- Joined
- Jan 10, 2008
- Messages
- 1,033
I`d like to share a small success with you. Thanks to the REIN organization and expert advice, my wife and I just closed on a three year pre-build condo deal.
For my portfolio, it was not the best idea to buy this property, but it was already too late as I had done it before joining REIN and building my team.
All of the caveats that go along with buying pre-build happened:
Extended build times, pre-occupancy payments, had to wait for building registration, countless other people invested in the same idea etc...When we finally get word we can close I looked at selling to make that initial `flip` we initially wanted. No go. At least 51 other `investors` thought the same thing and I was up against all this competition.
Not only that, but with the market downturn the builder still has 10 units for sale at the same price we paid three years ago. Not good. I sell, we will make nothing. In fact we will lose money with legal and realtor fees.
So I turn my attention to renting - I had analyzed this many times before in case I did have to go this route. I could make this cash flow at $1700 - $1800 rent. It`s possible with the location of the condo - or so I thought.
Upon more research, I see that the other `investors` have set the market price. I guess some don`t worry about putting in a few hundred dollars a month because "it will eventually go up". Non-sophisticated investors I`m thinking. So from $1700, I now have to make $1550 as top rent work. Believe it or not, with even low interest rates and already 60k pumped into the investment, IT WILL NOT CASH FLOW at that rent.
Now I begin to panic a bit while learning another hard lesson but I also know there is a solution.
What did I do?
I approached one of my waiting JV partners who wanted a `fixed rate` of return instead of the traditional JV split. This allowed me to borrow $100,000 at interest only payments while using another $100,000 from my LOC. I closed in `cash` basically and have now interest only payments which give me a superior cash flow at the end of the day.
I have also `stress tested` this property with higher interest rates and even if I continue paying interest only for 5 years, the condo on sale will net about $130k with only 3 % appreciation.
This in my mind was the only possible solution to make this cash flow while creating a win/win/win for everyone (tenant included).
I had the unit tenanted before it actually closed and even dropped my $1600 asking price to the `market level` of $1500 to get the tenant I wanted. (Long term professionaly woman - score over 750 with fantastic income)
This was only possible with having my JV lined up and ready to go, our "B-Plan" LOC money available and the great knowledge I learn every day from this forum, REIN members and more importantly my team.
A very special thank you goes to Peter Kinch who told me "In 18 months, you will be a different person than you are today" Those words carry me forward every day and he was dead on with that timing as now the JVs are beginning to happen. Peter ,Bonnie, Peggy and Rebecca have all been extremely important to setting up my funding.
The crew at Dube and Associates are nothing but the best - if you have not picked up the 81 Financial Tips book yet, it is one for your library.
Thank you everyone!!!! I could go on and on mentioning names...you all know who you are.
For my portfolio, it was not the best idea to buy this property, but it was already too late as I had done it before joining REIN and building my team.
All of the caveats that go along with buying pre-build happened:
Extended build times, pre-occupancy payments, had to wait for building registration, countless other people invested in the same idea etc...When we finally get word we can close I looked at selling to make that initial `flip` we initially wanted. No go. At least 51 other `investors` thought the same thing and I was up against all this competition.
Not only that, but with the market downturn the builder still has 10 units for sale at the same price we paid three years ago. Not good. I sell, we will make nothing. In fact we will lose money with legal and realtor fees.
So I turn my attention to renting - I had analyzed this many times before in case I did have to go this route. I could make this cash flow at $1700 - $1800 rent. It`s possible with the location of the condo - or so I thought.
Upon more research, I see that the other `investors` have set the market price. I guess some don`t worry about putting in a few hundred dollars a month because "it will eventually go up". Non-sophisticated investors I`m thinking. So from $1700, I now have to make $1550 as top rent work. Believe it or not, with even low interest rates and already 60k pumped into the investment, IT WILL NOT CASH FLOW at that rent.
Now I begin to panic a bit while learning another hard lesson but I also know there is a solution.
What did I do?
I approached one of my waiting JV partners who wanted a `fixed rate` of return instead of the traditional JV split. This allowed me to borrow $100,000 at interest only payments while using another $100,000 from my LOC. I closed in `cash` basically and have now interest only payments which give me a superior cash flow at the end of the day.
I have also `stress tested` this property with higher interest rates and even if I continue paying interest only for 5 years, the condo on sale will net about $130k with only 3 % appreciation.
This in my mind was the only possible solution to make this cash flow while creating a win/win/win for everyone (tenant included).
I had the unit tenanted before it actually closed and even dropped my $1600 asking price to the `market level` of $1500 to get the tenant I wanted. (Long term professionaly woman - score over 750 with fantastic income)
This was only possible with having my JV lined up and ready to go, our "B-Plan" LOC money available and the great knowledge I learn every day from this forum, REIN members and more importantly my team.
A very special thank you goes to Peter Kinch who told me "In 18 months, you will be a different person than you are today" Those words carry me forward every day and he was dead on with that timing as now the JVs are beginning to happen. Peter ,Bonnie, Peggy and Rebecca have all been extremely important to setting up my funding.
The crew at Dube and Associates are nothing but the best - if you have not picked up the 81 Financial Tips book yet, it is one for your library.
Thank you everyone!!!! I could go on and on mentioning names...you all know who you are.
