Hello,

In your last lesson we discussed the importance of negotiating from a position of strength...by joining with other investors to gain more leverage.

The remaining 11 lessons will explain what types of terms you should negotiate into your purchase agreement that will protect you and assure you of profitability.

Deadly Mistake Number 2:
Accepting a developer's standard contract
without adding your own protective terms

While you want to be sure to negotiate special pricing in your purchase agreement, it is even more important that you establish an addendum to the developer's standard contract. The addendum (a document attached to the purchase agreement to modify the terms of sale) will stipulate the precise terms that you have negotiated for the bulk purchase and should indicate that the addendum itself will supersede the developer's standard agreement.

If you recall from Deadly Mistake Number 1, there are many terms that you can negotiate to protect yourself. The addendum is the place to put them.

Let's discuss six of the top hazards you should avoid:

First, avoid reservation agreements. Developers are notorious for selling with reservations, holding your money for months (or years) and later canceling your reservation when they have found another buyer willing to pay more. Reservation agreements leave the developer in control (something you don't want). More about this in lesson nine.

Second, require the developer to begin and complete construction based on a strict timeline. In most cases when we negotiate deals we require the developer to acquire construction financing and break ground within six months of us signing on the dotted line. If they fail, we can cancel our contracts and recover our deposits with interest...thus having only lost some time. We'll talk more about this in lesson eight.

Third, forbid the developer from using your deposits for construction or any other purpose. The developer doesn't need your money. He needs your purchase contracts to get his construction loan. Your money should be held in escrow earning interest. You'll read more about this in lesson four.

Fourth, require the developer to take on the risks associated with declining property values. This is particularly important when the market stability is in question. We hear from investors every week who have purchased units during preconstruction for one price only to have developers selling comparable units for far less a year later. This can be avoided with a good addendum. We'll discuss this at length in lesson six.

Fifth, require the developer to allow you to resell during the construction period...without a closing requirement. You will clearly be better off if you can profit without having to close, finance the property and then resell it. In most cases our group will require the developer to resell our units for us during construction on a first out basis. The developer must resell all our units before he can sell the remaining units in the building. You'll find more on this in lesson seven.

Sixth, insist that significant profits are built into the purchase agreement. I'm not just talking about getting immediate equity due to a discounted purchase price. You should be able to have a net of 40% or more when property values are flat or depreciate...even after paying an agent to resell your units for you. All future lessons will address this issue.

When you negotiate your purchase from a position of strength, you can get all of the above terms and more.

In the next lesson I'll outline exactly why you should never invest when property values must increase for you to make a profit.

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.

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