Hello,

In your last lesson we discussed why it is important that you never pool your money with other investors or buyers.

This lesson will focus on the importance of getting compensation if you are brought to closing once construction is finished.

Deadly Mistake Number 11:
Investing without compensation if brought to closing

Throughout this course we've suggested that you should negotiate your investment so that you can avoid taking possession of the property once it is finished. The way to do this, of course, is to get the developer's permission to resell your unit during the construction phase.

In most cases, especially in soft markets, we negotiate our deals so the developer is responsible for reselling our units for us. In addition, we will require that he resell all our units before he sells the remaining inventory in the project. While he may have an obligation to resell for us, it is possible that he could fail.

In the history of this concept, no buyer has ever been brought to closing...but it could happen. This isn't so terrible. Most real estate investors expect to close on the property they purchase.

There is never any guarantee that your unit will be sold prior to the issuance of the certificate of occupancy...even if your unit is supposed to be the first one to be sold.

Once the local government gives the developer the certificate of occupancy he is allowed to bring you to closing...and you will need to finance the property.

If the developer is not successful in selling for you prior to this point, it is not unreasonable for you to impose some penalties. We generally require the developer to cover all of our closing and carrying costs for us.

This means that even if we go to closing, the developer must pay the mortgage, property taxes, association fees and all other expenses on our unit until he resells it. We now own the unit and may use or rent it...but the developer is on the hook to cover the expenses...not too shabby.

Of course when the developer makes the deal with us he is in the early stages of his project and is confident the units will sell...or he wouldn't build. But lots can happen during the construction phase. We are currently seeing a significant weakening of the real estate market here in the US. This softening is causing delays (slower sales).

It is important that you get the developer to cover the expenses until he completes his commitment to resell your units for you. While it is true that you might be in the project longer than you had hoped, you won't be facing a monthly payment or the hassles of finding renters, etc.

You might also be able to negotiate things like mortgage contingencies or appraisal contingencies that release you from contract even after construction is finished. With these terms, if you are unable to qualify for financing or the unit does not appraise for the agreed upon price when you made the deal...you can still cancel and walk away with your deposit...plus interest.

The key to all of the terms we've discussed in this course is to make time your greatest risk...but keep you capital safe (and earning interest).

My 72 year old mother is invested with our group. You might ask why a 72 year old woman on a fixed income would be buying investment property. The answer is simple. If the deal is good, her upside is 40% or more. If the deal fails she makes the same 4.5 percent interest she has been making anyway. Why not invest? Of course the letters of credit (explained in lesson five) make it an absolute no brainer.

In your final lesson we'll discuss the keys to selecting the right pre-construction investment group and the risks associated with choosing incorrectly.

Feel free to call me anytime. We don't sell any products or seminar tickets. We're a private investment group committed to education and partnership. Our purpose is to provide you with a comprehensive education so you can properly invest in what we believe to be the greatest opportunity anywhere for intelligent investors...pre-construction real estate.

Respectfully,


(847)793-0146
Joint Venture Partner
Senior Executive Advisor, BPV
Founder, PreConstructionSecrets.com
President, Freedom By Design, Inc.

P.S. To regain access to your 12 page report and the pre-construction audio explaining the details of our investing club, simply click here.

P.P.S. If you are a real estate developer or know developers who are looking for project funding, please give me a call. Our buying club may be interested in acquiring a large percentage of your pre-construction units.

Home Pre-Construction Report Audio Login