— hey, uh, I got it.

All right, hold on, your internet's really shitty. Can you maybe take the video off? It's really spotty. All right, come on, Herman.

I know, I know. Okay, so yes, I got this as a for sale by owner through My Plus Leads and talked to the seller for a while. He was—

sorry.

That's all right.

I'll hit you with the questions and then you can fill in the blanks. How long was he on? He or she?

I think at least 4 months when I contacted him.

Okay, that's, that's getting tired. Okay, uh, whoops, deal type, uh, I switched these. Uh, we're doing an AO here, is it?

Yes, sir.

Okay, before we dive into that, there's always new people on here. I don't care how many— come on, there's new people. So, um, you quickly, your background, um, and prior to SREC, and how long you've been with us.

Okay. So yeah, my name is Hidde. I go by Herman and I am from the Netherlands. And prior to joining the community, I was a private chef on yachts working for the 1%. And I did that from being 19 till about 25, 26. And just kind of got tired of the physical. And so I found— I tried to find something else. And so I did some courses in real estate, some multifamily, some, you know, just kind of like researching, seeing what would be a good way to go. And then I found Chris on a podcast. Honestly, I don't even remember which one it was. I think the Wholesale Hotline, but I might be way off there. And so then I did one of those, did the intake conversations with you guys, the interview, and I was sold. I was 100% connected with your values and the way that you guys worked and joined the Starter Program. And Pretty soon after that, um, the High 6, I guess. So we joined the starter program, I believe November 1st or 3rd or something. And then we jumped to High 6. What was it, uh, Chris? About a day before I got these deals. So that must've been July 9th.

At the bootcamp, I think, or thereabouts.

Well, we talked about it then. We actually signed up on July 9th. And I know that because it was the day before I got these 2 contracts.

That's good. Um, all right guys, just a little context. Um, some of, some people here have been to the boot camp. The boot camp has been ridiculously powerful. Uh, the little thing we did this morning with 3 high 6s coming in here and doing calls was just 2 and a half hours, but the boot camp's 2 and a quarter days. Um, if you're an associate or an apprentice, it's free. Uh, the only challenge is it's right here in the conference room and it's tiny, so you got to get that booked. Um, we have one next week. with a few seats. And then we have one in, uh, not September because the event's in September, we have one in October. So side note, if you haven't done that, get you— get your butt booked. All right, um, a little background on the seller hitter. Um, uh, why are they doing this? What happened when you called? Give a little context.

Yeah, real quick, Chris, that's my— how's my video? I fixed my Wi-Fi, I think.

Uh, you're fine now. We'll yell at you if it's not.

Okay, good. The seller, this guy, he knew he had a pretty nice property in a good area, and he basically just put it on the market. It might've even been more than 4 months just to see what he could get. And so the value of the property, I think, was just over $600,000, and he was trying to get $750,000 for it. So very early on, I was like, okay, this guy's dreaming. Let me just keep tabs on the guy and we'll see what happens. And The conversation led to an appointment very quickly. And so—

So how quickly? So he had been on for 4 months. You called how many times to get the appointment? And what was that time span?

Not too long, honestly. Hold on, I have it written down here. First contact was on the 18th of March and the 2nd of April I had my appointment. So it must have been, you know, 2 and a half weeks. I got it done pretty quick because I just figured, you know, once there's a face, once you have a little bit more rapport, it is just so much easier of a conversation. And so that was my I agree. My point there. So did the appointment. I had Rick, my coach, on the phone. I don't know if Rick is on here, but he was very helpful. And we basically just walked the gentleman through it and we started working on some numbers. So first we kind of looked at a subject-to option, owner financing hybrid.

How much? Okay, hold on. How much does he owe on this place? This is good.

How much has he owned on the place? I believe about $350,000.

Round numbers is okay. Yep. Yeah. About $350,000. Yeah. So $400,000, call it, right? Equity.

Yeah.

Okay. Go ahead. Keep going. Sorry.

Yeah. And so we looked at some options, but he was hoping to get a little bit more money upfront. And so the amount of money that we were able to do upfront in the sub-to just wasn't really enough for him. And so we figured, you know what? Let's just try to do an assign out. And he was trying to move to Atlanta or to Dallas, or he really didn't know what he was doing. He was just wanting to get out of Miami.

How much was he asking for, for down, like that made you pivot?

Well, he just wanted to get as much down. And I think he said, you know, $50,000 or $80,000. And I was thinking, you know, if I need to be able to pay him $50,000 or $80,000, that means I need to get at least $100,000 upfront. And that was, you know, that's steep. That's too much. So Um, that kind of made me think, okay, this isn't gonna work. Let me see what I can make work. And so then we kind of worked on some, on some AO numbers. Um, and, uh, yeah, pretty quickly that, that, that worked out. And, uh, he wasn't too, um, stingy with the numbers either. And, and so we got to some AO numbers, uh, pretty quick. And, uh—

Where do we end up? I'll kind of sketch it out over here. Uh, what did you sketch out for him?

Um, we ended up saying— hold on, I have it open here.

You guys, I want you to be able to see these numbers but then ask questions because we did 4 AOs today in the conference room this morning, and it's still— I don't care how many times you see it, it can be confusing when you're brand, brand new. It's just that I had done so many of them, so it's like rote for me now. So I want you to ask questions, uh, if there's blanks here. This is what we're going to tear this apart. This is the simplest structure, but sometimes when you're new, it's harder. So how did you outline it?

Yeah. So eventually we went with the purchase price of $750,000. I figured, you know, we can always try it and we can negotiate later.

Meaning you're going out at that or you minimize— you're saying his minimum is going to be guaranteed at $750,000?

His minimum is $750,000. And then we were going to bring it to market at $799,900 originally, but we actually did bring it to market at $789,900 per Nick's advice.

When you outlined this for him, this is what we did in the conference room today, and you said, hey, this is just an example, but we're going to go at $789,900. What, for the example, did you give him for down payment when you did this math just so he could see it?

For the seller? I probably took 10% as a— I think I took 10% as an average on this one.

Okay.

Yeah.

I just want everybody— and did you do 50/50?

Correct.

Yes. Okay. I just want everybody to understand. So they're only examples because you don't know until you go to the market. Our option agreement, bold and highlighted, says it's just an example. But if you, if you use, um, in this case, let's just for the example hit a, say, um, can I— I'll just round up to 80. I just want to show everyone. So if he's going to market at 80, this is a discussion that hypothetically you would have with a seller. Mr. So-and-so, I'm gonna, I'm gonna guarantee, I'm gonna try to guarantee you $750,000 or better. I'm gonna go to the market at $790,000. I'm gonna get $80,000 down, just as an example, uh, but we're gonna split that $40,000 each. So at signing, at financing, the buyer is eventually gonna owe you $709,900, but you got $40,000 already, so you're at your $750,000. Now this deal happened to come out to $750,000 the way I just did that on accident, but Usually it's going to come out where they get a little high. I was just giving you an example so you know how this is discussed on the Associate Mastermind call at 5. Rusty and I and Rick and Nick are gonna rip apart how you properly explain an AO in a lease purchase because there's some— there's too many different scripts floating around. We're gonna go over that on the associate call. All right, Hater, so go ahead.

Um, yeah, what's next, uh, Chris? The deposit?

Did you also, uh, ask for first month's rent?

Yes, $3,200.

Okay, so the monthly payment is going to be $3,200. This is not an agreement yet, correct?

This, this was under agreement, yes.

No, I'm sorry, you have an agreement to sell it, but you didn't sell this yet?

No, no. Okay.

Um, okay, uh, when did you guys go on, you and Nick?

Uh, the 10th of July.

So it's only been a month. Okay, activity yet?

Well, the activity was that yesterday he decided that he is just going to rent it out. So as of yesterday, I took this off the market.

Okay. We probably should have chose a different one, but that's okay. We'll use this for a lesson.

We have another one. That one's going well.

Okay, good. No, no, no. This is okay. So here— but actually, I'm glad you brought this up because I hit it with a message. Was it yesterday? Yeah. And I said, hey, that's the life of the AO. Like, The OAO seller can just go, "Hey, you know what? I changed my mind. What are you gonna do?

Sue him?

It's an option agreement, right? So we just we move on. It's nature of the beast.

The good, the bad, the ugly.

Huh?

The good, the bad, the ugly.

Yeah, you're probably gonna. I told the group today in the conference room because AOs is so easy for a seller to accept. They're so lucrative for them. They're also easy to back out of. But because it's so easy, I mean, Nick and I back in the day would take ten of these in a month. Ten." 7 to 10 and sell 60 or 70% of them. You're going to lose some. You can't get tied to it. Okay, Hitta, anything else about this? When you talked to him, did he tell you, I might rent it, I might pull the rug out, or did he not say anything?

Yeah, no, he was kind of just getting— he all of a sudden took a job out of state and he just wanted to fill the property ASAP. So he had it marketed as a short-term rental. He had it for sale for a couple different prices and we were marketing it.

So going into it, I knew it was going to be tricky.

But because we had good rapport and he was super interested, I figured, you know, let's, let's try it. What's the worst that can happen, right? It doesn't sell.

I would've— you could've popped it before he rented it. Yeah, it's fine.

I could've. Yeah, it could've happened. It's just, it was a tough area. It was, it was a little bit on the high side, but you know what? We, we tried and, uh, we did good. Um, it just didn't work out.

Well, you had some learning curves there too. So he would've got hypothetically $32,000 and $40,000. That would've been his only payday and then he would've moved on.

Yep.

Um, okay. So I, there's gotta be questions here. There's 60 people. So does anyone have any questions for Hitter about how he scripted it, how he set it? 'Cause you got it signed and a lot of you guys are just in that mode where you haven't got there yet. So I would probably pick Hitter's brain. Uh, we're gonna talk about more, but he's on fire right now. Any questions? Or Rusty, can you think of something else that I didn't ask or that these guys should be asking?

It was also a duplex, just to make it a little bit more interesting.

Was the duplex both sides empty?

No, the rear unit was already rented. It was a 1 and 1, and we had agreed that if the down payment was substantial enough, that the tenant buyer was going to be the beneficiary of that cash flow. But I think that was only up to 20% or over 18%. That was more of a verbal agreement. I figured, you know, We'll cross that bridge when we get there.

Okay. No questions for Hitta, guys? Yeah, I got one. So you said that this property, that he wanted $750,000, but the property was only worth like $600,000, I think you said?

Yes, correct. Correct. There was no support for his asking price. Not really. He was definitely about $100,000 over.

So, so with that, how was it that you were able to come up and say, I can sell it for $789,000?

Because the rent-to-own market brings a higher price. And, um, so that's kind of the, you know, we can immediately ask a little bit more for it. And then, um, this isn't a really upcoming area, so for the right buyer, they would definitely see the potential in there that, you know, at the time of financing, in a year or two Uh, that was going to be a real sweet deal for them. But again, this, this was a little bit more tricky one. I knew that going into it, but, uh, it was worth trying for me.

Yeah, it's— Brian, it's funny, with an AO, I've always done and taught like, okay, I, I can't find this, or okay, I think your monthly's high, uh, but I'm gonna give it a shot. That's the other reason why we're selling 60 to 70%, not, you know, 85 to 100. It's a gamble. When you're brand new, you tend to take more of those. Hey, Hida, how far out were you looking to get this sold?

What do you mean, time-wise? Yeah.

How many years for the option to your tenant buyer?

Okay, so this is an assign-out and we typically do 24 months.

Okay.

Yeah.

Yeah. So today, Jeff, we had— gosh, it was funny because we lucked out. You come to the boot camps, you'll find out sometimes we can dial and get nothing, right? So they come in here and Kyle is on here, I think. And they came in and boom, boom, boom, we hit these calls. They're all live, but they all were like, yeah, I'm all set. And so I said, well, what are you gonna do if it doesn't sell? I'm gonna rent it. I said, okay, well, hear me out. And every time I explain the AO 3 times in a row, they're like, oh, okay, you got my attention. So—

Well, Chris, on that note, uh, there's a question on there.

What is an AO? So maybe you can dive in.

Yeah, sorry.

I'm gonna sit down. I just think I'm in like Um, AO means this, guys. We buy sandwich lease purchase, owner financing, or sub-to primarily. But just like I alluded to this morning, when they're like, ah, forget it, I'm all set, I'm gonna rent it if I don't sell it, that's a last resort. We come in and go, we're gonna do this. It's called a sign-out. That's what an AO is. Uh, it's just something I created back in like 2013, and it means that we're gonna go out and find the same tenant buyer we always find for all our deals. Nick's gonna do the same exact thing he always does with you. The coaches are gonna— when we get that buyer though, we assign it. We do the whole closing and everything like we do the signing with the attorneys, and then we assign that buyer package and that buyer to the seller. We step away. The seller now is in charge of that, not us. Um, I can show you a couple different ways of what that looks, uh, how that looks on paper compared to a sandwich or an owner financing. It is over-the-top lucrative for a seller. Because they're getting a premium almost every time the way we do them. They're getting upfront cash, they're getting all the monthly cash flow, and if it's— they're not their primary, they're depreciating it. So like, there's so many advantages for them, but it's not for the person that doesn't want to— it's not that they have to be a landlord, right, with the right tenant buyer, but if they don't want to like deal with it, they want us to deal with it, then it's not for them. Example, today I called one of Avi's. That was one of the ones I called. And I said to Abby, do you think she's going to want an AO? Because he's going Sunday. I set the appointment for him. And we both said, I don't know. I mean, she's elderly. Does she really want to deal with that? But we're going to present it because we weren't clear what she wanted. We're going to present owner financing, sub-to, and AO to this woman. I just got to see if it's palatable for the seller to even deal with that. Did that help whoever asked that? Or did I confuse it more? I can do that too. Um, if it didn't, just ask me, guys.