Hello,

In your last lesson we discussed the importance of negotiating compensation if you are brought to closing by any developer.

This lesson will remind you of the importance of selecting the right investment group and risks associated with choosing incorrectly.

Deadly Mistake Number 12:
Joining an investment group that requires cash up
front, compensation without specific performance
or requires you to sign a power of attorney

I hope that by now it is obvious that, done properly, pre-construction real estate can be one of the safest and most profitable investments you can ever make. Of course you should never invest in pre-construction on your own...and should always negotiate as part of a group of buyers in order to get better protection and greater potential profits.

I'm sure that throughout these lessons it has also become clear that we are not suggesting you go out to start your own investment group. While bulk-buying seems like a simple concept, the reality is that it is extremely expensive, time consuming and labor intensive...at least for those who are finding investors, negotiating deals and managing the whole process.

What makes the most sense is to join with an existing investment group. But which one? I'd have to say that I'm a little biased about that. In my opinion there is really only one viable group with significant experience and a large enough partner base to gain access to enough good projects. Ours.

While there are a few other groups out there, nearly all of them are either doing it wrong, have a weak addendum, have too little capital to cover operating expenses, have too few investors to get enough leverage with developers or don't have the necessary experience to negotiate the deals in the first place. In this lesson I'd like to let you know about some of the issues you should consider when choosing a group to join.

First, never join an investment group that requires you to give them cash as part of an enrollment fee. Actually, you should never be charged any fees except those based on specific performance...after you have received profits. As mentioned earlier in the course, you should also avoid ever sending them your money. It should always go straight to escrow...and no place else. If they are charging you ongoing fees, they either can't afford to operate without the fees...or they aren't confident in the projects they are selecting. Either way it isn't good for you.

Our team spends six to eight month on average on each deal negotiating terms and making sure the project makes sense. There are significant legal fees, travel expenses, staff salaries, facilities and dozens of other expenses. And since we (the joint venture partners) pay the group management based solely on the success of each project...they have to wait another two years or so to receive their compensation from us.

As a result, our investment group managers have more at risk than we do. If they are not selecting great projects, they are mostly hurting themselves...since we're only facing the return of our deposits and a loss of some time.

Secondly, it should be clear to you that you should never join a group if they are unable to protect you and your capital in every way discussed in this course. Any group you consider should provide you with a copy of their standard addendum before joining. Read this document to be sure you are protected in each transaction. Most groups out there have a four or five page addendum to the purchase agreement. Ours is a 15 page document...and protects you in many more ways than we have discussed in these lessons.

Third, google the backgrounds of the group management for felony or other legal issues. You must know who you are dealing with. Unfortunately, people don't always act out of integrity.

Fourth, and this is vital! Never work with a group that requires you to sign a power of attorney giving them the authority to sell your units for you. This is like giving them your money...and our attorneys have advised us that doing so makes them an illegal security. You must retain control of all the decisions on your investments...which is just good business anyway.

Fifth, be sure the group's addendum requires the developer to inform their lender that you are investors and have no intention of actually closing or taking possession of the property when it is finished. This seems obvious but many investing groups and developers (fearing the bank won't make the loan) withhold the addendum to the purchase agreement when showing the buyer contracts to the bank.

Most banks are concerned when developers sell their pre-construction units mostly to investors...because if the investors bail...the bank is at risk. To withhold the addendum from the lender is bank fraud...and you as one of the buyers could be at risk if the project gets into trouble.

Our addendum with the developers all stipulate that they must disclose our documents to the lender. Actually, because of our reputation with lenders, we are often there to help the developer get their loan approved...based on our investor partnership. Sometimes we refer the developer to our banks...and sometimes banks refer developers to us.

By the way. In addition to potential felony charges, if the developer defaults on the loan during the construction phase, the lender will be subject to all of the terms of your agreement. However, if they were not previously informed of all the terms of the agreement, they can dispute them in court. Don't let an inexperienced investment group put you at risk.

Sixth, make sure the group is large enough to negotiate with sufficient leverage. A group of 50 to 100 investors may be sufficient to negotiate with smaller, less experienced developers, but larger, more prominent projects will require a much larger investor group. Of course less experienced developers are more likely to fail for one reason or another.

You will find that the smaller the group, the fewer projects. And that the projects will have a higher chance of failure as the group is not able to successfully negotiate with larger, more established developers.

Our group represents more than 400 active joint venture partners. And these are not just names on a list. All of them have invested in projects with us. There is no shortage of opportunities...in the US or internationally.

As a side note, our group also offers compensation for the introduction of any other partners you refer. Our membership is by invitation only and all new partners must be referred by an existing member.

Well that about does it for this 12 part course. Most readers tell us that our free course is more valuable than any other information they've ever found on pre-construction investing. We hope you agree.

If missed any of the lessons or would like to review the course again, you can simply click here for easy access.

As I've said before. 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.

If you'd like to learn more about our group, our partner requirements, how to apply for membership or have questions about any aspect of this course, feel free to call me anytime.

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.

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