Making $15k With a Single, Quick Payday

A/O Deals offer a single payday compared to the normal three, but they can still be well worth your time.

Today, we’re looking at something a little different from our usual sandwich leases and subject-to deals. This is an A/O deal, which stands for “assign out.”

An A/O deal functions like the first part of a sandwich lease deal, but it stops there. Basically, we do the same thing we would do for any house—we settle on a purchase price, find a tenant buyer, settle on an approximate term length, and get them in the home. (We say “approximate” term length because once we find the buyer we get the sellers’ agreement on who we found, their qualifications and their mortgage ready dates). The main difference with an A/O deal is that we leave (assign our buyer over to our seller) once the buyer is in.

Normally, we’d see the deal through until the buyer purchases the home and we’d be making a profit on the monthly spread as well as the final sale of the house and the principal paydown throughout the term. But with an A/O deal, that’s all on the seller. They get more profit for themselves, but they also take on all of the risk and potential headaches.

And not only do we leave everything to them, but we fully remove ourselves from any responsibility. Our forms actually include a general release after we get a buyer into the home that releases us from all liability with the seller and buyer—so no matter what happens, there’s no risk on our part.

A quick relocation

This particular deal was with a military family. And there’s one quick note before we begin, which is that we often work in areas that have military bases and lots of military families.

Why? Because people in the military often need to relocate with very little notice. If they own a house, that means they need to get rid of it quickly—and we’re in the perfect position to help them. Like most of our deals, it’s a win-win for everyone involved. The seller gets a quick way to sell their house, the buyer is able to move into a house they otherwise wouldn’t be able to, and we get a great deal.

The seller was in the military and had recently purchased a home in the area. But he soon got word that he was going to be relocated across the country, so he put the house on the market. It was on the market for about a month and a half, and he realized he would soon be in a situation where he’d owe the realtor money without getting anything in return.

That didn’t sit well with him, so he took it off the market and was trying to rent the property himself (unsuccessfully). Then, he found our Associate. We gave him a great opportunity—we’d find someone to not only rent his house, but buy it at the end of a term. We mentioned to him that most buyers qualify for a mortgage in anywhere from 12 to 18 months.

All he wanted was to get out of this situation without losing any money. We were able to not only accomplish that, but make him some extra money in the process. This was a fantastic situation for him because he had already made five mortgage payments on the vacant home—so the prospect of not only making that money back, but profiting on top of it made this deal very enticing for him.

Here’s what happened…

The Single Payday

Originally, our Associate talked to the seller about a subject-to deal (mainly because he didn’t have any equity in the property). The subject-to means that we would purchase the home and the mortgage would stay in the sellers’ name. The seller didn't want to go that route, so we told him we’d bring it to market for him and find a buyer.

We agreed on a purchase minimum net of $199,000 for the home. Once we mark up the home and find a buyer, the rest is simple. With A/O deals, we give the seller 33% of the down payment and then we take the rest for our fee. In this example, a simple markup of $20,000 would allow us to be paid and the owner to get more than the minimum we promised.

We secured a $20,000 down payment, which meant we got $13,400 and he got $6,600. But just like all of our deals, we structure A/Os in a way where we capture the first month’s rent. In this case, that was an additional $1,645—making the total come out to around $15,045.

$15k for getting a buyer in the door… Not a bad deal if you ask us! And remember, if you use our forms on an AO deal, you are entirely released from any liability once the deal is over. If something happens with the buyer and the deal doesn’t work out—it’s on the seller, not you.

But that brings us to the final aspect of this deal… Which is that it could easily turn into a sandwich lease or subject-to deal if something goes wrong with the buyer. If there is one hiccup, the seller knows he can call us and we can take over the deal. That means we take on some more risk, of course, but it also gives us Payday 2 and 3, so there’s a lot more in it for us.

Regardless of what happens—if the deal ends here or if it does turn into something more—this is a great deal with little time invested. Just a few hours of talking to the sellers and the buyers and our Associate made out with $15k in his pocket.

Would you do a deal like this for $15k? Share your thoughts in the comments below.