RE Gurus & Authors- Please Read (new niche) - Posted by Alexander Manuel

import · December 12, 2003, 10:38pm

Posted by Jorge on December 14, 2003 at 14:05:08:

Hi Alexander:

About your house, that is eactly what I want to do with a small condo I’m waiting on it to be ready by February 2005.
About your friend luxury condo here are the options I’ve found as exit strategies:

Double closing. It means to have somebody ready to buy the property when you are going to close on it. Obviously, the situation here is finding that person but you can get a realtor to help you.
The contract you sign at the beginning has the option to be assignable, which means you can sell it before the property is ready. It depends on the developer.
Some developers have what is call the reseller plan. Which means they will help you selling the property around 6 months before it is ready. A friend of mine bought a luxury condo at 350K and 2 years later the developer offered him the reseller plan (which means only the developer can sell it) and they offered him to sell it for 480K. The issue here is that the property was offered for 540K in the market so it depends on how much risk you are willing to take.
Other option is to sing the contract under your name and/or under an LLC company. This way you can sell the company which only asset is the property. This is very common specially in luxury properties.

I hope this helps.

Jorge

import · December 12, 2003, 10:38pm

RE Gurus & Authors- Please Read (new niche) - Posted by Alexander Manuel

Posted by Alexander Manuel on December 12, 2003 at 23:38:49:

I believe there might be a niche for the Real Estate ?How To? authors that hasn?t been addressed as far as I can tell. There appears to be a course for just about every RE investing related topic- except for ?Real Estate Pre-Construction Deals.?

What I?d like to find is a course from an authoritative and experienced RE professional that would compile the MECHANICS of working with RE developers to tie up properties that stand to appreciate over time. I?ve pieced together different bits & pieces from various investors as the ?best way? to pursue this, but have yet to find someone with anything close to resembling a proven system that can be replicated.

Here are some of the topics that I believe would be interesting for such a product:

WHERE TO FIND RE DEVELOPERS- In S. Florida there is a ?Home Buying? section that runs in the Miami Herald advertising the developments either in progress or under way. If I were in any other state, I wouldn?t have a clue where to begin looking for RE Developers unless a similar section ran in the local paper. I?d like to know how I can get in touch with smaller RE Developers that would likely be more flexible than the larger more established ones. Is there some RE Developer Association, club, organization, etc. where they might be found?
WORKING WITH RE DEVELOPERS- What specifically does a RE Developer NEED in terms of a contract that would motivate him/her to more favorable terms BEFORE they setup the sales office and open for business. Someone told me that RE Developers that can show his/her lender signed preconstruction contracts receive their funding more easily than those who don?t. I recently worked with a small RE Developer who signed with me for a mere 1.5% down, while others have demanded as much as 20% before committing to a contract. Why such a disparity, and what is really motivating these developers? Perhaps an insider?s look at what makes them tick can provide the necessary insight to land better deals.
LLC, SUBCHAPTER-S OR PERSONAL NAME- Most of the RE pre-construction contracts I?ve seen don?t allow assignments of any kind. If title is taken in the name of an LLC or Subchapter-S Corp, couldn?t one conceivably sell the entity itself to a buyer and bypass this clause? Although several investors have authoritatively told me this would be the way to go, I?ve had others authoritatively indicate major problems would result during the close that could ruin the deal. I?d like to know how professional RE Investors handle this in detail. Would a double-close be the best option if one simply wishes to cash out and not violate the ?non-assignable? terms of the contract? If one takes title to a pre-construction deal in an LLC and later sells the LLC to a buyer who wishes to take title in his/her name-can this be done legally without violating the non-assignability clause? This section would definitely require the insight of not only an experienced RE Investor but a good RE Attorney for it to be of substance.
PRE-CONSTRUCTION DEALS WITH PARTNERS- What is the best structure when working with partners? What are the tax implications? Since the more lucrative pre-construction deals might require partners due to the large cash outlay, learning how to structure a deal with multiple individuals and subsequently cashing out merits analysis.

Anyway, these are just some of the ambiguities I would like to clear up that relate to pre-construction RE deals. I have looked all over and simply can not find ANYTHING related to pre-construction deals. I can’t believe no one has put something like this together since the demand is definitely there. I know at least a half-dozen people personally who are fumbling through pre-construction deals only because there is no product out there.

If anyone has some insight on these questions or sources of information to suggest I would be immensely grateful.

Kindest Regards,

Alexander Manuel

import · December 14, 2003, 3:07am

Re: RE Gurus & Authors- Please Read - Posted by Judah K. Swagerty

Posted by Judah K. Swagerty on December 14, 2003 at 04:07:50:

Robert Campbell made a good point;

“…make sure that a real demand exists for your product/service in the marketplace.”

So I took the time out to search for this market on the internet and here is what I found.

About 15,275 people search for this keyword “pre construction” at the top 25 search engines last month.

About 3,750 people search for the keywords “pre construction miami” at the top 25 search engines last month.

About 3,275 people searched for the keywords “pre construction condo” at the top 25 search engines last month.

About 3,050 people search for the keywords “home pre construction” at the top 25 search engines last month.

Total Searches for the month of Nov. = 25,350

Alexander, can you work with these numbers?

Also, 26,800 websites came up in Google under the keywords:
real estate “pre construction”,

10,300 websites came up in Google under the keywords:

florida real estate “pre construction”

Visit the top 10-25 websites for each keyword and see what kind of info you can find. Do your homework.

Start the niche!

I think the market is there. It may not be a big one, but you can make big profits from small amounts of people.

For Example:

Would you rather make $25,000 from 10 people?

-OR-

Would you rather make $10,000 from 1000 people?

Do your research and see what you come up with.

Good Luck!

Judah K. Swagerty

import · December 13, 2003, 1:27pm

Goto this link… - Posted by osirus

Posted by osirus on December 13, 2003 at 14:27:44:

Goto the link below and look at item 17. They have a business model where they buy directly from the builder. Their business model also allows them to pay full retail price for real estate; even in Southern California no less! I am not affiliated with them in any way; but thought they had an unique and interesting business model.

Hope this helps!

http://www.professionalhousebuyers.com/Where%20WE%20Buy%203.htm

import · December 13, 2003, 11:00am

Pre-construction South Florida - Posted by Jorge

Posted by Jorge on December 13, 2003 at 12:00:43:

Alexander:

I’ve been looking at the pre-construction market in South Florida for over a year now. I’ve been trying to find what you are looking for (experts on the field) with no luck so far. Some friends have invested on this and the results have been unbelievable (100% ROI after 2 years) which is far more than what most investments can give you. I invested in one myself in Palm Beach and is to be finished in February 2005, so we’ll see.

I will be following your post here to see if more people have better exerience in all this.

Jorge

import · December 13, 2003, 10:31am

Re: RE Gurus - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on December 13, 2003 at 11:31:36:

Check over on the commercial page. There may be something available there.

import · December 13, 2003, 9:12am

There are lots of empty niches. - Posted by GL(ON)

Posted by GL(ON) on December 13, 2003 at 10:12:54:

All the gurus can tell you a hundred ways to buy property with no money, but none of them tell you how to manage it once you have it. That’s like teaching how to plan a wedding without mentioning that you are going to be married.

Another thing they don’t mention is how to tell a good deal from a bad one. This relates to the first criticism above.

There are lots of important niches that will never be filled because the public won’t support the guru who covers them.

The pre construction niche is not likely to be covered because as you point out, it is very complicated and in most cases, takes longer and is less profitable than dealing in existing properties. It would be awfully hard to sell to newbies especially if you told the truth.

import · December 13, 2003, 7:15am

About a new niche … - Posted by Robert Campbell

Posted by Robert Campbell on December 13, 2003 at 08:15:29:

Alexander,

The advice given below by Judah should be considered.

One caveat, however: Before you rush out and become (and own) a niche expertise, make sure that a real demand exists for your product/service in the marketplace.

Do what you love only makes $$$ as a business if others love what you do.

Good luck,

Robert Campbell

import · December 13, 2003, 8:39pm

Re: Pre-construction South Florida - Posted by Alexander Manuel

Posted by Alexander Manuel on December 13, 2003 at 21:39:10:

I’ve been recently investigating pre-construction deals since the returns I’m finding are usually triple-digit. The best part of all is that they require no day-to-day management. Once you identify a winner, you put down your deposit (which is held in escrow) and simply sit back and wait for the property to fatten up on the equity. I have friends that tied up a pre-construction luxury condo in S. Florida for $625K that can realistically sell for $950K by September of next year. The only part which is unclear (for me at least) is the exit strategy they plan to use to cash out and move on to the next one (actually, that’s one of the things we’re trying to figure out together). I’m sure there are several ways to go about it, but we are still not sure how to do it and minimize costs, taxes, liability, etc…

The ROI is definitely there on pre-construction. The small SFH I tied up for $2.5K has increased in equity by $25K, and won’t be ready until July of next year indicating perhaps another $5K-$10K might still materialize. Since I plan to actually close on this deal and rent it out for cash flow, I’m not concerned about an exit strategy. My friends however who are sitting on $300K equity in the luxury condo however CAN NOT afford to close on this monster and MUST cash out- ASAP.

Anyway, if no credible guru steps up to the plate to fill this niche, I’ll take Judah’s advice and consider putting something together myself.

Alexander Manuel

p.s. Judah’s post for some reason was erased. I’m including it below (without advertising any links this time) since the advice I believe was very good:

Hi Alexander,

Don’t wait for someone the start a new niche. You can start this niche yourself
and become a specialist at it. Whenever someone thinks of this niche, they will
think of you.

Get Started Now!

Good Luck!

Judah K. Swagerty

import · December 14, 2003, 2:41am

Re: About a new niche … - Posted by Judah K. Swagerty

Posted by Judah K. Swagerty on December 14, 2003 at 03:41:49:

Good Advice!

If there is no market, then there is no profits to be made.

Good Advice!

Judah K. Swagerty