To Sell Or Not To Sell
Back on May 1 2004 I put 10% ( 48K )down on a pre construction condo , in the new and booming downtown Miami area , selling for 480 K . 4 months later (Sept 1 2004) I put another 10% down ( 48K ). Totally the requird 20%. Last week someone made me an offer of 621K to sell them this contract. The way the deal works is if I decide to sell now ..... I will get back the 96K that I put down ...LESS 4.75% of the new sales price of 621K in the form of real estate commisions, which equals around 30K.....or 66K now... ( Dec 2004 )..... then I must wait for 2 years until the project is built and ready for closing, at which time I will recieve the balance of the money due which will be the difference between what I paid for the contract , which is 480K , and the new sales price of 621K after paying another 3.25% commision ( 8% total commisions and fees back to the developer and sales force) which is another 121K in Dec 2007. (after the new owner closes). All in all by tying up 96K for 7 months and then getting it back and tying up 30K for another 24 months I stand to make a 90K profit. I am tempted to go for this deal right now. I am also reluctant since of all the pre construction condo units I have gotten involved with ,, this particular unit is the most special since it is located in the very best "stack" in the building since I was literally the very first person to get in on this 500 unit project . I was very fortunate to have first pick of the most desireable units in this particular building and I anticipate the end selling prices to be well above the 621K I am being offered right now.
With the cost of cement and materials up 25% and the minimum wages up 20% and the desireability of this great location , I am certain that subsquent comparable projects will push the ultimate selling prices of this particular "stack" up to 750K-800K 4 to 6 months proir to completion. Given the dynamics of the 8% commisions this will mean ,,,@ a sales price of 775K will mean a profit of 233K after tying up 96K for 30 months as opposed to a profit of 90K after tying up 30K for 30 months.
I do have concerns about interest rates going higher and thereby nuetralizing some of the appreciated value over the next 2 years. I just can not decide . (Bird in the Hand .or 2 in the Bush ?? ) One part of me says sell it for a quick profit right now . eliminate risks and the uncertainty of holding onto it for a better price, take the 66K Id get right now and reinvest it , forget about mortgage rates going higher and move on .......... While another part of me says hold onto what seems to be a very well picked and well situated property for maximum returns down the road 2 years. If I ever needed the advise of someone who really understands the dynamics of such things it is now.
I call on the collective wisdom of this group to tell me things I do not know . I would appreciate any advice that you may have on this matter. Thanks DH
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