Pre-Construction/Double Closing
I will be getting into REI but am doing quite a bit of due diligence before doing so.
One of the questions I have is when I do find my first pre-construction deal and set up a double closing, do I need to qualify for a mortgage before close or, because there is a double close and my buyers will be funding my purchase, this may not be needed?
The biggest thing here is to make sure the buyer has a lender that can handle non-seasoned purchases if yuo are doing a double-close, are you doing this instead of assigning to hide your fee?
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The similtanious close in florida? Can you do this to get around a no assignment clause by the builder?
Thanks in advance,
Bentley
The similtanious close in florida? Can you do this to get around a no assignment clause by the builder?
Yes similtanious close is different than an assignment and better becuase you still keep controll of your property and your agreement with the deceloper/builder. Just becarefull and make sure your buyer is going to show up to closing. Cash or letter of credit held in escrow is what i use. To the first poster, it is always good to be ready to close on your deal, ive seen cases where investors will walk away from large amounts of deposits(cash or letters of credit held in escow) for al kind of reasons.
It is always a good idea to get more cash or letter of credit than you put up too.
<<Yes similtanious close is different than an assignment and better becuase you still keep controll of your property >>
How do you actually do this? How do you legally get the deed to go into your buyers name and not close on the property first when the builder you are in contract with has you contracted with a no assignment clause? Thanks for sharing!
Thanks Ray,
do you know of an investot friendly tile company or person I could get in touch with?
Thanks again
Ray and/or any other helpful members... I am also looking at this form of investment as I presently have a reservation deposit for a condo in Myrtle Beach. As a newbie I am unfamiliar with the terminology of the words you all are using such as "no assignment clause" and "seasoning requirement".
From what I understand, if I decide to sell this unit to another party before final contract, this is called "flipping"? How would I do this without having the new party that is purchasing realize what I had originally paid for the unit and the potential large profit I am making from it? It seems to me that if we are doing a double closing they would be paying the developer the amount I owed and then paying me the difference?
Please tell me if I have summed up the following process correctly and in the right order? 1. I put down a reservation deposit (in my case 2k) on the front end and later when construction is started a percentage of the purchase price (in my case 10%) to the developer. 2. Between the beginning construction of the unit and completion, I try and find a purchaser willing to pay the now inflated price of which these units have risen to. 3. Once a buyer is found I require them to give me a cash deposit (should this be equal or greater than my 2k + 10% deposit?) or a deposit in the form of a letter of credit and I then have them sign a reservation agreement similar to the one I signed with the developer, or else hire a title company to do this for us? 4. At final closing date we three parties (the developer, myself and the new purchaser) meet to exchange paperwork and money. 5. I pay Uncle Sam his share of the profit as a capital gain and start the process over again.
I am also curious how the financing on this would work if it was needed. If the party backed out of the deal at the last minute I realize I would then be required to carry through this transaction with the developer. How could I have financing in place as a backup in case a scenario like this played out? Thank you.
How do you have a closing date without a contract? Or is the 26th a "hope I close" date.
Are we talking about wholesaling here?
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Sorry guys,
I have had the proeprty under contract since March 26th. I have a 30 day escrow period, I have been trying to find a buyer or other investor to wholesale/flip to, but to no luck. Like I mentioned before, this is very discouraging on my first deal, any ideas?
Thanks,
Brad
PS - Sorry about not explaining myself thoroughly before. I appreciate all the advise from all you experienced people out there in "investor land"!!
what kind of marketing have you done?
sexton81,
Glad to meet you.
First I think you should tell us what the deal looks like, until then all anyone would be doing is guessing.
Need some hard figures to see what is going on, then you will get some advice.
John $Cash$ Locke
Good Morning,
The deal is a mutli-family unit, 100% occupancy, under contract for 68,700, fmv = 110,000.
All utilities paid by tenants, all tenants have been there on average two years. I have been trying to market it for 95,000, since the return will yield an extra 400 - 500/month cash flow.
I thought that this would have been a good deal, but maybe I was wrong. I have been marketing in the local papers, but as I said before, no takers. What have I been doing wrong? I guess I should just chalk this up to being a learning experience! (lol)
Thanks in advance,
Brad
How many units? What are the rents?
How did you arrive at the FMV figure?
What is the breakdown on the expenses?
What is the NOI before debt?
How many prospective investors have you talked to about the deal? What have they told you?
[ Edited by commercialking on Date 04/12/2005 ]
Brad,
From what I see your marketing is what is lacking, I see your area is rather small and Columbus is one of the closest cities I see where there are any numbers to draw from.
What type of marketing have you done? If I were marketing this property I would be looking at Columbus for my major thrust, with the right ad, I see no problem in moving this property when you reach out in an area with a larger population base, always "numbers" when advertising.
John $Cash$ Locke
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Hell, I would even assign the contract, just to get the first deal under my belt! (lol)
Anyway, thanks guys for all your help and advise. I know that eventually rei will lead to a wonderful life for me and my family, I will have to continue to work at it.
Thanks again for all your expertise, and I look forward to a good relationship with all on this site.
Brad
Have you thought about holding onto this property for a while? It seems like you will have a pretty solid cash flow since you got it at a bargain if your FMV is accurate and the condition is as good as you say. Keeping it and getting the price you want seems to be a better idea than just selling it to get rid of the property.
The only way to flip a REO is to do a double close but make sure there is enough $$$ in the deal first.
HTH
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Scott,
Yes it can be done. If you find a deal and do not have all the appropriate cash to take down such a deal then you could finance it through a Hard Money Lender(HML) who will charge points.
Try visiting your local REI club in Dallas, we have three of them here.
1. www.aireo.com
2. www.dfwrein.com
3. www.aireo.org (not the same as above club)
HTH
Good Luck!
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Nancy,
Thank you for the info. May I have a copy?
Thanks
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I think this would be really helpful. Do you mind sharing the document?
**Please See My Profile**
If you want I can post it on my website and from there we can put a link and everybody can download or you can send by atachment to email
hope this help you
Nancy
Also, I am wondering if you are using formulas with the MAO result ?
the formula about the ARV X .65 - c/c/costs - etc, etc = mao ?
or you are using other formulas also to analize everything ?
nancy, good, I will take a look on it and I will let you know
thanks
Lisa,
I am in the military and it is very common for us to do closings this way. I did a mail away closing when I moved from California to Louisiana. My real estate agent (through the brokerage) found a title company in California that could handle the deal. All I had to do was show up at the title company, sign the paperwork, pay the closing costs and they expressed the paperwork back. I moved in 2 weeks later. Very simple process. Just make sure that everyone knows what is going on.
My cousin and his wife were told that they now are required to go to the closing in person - after overnighting the closing docs back to the title company. Could this be because of simple errors like missing signatures? It just seems like a waste of time now since the closing procedure was done remotely and now they have to travel to the closing after all. Could the seller change his mind about the closing process?
Thanks for helping to understand this!
Lisa