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How To Make 100 000 And How To Lose A 50 000 From The Same Property
t our new web site,
www.GetPreconstructionDeals If I'm talking to a person
.com, I always get one face-to-face about this, it is
pecific question sent in after we about at that this time in the
announce a new preconstruction conversation that their eyes
project: "So Chris, is this glaze over and they really start
preconstruction project a good to wonder about this so called
deal?" . The answer that is "expert".
expected back by the person is
"yes this is a GREAT deal" or
"no, I don't think this is a very
good deal". So let me give an example of two
hypothetical investors, Freddie
the Flipper and Barbara the Buy &
Holder, who both contract to
Even though I am not trying to be purchase a preconstruction condo
flippant, my response back is in Atlanta. Suppose the condo
usually along the lines of you costs $250,000 and requires 20%
could potentially make a lot of down at time the hard contract is
money from this project or you signed. Furthermore, suppose the
could lose a lot of money. Boy, condo will be ready 18 months
that's a big help thinks the after signing the hard contract.
person asking the question. In The broker in charge feels very
fact, it is quite possible that strongly about this project and
two people could invest in this is honestly convinced they will
project, at the same time, with be worth $350,000 at time of
one making a $100,000 and another closing.
losing $50,000 from it.
Now this is Freddie's first deal KNOWS that she can get close to
and he has heard you can make covering her monthly expenses if
TONS of money flipping she has to rent it out. She
preconstruction projects. firmly believes in the area and
Freddie does not have much money believes this is a low risk
and takes out an equity line of investment. She listens to the
credit for the down payment. OPINIONS of the broker, agrees
Freddie has no intentions of with him, but knows that nothing
closing this property but wants is certain.
to flip so he does not have to
pay closing costs. All he can
think about is that this very
knowledgeable, and quite Looking into our crystal ball,
trustworthy broker thinks he will suppose we find out that at time
make $100,000 in 18 months. He of closing, the condo's have
can hardly control his actually dropped in price and
excitement. only have a fair market value of
$210,000. There has been a
temporary softening of the local
economy and some people have been
Now Barbara the Buy & Holder is dumping their properties in a
an old seasoned pro. She has panic. All expectations are that
done 10 preconstruction projects this is a temporary blip but we
in the past, has multiple long know that NOBODY can predict the
term rental properties, and does future.
a flew flips of single family
houses on the side. When she
enters the contract to purchase
this property, Barbara thinks the Freddie gets the call that he has
values will keep going up but she been dreading. It is now time to
close on the condo and will seller who closes on it, then
require about $10,000 in closing does not know how to rent it,
costs. He does not have it! panics, and sells for $200,000.
After consultation with his Two years later, Barbara sells
attorney, he realizes that there these condos into a booming
are two options: close the economy for $350,000 netting
property or walk away from his $100,000 from one and $150,000
$50,000 down payment. Since he from the other.
financed that down payment in a
home equity line and it does not
"feel" like he really lost the
money (even though is monthly Yawn: just another day at the
payments have gone up), he office for a well prepared real
decides to walk away. This estate investor.
finally releases him from months
of mental anguish over this
foolish mistake he has made.
I hope that this article has
provided an example of how the
outcome of an investment is MORE
Barbara on the other hand about the approach and thought
realizes that this is part of the processes of the investor rather
game. She is still very bullish than the investment itself. I
on this project and simply closes learned this in the area of
and rents the condo and is losing trading from one of my mentors,
about $50 per month net all Van Tharp, but it is equally
expense. No big deal for her. applicable in all types of
Furthermore, she buys another investments.
condo from a really desperate
About the Author:
Chris Anderson is a leading authority on preconstruction real estate investing. Get his 4 day e-mail course and a 33 minute video free today! Visit http://www.GetPreconstructionProfit.com & http://www.GetPreconstructionDeals.com
Source: www.isnare.com
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