Mirepresented Cashflow On Recent Purchase
I closed escrow last week on a condo in Mississippi.
I bought this condo for two reasons...
1-It is located in the post Katrina area that the govt. has designated as the "Go Zone"...you get special tax incentives for buying here.
2-The tenants are suppose to be corporate tenants who are rebuilding the area, and they pay 2200.00 per month which would provide 400-500 mo. positive cash flow.
Yesterday I spoke to the property mgmt. co.
They told me that the corporate tenants only rent for days or weeks at a time, and are genarally unreliable as month to month tenants.
The regular, non corporate month to month tenants are paying 800 to 900 per month.
My total outlay will be 1800 mo...I went through this escrow thinking that my income would at provide at least a 400.00 positive, and now I am faced with a 900.00 negative.
I have a copy of the "Figures" that were presented on the agents website showing this cashflow, and a copy of the appraisal showing comparable rents between 1700 and 2045.
I will be calling a RE atty. today.
Has anyone had a similar experience?
What recourse do I have?
Sounds like fraud to me. Fraud vitiates every agreement (letting you off the hook). You could probably sue the real estate agent and his broker (although the broker probably had no direct knowledge). Easier said than done, though. You are doing well to consult a RE attorney.
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For future reference, you should always examine the last three years of tax returns for any income property you buy.
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that sucks. Did they provide lease agreements? Are you sure they presented the income as assured/contract and not a prospective income statement or stabilized income statement?
You really should have done more due diligence. leases, income/expense from them plus their Schedule C on the properties from their income taxes...
Thanks for the replies.
I am currently talking with the lender...he is telling me that I have miscalculated my payment and total outlay per month.
Instead of 1800.00 as I was thinking, it looks more like 1300.00.
I did contact an atty...he said that it could be a scam where the appraiser is in cahoots with the agent, etc.
However, the atty. would not do anything on contingency and it may not be worth it to take on.
I have several emails out to my agent, the broker in MS, etc.
I will report any other information that I get.
And yes...it is unfortunate that when it comes to buying property, you can trust NO ONE.
Wow, your situation sucks, and i dont care that you are out of town. So when the final bill comes in at $1500/mo, you will be stuck a little.
Unfortunately, $900/mo is high for many areas in Mississippi...including Jackson. I have a home in the state and think its going to be difficult to get consistency at that rate...thats why property values are ususally lower.
I hope you take the appropriate person to small claims court. I also hope your appraisal wasnt done factoring $2200/mo numbers for the area.
But Mississippi is a safe area with good people.
I believe you need to talk to the planning and zoning first to see if what the minimum lot size is . It may be possible to buy the props and then split them into 2 seperate entities and thus resell and redefine boundries, driveways and the like.
good luck
If the property is listed as a single property at the courthouse then you will have problems.
You can file all the agreements you like at the court house; but you will be in a world of trouble, regarding IRS, loans, property rights, etc...if you and your friend go on bad terms. Good luck.