First of all, this forum is great. You all are doing a fantastic job.
Now down to biz…
I’m new to real estate (but just 29 years old), and recently decided to start getting educated and involved in REI deal analysis.
I have an opportunity to get in on first phase purchasing ($20-35k reduction) on a condo (from $125-150k) on a newly renovated condo complex in Dallas. No condo’s have been sold yet, this is a brand new project.
My questions are:
What’s my play here? Buy it, sit on it until the subsequent pricing phases are launched, then sell it?
How do I evaluate this deal? Does anyone have a worksheet with the deal points I need to evaluate? Any tips/examples?
Can I sell this condo right after I buy it?
Is there a law that says i have to sit on it for a certain # of days?
It is my opinion and a lot of other investors that condos are not good rental property investments unless you can steal them. I bought one for $17,000 in 93 and broke even on the cash flow for years. Today it is only worth $35,000. I got it for $200 down so not a bad return. I would not buy it today to rent out for $450 however. One more thing to watch out for is that the developer may have to sell a high percentage of the units before thet can get the loans funded. I have seen this especially in conversions where as much as 80% of the units had to be sold before the construction loan could be paid off. These are expensive too and if you do not sell soon what will your plan be. Do you need to close or can you walk away and only give up a small amount of earnest money? What is the worst case scenerio?
Good luck and thank you,
Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737
512-301-9171 home
512-587-6177 mobile
The earnest money is $1k, so no big deal there. The builders have structured the deal so that I will not have to pay my first mortgage payment until 45 days after the condo is completed.
My goal (I think) is not to rent the prop out, but to resell it as soon as possible for the true appraisal price (which presumable will be higher since I’m purchasing the condo at the reduced “first-phase” price.
When a condo deal is hot I have seen it work where the option holders made a killing and resold the units with ease for a big profit. At a discounted price you can not go wrong unless the entire project goes wrong and they have to leave them as apartments or worse and put up a big fence around them. It takes deep pockets to vacate a building abd rehab it and sell the condos. Are they keeping tenants and converting as it sells or getting rid of all tenants. Do you know how many tenants are planning on buying their unit?
Good luck and thank you,
Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737
512-301-9171 home
512-587-6177 mob
Interesting. I’m sure you’ll think this is silly…but by “option holder” do you mean “the persons that purchase a condo at the discount rates”?
The company handling the restore project is “known” for operating good renovation projects. All tenants are being forced to move out by the end of the Feb. The property landscaping starts immediately, as does all the basic gutting/drywall/electric stuff. They leave floors, cabinets, and some other stuff unfinished (to be chosen by the purchaser).
I don’t think there will be many tenants buying their unit…as the concept here is to turn the property into an upscale condoplex. But that’s a good question. But tell me, why do you ask?
I am really used to the lower end deals where a lot of the tenants stay and buy or lease from the investor that buys. If the developer is as good as you say then they may know what they are doing. I would want to know that they are financially sound with good backing. When I said option holder I mean you will be as the buyer under the sales contract with an extended closing and with the option to resale the unit. Do not mention and or assigns in the sales contract , As long as the contract does not forbid you from assigning then you will be able to do so
How am I supposed to find out if I will be allowed contractually to resell this sucker as soon as prices go up? Does it matter that I don’t have an RE license? Do I have to hold on to it for __ days?
You need no license to sale something that belongs to you. The sales contract will let you know if you can assign the sales contract. Your best bet to resell it is to become good friends with the sales agents and when the time comes they may be able to help you get a buyer. A lot of lenders today are checking to make sure that the current owner has owned a property for a specific period of time. Seasoning as it is called may not matter to the lenders where the condo property is located. You may want to ask the sales agents about any problems there too.
I personally, have never speculated with condo’s in this way. I’ve owned a condo and probably won’t ever buy another one unless I get it for 30 cents on the dollar.
I know speculators in Las Vegas are making great money flipping new condo’s. However, you don’t live in Las Vegas. The Dallas economy isn’t as hot as Vegas is. I would pass for that reason.
But again, this isn’t what I do. Maybe others with experience flipping condo’s can chime in.