Hello,

In your last lesson we discussed how to profit from pre-construction even if real estate values are flat.

This lesson will focus on protecting your deposits from use by the developer or anyone else.

Deadly Mistake Number 4:
Giving the developer access to your deposit
or sending money to anyone other than
the developer's escrow agent

In most states the law allows developers to gain access to your entire pre-construction deposit for use in construction, marketing or whatever purpose the developer deems necessary. Some states, like Florida, restrict access to the first 10 percent of the purchase price deposited into escrow, but allow the developer to utilize the balance.

It is vital that you understand that the vast majority of all pre-construction projects that fail...do so prior to acquiring their construction loan. This is why the pre-sales are so important to the developer. Once the loan is acquired the project is far more likely to be completed.

The developer does not need your deposit money for construction. He will be getting the money from a construction lender. What he needs is your name on a purchase contract along with the other pre-construction buyers. On the other hand, the developer may need your money to market his project or pay sales commissions to agents who find more buyers. Since 95% or more of failed projects fail prior to construction financing, it is CRAZY to give the developer access to your deposit for this or any purpose.

When negotiating the deal, be sure to indicate that the developer shall have no access to the deposits for any purpose unless you are to close on the units following construction. While the law may allow the developer access to your deposits, you can forbid access in your revised agreement.

You should also know that money held in escrow is NOT subject to bankruptcy law. The government cannot touch your money if the developer files for bankruptcy.

One last note about deposits: Be sure the deposit is held in an FDIC insured interest bearing escrow account. You should be able to negotiate the interest rate on the escrow to four or five percent.

In addition, if you are considering investing as part of an investment group, never send any money to the group directly. I've spoken with dozens of investors who have been asked to wire as much as $200,000 to a group within 10 minutes of meeting them on the phone. DON'T DO IT!

Reputable groups will never ask you for money up front. They will not have group joining fees. They will not charge monthly or annual maintenance fees. They will only charge you based on their performance...and only after you have actually received your profits from each transaction.

As a side note, reputable groups will never ask you to sign a power of attorney. Signing one will give them complete control over your transaction and may be in their best interest...but not yours. Signing a power of attorney for pre-construction deals is equivalent to handing them your money. DON'T DO IT!

You don't want to miss the next lesson. We will discuss how to increase your profit margins from 40 percent to as high as 2,000 percent or more by using a financial instrument known as a letter of credit.

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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