I found a company online that stated that they represented distressed builders that liquidated their properties far below the comps in the area, they say there’s $35k equity in each unit. I learned that they are condos in Scottsdale, AZ and Las Vegas. I looked at the properties on their website, and they are top of the line. I am impressed, I must say. There’s crown molding, stainless steel appliances, dark wood cabinets, the places are nice. The ones in Scottsdale are right across the street from the Biltmore Hotel, which I guess is a really nice area. What I’m struggling to get my hands around is the fact that they say that I’m only required to put down 10%, even though I won’t live in them, but, then they say that the builder will give a “designer credit” back to me of 20%. And, since the condos are brand new and completely upgraded, that money goes right into my hands. I’ve never heard of that before. When pressing them, they said that it’s just one of the benefits these builders have “built” in to sweeten the deal for their investors. Has anyone ever heard of such a thing? What I do like, though, is that they have onsite property management and guarantee that they have tennents in place, so I wouldn’t have to find a property management company. I like that. So, for instance, the 3 properties I’m considering are $259k each, so my down is $25,900 (10%) per property, and the builder will send me a check for $51,800 (20%) within 30 days of closing. So, on these three properties, I’ll be getting in with $35k equity each, over $25k profit per property in 30 days, and have positive cash flow on each unit because of their “off sheet” wholesale bank rates that individuals can’t qualify for on their own. I can’t seem to find any holes, but, I just would like to know if anyone has ever heard of this type of offer, and if they have, did they do it? And, if so, do you really get that 20% back? They say that the areas their properties are in are stable job markets with high rental rates and all the things that investors look for in investment property, and it just seems TOO good. Am I missing something? Any advice would help. I’m planning on doing this after the holidays. Thanks in advance for your thoughts.
Are you missing anything?
Yeah, you are missing your own home work. “They say, they say, they say…”
Have to looked at the area? Have you verified that there are even any buildings and not just pretty pictures on a webpage? Have you checked the contractor’s lcensing board to see if the builder really exists and if he has complaints filed aginst him?
Have you done anything to compare prices with what is being sold in the area? Have you done a market study to see what rents really are? How about vacancy rates?
Surely someone named “savvy Investor” doesn’t really think that the seller is going to give you $51,000 as a gift. That $51,000 is part of the loan that you will be taking out and paying back.
I don’t know whether it is a good deal or not. Some builders give some pretty nice incentives to get their inventory sold down. The way you put it, it sounds like a snow job to me, but for all I know you are filtering what the seller has told you through rose colored glasses, and that’s not everything you were told.
What do I think? I think that not only do you not have enough information, I think that you don’t have any information at all. All you have at this point is a nice advertisment.
Thanks tatertot for your honesty and advice.
I’m going to be doing much more homework on this now before I do anything. I do consider myself to be a savvy investor, and that’s why I’m looking to others for feedback and advice BEFORE I do anything. It is for this reason I haven’t been “taken”.
You bring up several good points for me to consider. Any advice as to how I’d find out what rents are in those areas? Also, another good point is do they actually exist. A colleague of mine lives in Phoenix and I will have him go verify these properties and look at the interiors and the neighborhood.
The most significant part of this deal to me is this “designer credit” of 20%. I’ll be sure to get that in writing and verify that it is not part of the loan itself that I’ll be taking out and paying back.
Also, they did send me pro forma statements for these properties, as well as some others in the Go Zone (Mississippi) that seem to have some pretty good incentives from a bill Congress passed to encourage building in that area.
I’ll update with any additional info on this deal, and please feel free to opine with any more advice.
Thanks again for your thoughts, tatertot.
I think if it sounds too good to be true, it probably is. If it were me, I would go look at them myself. I would not put it off on a friend of mine. What he sees is different than what you see. Before you invest thousands, invest hundreds and fly there. I have been taken in the past. I am not negative, however I would not trust pictures, pro formas and such. Fly, fly, fly over there.
I have just one comment…
I get on stage and talk to investors about how to invest… At times I follow some guy who flew across country to pitch an investment opportunity…
If the investment opportunity was so darn good why did they need to fly across country? you would think they could have sold it to someone in their own area.
I own a comapny here in downtown Phoenix and drive thru Scottsdale several times a month. Many company’s have large condo projects going up in Scottsdale and the Tempe area (right next the Arizona State University). Im always looking at RE deals and the market is ripe here now and if you need someone on the ground to find the project send me the cross streets or what site you have and Ill check it out.
Everything in Phoenix is being short saled here now. Im working on one right now SFR that is over 100k below comps. Im sure they need to get rid of what they are building like everyone else.
Recently I’ve had my feelers out for good deals on rental property. I’ve never invested in rentals, but have 2 friends that have and they say it’s a great investment. Regarding this company you found online, have you talked to them to find out the details?
Did you find out if that 20% back is part of the loan that you’d have to pay back.
And, curious if you’ve purchased rental properties out of your area before.
“designer credits” should be disperssed at closing and be on the HUD1 form. anything else is a very gray area. dispersals outside of closing have been the tools of many a loan fraud scamer and i strongly advise that you remove yourself from it.