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Real Estate Investment Clubs: From The Developer’s Perspective

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Title: Real Estate Investment Clubs: From The Developer’s Perspective Word Count: 841 Author: Chris Anderson Email: chris@yourproductteam.com Article URL: www.submityourarticle.com/articles/easypublish.php?art_id=4615

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Do you want a discount on every real estate investment that you make? Do you want to always get in on the inside track for preconstruction projects? Do you always want to get called first by the developer about their latest, can’t miss project?

If you are a truly serious real estate investor, then the answer is a no-brainer. If you answered no to any of those questions and you think you are serious about your real estate investments, you may need to hang up your investor’s hat and go back to earning 2% in bank CD’s! All kidding aside, every investor would like to get a discount, be on the inside track for preconstruction, and always get called first.

So, how does an investor accomplish this feat? Simple. Become an asset to the developer when they NEED you!

Last week, we introduced the concept of working in a real estate investment club (or group) and the power of Get ‘er done. Quite simply, if a developer or broker knows that your real estate investment club can HELP them, then they frequently will think of you first.

To understand the importance of a real estate investment club, relative to an individual investor, let’s consider 3 scenarios for a developer.

Scenario 1: Developer A is offering a 300 unit, high end condo for sale in preconstruction. Average unit price is $400,000 resulting in a total of $120 Million if completely sold out. Early on, the developer needs to accomplish two goals: generate enough pre-sales (maybe 50% of the project) to obtain construction financing and to generate a large number of sales rapidly to produce good publicity, buzz in the marketplace, and initial sales momentum. Remember that for an individual buyer, you are only 0.33% (that’s 1/3rd of 1%) of the total project so will not be in a strong bargaining position as an individual going in on your own.

Scenario 2: Developer B has sold 80% of a project already sold, but now the sales are starting to slow down. In the mean time, this developer has additional projects that they need to get started. For the developer, this requires tremendous amounts of capital that is still tied up in their previous project. For real estate investment clubs, the developer may decide it is much better to discount the current project, for a quick sale to the group, so they can move to their next project immediately.

Scenario 3: Developer C acquires an existing, 200 unit apartment building for a condo conversion. They pay $100,000 per unit and finance 70% of the purchase at 8%; i.e., they now have $17,000,000 in debt that has an interest only payment of $113,000 per month! In this case, the developer has to make a decision if it is better to hold out for top dollar or instead, work with real estate investment clubs to rapidly pay down their debt. Once they have sold some preset percentage, the developer can then open up to the general public at higher prices through planned phased pricing.

Now it is time to switch hats. Putting yourself into the shoes of these developers, now ask yourself what will happen if a single investor, approached you for special terms. While I am sure that you would be impressed (if you let the individual through the door), in reality there is nothing that an individual investor can offer you that would significantly impact their business. None the less, we still see this happening and always with the same result.

Now that you get that picture, let’s look at that situation but with a real estate investment club. A person for the group can meet with the developer or appropriate representatives and see if a good situation can be made for BOTH the developer and the real estate investment club. If so, then the developer can literally sell 10-100 units in the SAME TIME as it would take to sell you on a single unit. This power in numbers as it pertains to real estate investment clubs and groups is true and tested; GetPreConstructionDeals.com is a prime example of where this principle continues to work for the members of our group!

When working with real estate investment clubs, developers typically have 4 primary concerns: 1. How much property can be purchased and how fast; 2. What special concessions will they have to provide; 3. How will a group of investors impact the reputation of the developer and project; and 4. How confident are they that the real estate investment club will actually go to close.

If these issues can be addressed in a way that is beneficial to both developer and real estate investment club, then you have a great opportunity to participate in a tremendous investment.

About the Author:

Dr. Chris Anderson is the founder of www.GetPreconstructionDeals.com and is referenced in many venues including the New York Times and USA Today. Get his weekly, thought provoking articles by signing up today!

Next week, we will extend this concept to really understand what has to be done (in advance) by a real estate investment club and how GetPreconstructionDeals.com can help to facilitate these activities.

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