Tips for Buying an Investment Property on Assignment

Buying an investment property on assignment means acquiring the rights to a property from the original buyer before construction is complete. This often allows you to secure a property in a high-demand area, typically at an attractive price. In an assignment sale, you buy the purchase contract from the initial buyer (assignor), who transfers their rights to you (assignee). This can be profitable, especially if the property’s value has appreciated since the original contract was signed.

While assignments can be great investments, they come with challenges. Here’s how to successfully navigate the process:

1. Review the Agreement Carefully

• Ensure the assignment agreement includes terms that protect your interests.
  • Check the purchase price and deposit structure.
  • Determine whether conditions allow you to renegotiate if market conditions change.
  • Closely review completion dates, penalties for delays, and the assignor’s responsibilities.

Tip: Always have a real estate attorney review the agreement to avoid any legal pitfalls.

2. Check Developer Approvals

• Confirm that the developer permits assignment sales.
  • Some developers have restrictions or require approval for assignments.
  • Obtain written confirmation regarding their fees and policies.

Tip: Be aware of any fees or conditions imposed by the developer to avoid surprises later.

3. Research the Market

• Analyze the current market conditions and the potential for growth in the area.
  • Assignment sales are more beneficial in rising markets.
  • Ensure the assignment price is reasonable compared to the current market value.

Tip: Stay informed about property values and trends in the area to make a well-timed investment.

4. Assess the Financial Impact

• Understand all the financial implications of buying on assignment, including:
  • The assignment fee paid to the assignor
  • The deposit structure
  • Additional costs, such as legal fees and land transfer taxes

Tip: Calculate the total cost before proceeding to ensure the purchase fits within your budget.

5. Conduct Due Diligence

• Perform thorough due diligence on the property and the development project:
  • Research the developer’s history and reputation.
  • Assess the surrounding area and monitor construction progress.
  • Investigate any legal or zoning issues that might affect the property.

Tip: Visit the site personally, review zoning bylaws, and ensure all necessary permits and approvals are secured.

6. Start the Financing Process Early

• Financing for assignment sales can differ from traditional mortgage processes.
  • Some lenders may have specific requirements for assignment properties.
  • Begin the financing process early to find suitable loan options.

Tip: Get pre-approval from an experienced lender to ensure the assignment process moves smoothly.

7. Have a Strategy

• Think about your long-term plans for the property:
  • Will you rent it out?
  • Hold it for appreciation?
  • Or resell it once the project is completed?

Tip: Create a clear strategy for managing and eventually selling the property to maximize your returns.

Final Thoughts

By following these tips and conducting thorough research, you can successfully navigate the assignment purchase process and take advantage of suitable investment opportunities.