Pre Construction Condo Reality
I have 750K cash in the bank. And zero (0) income (retired) I am looking ( for investment purposes ) at a very upscale condo being offered for 2M with 20% down. (400K down) Closing to take place in early 2007. It will surely be built and most surely appreciate in value at least 40% by then ,given the primest of locations in which it is located etc. ( preconstruction prices have started at 1.25M for the least expensive units all the way up to well over 15M for the penthouses. I was figuring on a "double closing" in 2007 with someone who will be willing to pay the 2.8-3M or so which this property will certainly be worth and going for by then . (all 180 units were "sold out" withing a few months of being offered, ( no hype , fact ) ( I realize that all deals dont apreciate this much but please assume that it will for the purposes of my question) Knowing how ruthless and shrewd the potential buyers are surely going to be, combined with the fact that any realtor will soon be able to figure out that although I am a guy who has 400K to put down ,there is no way I could ever be able to actually close on ,much less live there with what will amount to conservatively 20K per month P.I.T.I. and condo fees. With this in mind as tempted as I am to "go for it" and rake in the big bucks in 2007, I have a gut feeling that the potential buyers will find out that I am tettering on the brink of default and take full advantage of this when making an offer as the clock is ticking its way to my contractural closing date and any offer I will recieve (under these circumstances) will be right around at the 2M I paid for it or even lower depending on the "killer instincts" of these multi millionaire buyers. I would hate to be "snookered" into this scenario but feel that it is inevitable. Is there any way at all that someone in my situation could actually pull a deal like this off ? I am envisioning my being forced to sell it off at a miserable 1.8 less another 108K for the standard 6% commision of the sale leaving me to "salvage " a mere 25 % of my initial investment 400K at the end of 3 years of stary eyed speculation ! ( me considering myself feeling LUCKY to at least have 25% rather than total forfeiture of my 400K. !! I have made out well on other pre construction deals in the 200K-400K range but have a feeling this may turn into a monster . Can anyone advise me on this ? Again , my question is based on the assumtion that this place will in fact appreciate 40% plus as everyone seems to be in total agreement that it will. And the precieved dilema I may face if it does so. Is there any strategy I can employ to protect against this turning into a bust instead of a boom ? It is almost like I not only will have to come up with 400K after finding this realtively unpublicized opportunity but will also have to pretend to be wealthy to avoid being taken advantage of ! What do you think ? Thank you for listening . 
Doesn't sound like the right kinda deal for you. Too many eggs in one basket. Retirement money at that...
And 3 years of lying awake at night worrying just may not be worth it.
I suspect that within your comfortzone of 200 to 400K you should be able to pick up other properties that have a more comfortable horizon.
You don't seem comfortable with this; your exit-scenario is not formulated and therefor it has become (yes, here comes that ugly word) speculation.
I'm not expressing an opinion of the property here; I just don't think that this opportunity fits you.
Wish you all the best in making your final decision.
[addsig]
Dear Newbie Investor.
Lets see, $750,000 in the bank, no income and you are retired. May I ask if you had help in planning your retirement. If so you are entitled to shoot him. No thats too easy maybe keelhauling would be more in keeping. Ah the rasp of rusty chain in the early morning.
No, do not do this deal, it is too far out in space and time 2007, my god the way we are going the Treasury of the US is going to have no credit, their only asset will be a slightly burnt out printing press. The Euro will be the leading currency in the world. The Bushes will be writing books on how to take down a country in four easy years and throwing in the CD on How to Grow Hemp as your new home business. I mean this kind of planning advice sounds like the side line activity of the guy who is trying to rent summer homes in downtown Baghdad and specializing in the Sunni area.
You must play a shorter game. You are going to have to roll that $750,000 on a lot smaller wheel. Forget the retirement you dear Sir are going back to work. Oh I do not mean sit at a desk and have meetings and decide policy. You my friend are going to have to go out and start learning the other aspects of short string investing. Hardly any risk a 10% return and as the risk increases up to 15% and stop there. Always backed by Mortgages and Trust Deeds. Get that rolling, your feet are wet and then start to look around for deals in which you can be the principal. A little buy and sell, a little buy, fixup sell, etc. etc. You my friend are about to start a whole new life. Probably a lot more fun then the last one but you are going to have to become but active.
After awhile you will like it. Might as well put all that life experience to work.
As you run into things post us. We will all help you. Besides I like to talk to rich people. So go get rich. Lucius