To Good to Be True, Watch Your Investment Back, Pain or Gain?
What are friends for?
A good friend of mine and a fellow real estate investor recently reached out to me about a different spin on investment real estate. She asked me my opinion on the following guaranteed rental investments. For instance, on the surface, it looks like a great deal and an excellent opportunity.
I sat back and thought of this investment. Above all, I reviewed the details of the opportunity.
The Investment Real Estate Opportunity, Guaranteed Rental Investments
- Immediate Positive Cash Flow Potential
- Completely Hands-Off Investment
The Offer – Registrants VIP Incentives
– 2 Year Lease Guarantee
– 2 Year Free Property Management
– Free Furniture Package
– Extended Deposit Structure
– Assignment Fee Waived
My Financial Investigation
The Investment Real Estate Offer is an investment owner’s dream. However, I needed to drill down a little further.
I asked my friend the following questions:
Do the two-year lease rents cover all costs and give you a little slush fund?
What is the property management fee in two years?
Are you locked into the same property manager for the property after the two-year period? (The reason I ask this question, what if you are not happy with the performance of the property manager)
With the furniture included, is this furniture package conducive to the property? In conclusion, will it attract the tenant profile you would like in two years?
Does the Real Investment Gain or Pain Begin in Two Years?
First, is there any chance of equity growth? Will this property increase in value, or will there be a stampede to sell to get a short-term return on equity in two years when all investors’ two years is up? Above all, what process in place to ensure all owners don’t try to exit at once?
What are the current rents, in addition, any chance of rent increases in two years?
Therefore, can you positive cash flow in two years add in all the costs that are waived?
In conclusion, is there any value left in the furniture package in two years, or do you have to replace it?
Real Estate, Similar Stories
My brother bought a beautiful downtown high-rise condo in a major Canadian city. However, this purchase didn’t have the ending he signed up for.
The development had a significant hotel as the anchor, and the residents were above the hotel floors. He put down a $20,000 deposit; the project never got built after numerous attempts, including digging a hole for the foundation. He had to fight over five years to get his deposit back—no interest earned on deposit over five years.
This is not quite the same situation. However, you need to understand the extended deposit structure of the VIP Incentives listed above.
The opportunity sounds excellent in the short term. Over the first two-year period, you have collected positive cash flow, see equity growth, and pay down your mortgage principal. Therefore, all positive signs of a great incentive.
Is this too good to be true?
Investment After The Honeymoon
What happens in two years is where my head is at? Do your homework; above all, know the marketplace you are buying in. You should know the current values, trace back on history in the area you are purchasing. For instance, what has been happening to values, the rental rates, and costs of operation?
Please watch condo fees, my wife and I are in a new development we love, but the developer has not been selling the development as quickly as he had hoped. He has kept the condo fees low. I have talked to him about raising the condo fees because a reserve fund study needs to be done down the road. His logic is to keep the fees low as he tries to attract more purchases. However, I know a cash call is coming if we don’t move the condo fees up soon; short-term gain for the long term pain.
In my upcoming book, “31 Days to Purchasing and Renting Your First Investment Real Estate Property,” I discuss Team REAL (Real Estate Advisory League). One of the most important members of your Team REAL should be a realtor (third party).
Giving you an honest appraisal of this purchase area can add a good feeling or a word of caution about this opportunity. Therefore, make sure your offer sounds like an opportunity, not an open hole of financial woes.
Your Investment Future
Is investment real estate of interest to you? (Listen to this podcast episode to see if investment real estate is right for you, Entrepreneurship; The True Cornerstone to Small Business. The Investment Real Estate Story
Take a moment to review this concise survey below, and enjoy the result.
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