Hello,

In your last lesson we discussed six of the biggest hazards to avoid when negotiating to buy pre-construction.

This lesson will focus on assuring yourself of profitability...even if property values drop.

Deadly Mistake Number 3:
Investing when property values must
increase for you to make a profit

This lesson is vital to your success. If you only learn one thing from this course, understand this. Investing with the "hope" of appreciation is CRAZY!!

Never count on appreciation when buying pre-construction. If you buy a $250,000 condo and then go to resell it, you will incur a 5-6% real estate commission. At 6% you are facing a $15,000 loss...unless property values increase.

In addition, since most developers will require you to take possession before reselling (unless you negotiate a bulk purchase) and thus finance the unit, you will be faced with steep lender penalties if you resell during the first year after taking possession.

If construction takes 2 years and you have to close on and hold the unit for another year to avoid prepayment penalties with your lender...you are now exposed to the market for 3 years. Lots can happen in 3 years...and if you need out...you don't want to be facing a loss.

When you negotiate the deal you need to establish terms with the developer that will protect you from market weakness and cover the costs associated with reselling your properties.

This will require you to change your thinking a bit. When we negotiate our deals we are actually not very concerned with getting discounts. What we are more concerned with is that the public price for the units is significantly above our price. Our concern is with the difference between our price and the public price...the price everyone else will buy for.

In addition, we make sure the developer agrees to sell all future units at the higher public price...or higher.

For instance, let's say you buy your units for $200,000 each. You may require the developer to sell all his remaining units (and resell your units) for at least a 10% premium...or $220,000. If you make a 10% deposit of $20,000, you'll will be starting out with a 100% gross profit when the unit resell for $220,000. You invested $20,000 and resold for $20,000 more than you paid...thus a 100% gross profit.

From this $20,000 gross profit you can pay your 6% real estate commission and still have a significant net profit...even in a market that is flat. This return on investment can be increased significantly if you negotiate to have the developer cover some or all of the costs associated with the resale (the real estate commissions).

The point is that you should never enter the transaction if a flat real estate market can leave you with a potential loss. Your biggest risk should always be time...not money.

Lesson six will address how to maintain profits even if propertay values drop. Hint: Negotiate to have the developer eat the loss.

In the next lesson we will discuss another very important issue...how to protect your money properly in escrow...so the developer and nobody else can get their hands on it.

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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