need some help on this deal

[miskog]

I have a property which i am selling for 1.2 million. i have a full offer which is neting me a great profit of 400K.
however the offer is in the value of 4 homes. They are worth 345K now it is said that in six months they would be worth about $400K if the builder who has about 20 lots starts building higher end homes in the area . i have no concrete info if the builder is building or not this is speculative at this point.

what would the experts think i should do

thanks

 

[JamesB]

QUOTE (miskog @ Feb 17 2010, 04:04 PM) I have a property which i am selling for 1.2 million. i have a full offer which is neting me a great profit of 400K.
however the offer is in the value of 4 homes. They are worth 345K now it is said that in six months they would be worth about $400K if the builder who has about 20 lots starts building higher end homes in the area . i have no concrete info if the builder is building or not this is speculative at this point.

what would the experts think i should do

thanks

From my past experiences, I would sell.

I have done some spec stuff and held out for more money. Each time I did, i didnt do as well as when I took the offer I had on the table.

From these expereiences, I have decided that moving forward, I would rather make a quick nickle than a slow dime! There are lots of ways you can take your sizable profit and roll it into other VERY profitable deals.

In short, take the money, be happy, and look for another opportunity. It`s not about buying at the very bottom and selling at the very top. Its ok to leave some profit on the table for others.

Youve done well, congrats! Enjoy it and dont forget to have a little fun with your success!!

 

[markl]

A bird in the hand is worth 2 in the bush.

Just wanted to put up another analogy.

 

[miskog]

QUOTE (markl @ Feb 17 2010, 04:38 PM) A bird in the hand is worth 2 in the bush.

Just wanted to put up another analogy.


Thanks but no money is actually exchangeing hands is all a rollover of the profits to the other four homes

should i consider this deal even on the speculation of the other developments

 

[Pump]

QUOTE (miskog @ Feb 17 2010, 05:14 PM) Thanks but no money is actually exchangeing hands is all a rollover of the profits to the other four homes

should i consider this deal even on the speculation of the other developments

i would find out smoe solid facts about these properties before going on someone`s word. i have a bridge i will sell you... just seems like you dont` have all the facts. great the guy is offering you 4 homes that he says will go up in value... i would think about that before banking on it

 

[miskog]

QUOTE (Pump @ Feb 17 2010, 07:24 PM) i would find out smoe solid facts about these properties before going on someone`s word. i have a bridge i will sell you... just seems like you dont` have all the facts. great the guy is offering you 4 homes that he says will go up in value... i would think about that before banking on it


i would agree. But he the owner of the homes is a builder who is interested in purchasing my investment property. The deal is that he bought some developed land that have 5 homes he sold 1 and now wants to trade these 4 for the 1. He is going to build some nice homes on the land this spring which would increase the value of thsese 4 homes.

it s a rollover of profit which i am not familliar with

i see the value in my property but again if i wait i will not get full price and take a hit on the profit.

 

[invst4profit]

You really have to ask yourself why he hasn`t sold the 4 homes.
Very speculative, extremely risky and not a deal I would likely take unless I knew the market extremely well.
You of course will be taking the risk and time to sell in addition to paying the real estate fees on 4 more properties.

Rather than a "bird in the hand" you are looking at 4 in the bush.

A good deal for him as he does not have anywhere near $345,000 in each home and will be saving all the fees associated with selling.

 

[housedoc]

Why are you selling? What type of property? Where?
Why has he only sold 1 out of 5? After how long? For how much? Are you getting a discount? Are they even finished?
Will you sell them or hold them?
Future value of 400k based on developers assertion that he`s building higher end homes nearby....although he can`t sell the ones already built?
Does this guy have a track record?

Deal highly favours him.
Fails initial smell test.

 

[Pheenix]

Additional questions and concerns;

sounds like there would be a capital gain, but no cash, so how do you pay your taxes?
who covers closing costs?

are these real gains or potential and when are they realized, if and when the homes sell and only if this builder develops other property? can you defer any of it?

will you have costs to dispose of the houses or did I misunderstand and that you could rent them out (easily) and if so is the price justified by the rents? (if so this maybe a good deal - especially if you get some cash for the above items)

what are the carrying costs for the homes and how does that compare to the same expenses on your existing piece? are you leveraged and would you qualify on the homes?

sounds like a slick way for him to get more land to work on, you get the hassle and ownership costs at a higher level. Almost half your projected gain is based on potential upside move on homes - if they go down or side ways where does it put you?

Is your land already properly zoned and serviced or is there a development play here?

Maybe you should look at a joint venture - you put in the land, and current carrying costs, they pay for and do all the leg work to bring it up to development point - roll or sell after that, then split the profits based on some contribution formula. By the way, don`t allow them to put a lien on the property, so if they fail to perform or can`t get it done you still control the land.

Put in some escape clauses if events don`t unfold as planned and give them right of first refusal if you have an opportunity to sell for cash.

Is hanging on to the land your highest and best use of the value?

Just some thoughts.