Hello,

In your last lesson we discussed how to dramatically increase your profit margin by investing with letters of credit.

This lesson will focus on protecting yourself from declining real estate values and dishonest developers.

Deadly Mistake Number 6:
Investing without price protection

As we've been discussing in these lessons, the key to successful pre-construction investing is to gain leverage by joining with other buyers to negotiate a bulk purchase. Bulk buying will allow you to get very favorable terms.

In lesson 3 we also discussed the importance of requiring the developer to impose immediate price increases on all remaining inventory immediately after you make your deposits.

There is one important point that must be mentioned here. In addition to agreeing to increase prices significantly after you buy a block of units, the developer must also agree that if he sells any of the units for less than the agreed upon premium amount...that your purchase price will be reduced on a dollar-for-dollar basis.

This is critical to your protection from the market and the developer. Of course the developer must also agree to allow you to review his books to verify that he has not in fact sold any other units at a discount. In this way, you will always know that you got your units under better terms than all other buyers in the entire project.

I understand that you may be wondering why any developer would ever agree to terms such as these. The answer lies in the reality that they must sell at least half of their project before they can ever get their construction loan.

When we enter into negotiations with developers their first question is usually, "How big of a discount do you want?"

Our answer is, "We don't want a discount."

This usually takes the developer by surprise because everyone is always asking them for discounts. Remember from lesson 3...we are more concerned with the price spread than we are with the purchase price.

So long as the developer sells the other units (and usually resells ours too) for at least the premium public price...we know we can be profitable.

However, there must be consequences if the developer fails to keep his commitment. Of course the consequence is that he must adjust our purchase price downward on a dollar-for-dollar basis for every dollar he sells any other unit for that is below the agreed upon public price.

Our dollar-for-dollar discount applies whether the developer is forced to sell units below our agreed upon price (because of market conditions)...or he chooses to. Developer's are known for cutting deals all the time. But if they break our agreement on even one unit...every one of our partners gets a discount. This is why we insist on having access to their books to verify that no discounts have been given.

Often, knowing the immediate price increase might make selling the other units more difficult, the developer will offer us a discount and raise prices from their. Again, we are not concerned with the purchase price...only the price spread and guarantee that we will get the dollar-for-dollar adjustments if the developer is forced or chooses to discount other buyers.

Please note: When I say we are not concerned with the purchase price I mean it only in relation to discounts. When we select projects, we are particularly concerned that the units are priced in such a way that we believe we will be able to resell them easily.

Lesson 7 will address how to profit without ever going to closing, financing or taking possession of the property. Don't miss 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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