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Real Estate Right of Recission

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					                        Pre-Construction Financing Investment


                                                   By Price Morgan



                                               Table of Contents



Introduction—Where to invest? ...........................................................................................2
What is pre-construction financing? ....................................................................................4
What are the current market conditions? .............................................................................6
   The reservation period .....................................................................................................7
   Right of recission .............................................................................................................8
   Hard contract ....................................................................................................................8
   Construction .....................................................................................................................9
   Closing on the unit ...........................................................................................................9
What happens if you change your mind? ...........................................................................11
How do you get started with this investment? ...................................................................12
What does a typical transaction look like? ........................................................................13
Conclusion .........................................................................................................................15
Introduction—Where to invest?

If you are considering investing in real estate, you are following the most reliable
strategy in America for building wealth. And pre-construction financing is the
safest and most reliable way to invest in real estate. It’s also a terrific way to
own a wonderful condo on a beautiful beach.


More millionaires have made their fortunes in real estate than in any other arena,
including the stock market. Robert Kiyosaki, author of the wildly popular “Rich
Dad, Poor Dad” series of books, seminars, and DVDs built the bulk of his wealth
in real estate, as did Donald Trump.


Real estate has also built real wealth for millions of middle-class Americans.
These ordinary people don’t hold multi-billion dollar portfolios like Mr. Trump
does, but you might be amazed at how many seemingly upper middle-class
people hold multi-million dollar portfolios, built from real estate profits.


Ordinary Americans have built substantial wealth by investing in real estate and
you can, too. Why is real estate such an amazing tool for building wealth? Well,
for one thing, the supply is finite—yet the supply of buyers increases each year.
This drives up real estate prices.


The stock market, on the other hand, derives its value from the performance of
companies. New companies are being created every week. Most fail, some
survive. Unless you have time to travel out to a company’s premises, interview
their senior management, and get a feel for how they conduct their business,
you could be buying into the next Enron or Worldcom.
Had you begun investing in 1989 in real estate, odds are you would have seen a
nice, steady rise in the value of your portfolio every single year, since the median
home price in America has gone up each year during that time. The same
cannot be said about the stock market (remember the dot-com crash of 2000?)


But the biggest way in which real estate generates amazing wealth is through
the power of financial leverage. If you’ve got $10,000 to invest, you can buy
$10,000 worth of stock. That means you control $10,000 worth of that stock. If
the stock value increases by 10%, you make $1,000. All fine and well, but…


When you invest in pre-construction financing, you can use that $10,000 to hold
as much as $100,000 in real estate for 12 to 24 months, without any additional
holding costs. If the property value increases by 10%, now you make $10,000.
You have doubled your money. This is a much better scenario.


Better yet, with pre-construction financing, you have the option to take a profit
or keep a desirable condo for yourself. The choice is yours.
What is pre-construction financing?




If you’ve ever toured a brand-new condominium development on a sparkling,
white-sand beach only to be told that they’re all sold, you’ve discovered too late
that condos in gorgeous locations are a hot commodity. Everyone wants to have
a condo in a destination resort location, so those condos sell quickly.


But what if you could get in on the ground floor and invest in those condos
before one single shovelful of ground is broken? And what if you were able to
keep your options open…maybe have several different exit strategies? Better
yet, what if you could make a significant profit?


With pre-construction financing investment, you can do all those things.


Your initial investment is minimal in terms of cash is minimal, and you have two
different opportunities to cash out of the condo. Or, if you decide you want to
retain the condo, you can keep it for your own use or rent it out and reap rental
income.


Pre-construction financing investment offers you multiple exit strategies and two
separate opportunities to cash out of your investment, usually with a healthy
profit.


This lucrative investment vehicle was created by destination resort real estate
developers in order to be able to show banks that they have a viable project for
construction financing.
You could also think of pre-construction financing as a development process that
is used to market destination resort real estate products, namely condos.



Who invests in pre-construction financing? Everyone from the short-
term investor who reserves a unit and flips his investment for a
property 10 months later to the buy-and-hold investor who reserves a
unit, signs a contract, then closes on the property and enjoys its
use.What are the current market conditions?


The market’s track record over the last two decades has been truly outstanding.
Historically, destination resort real estate has appreciated at a rate of about 10-
15% in the last 20 years. Recent yearly appreciations have been even better—
about 25-26% annually.


The supply of beaches is limited, and so is beachfront property. Thus, according
to the law of supply and demand, since supply is restricted, demand is high.
Prices have been rising and will continue to rise as retiring baby boomers
purchase second homes in beautiful destination resorts.


As market values rise, so does the value of your condo. Typically, the time
period from the reservation stage to Certificate of Occupancy (the point at which
you could close on the condo and occupy it) is about 2.5 to 3 years.


If the market appreciates at even the lower figure of 10% per year and you
reserved a $500,000 condo, the market value of your investment might look like
this:


Initial value of condo                     $500,000
After 1 year, at 10% appreciation          $550,000
After 2 years, at 10% appreciation         $605,000
After 3 years, at 10% appreciation         $665,000


Thus, your profit would be $165,000. Better yet, most pre-investment condos
require a down payment of only 10%, with no payments until closing, so your
Return on Investment (ROI) would be $165,000 on $50,000—or 330%.What
are the stages of pre-construction financing investment?



There are several stages of pre-construction financing investment, with
opportunities at each stage. The first step is to reserve your condo with a low
down payment. Later, you will receive a package of condo documents with a 15-
day right of recission. Next, you sign a hard contract. Finally, if you choose, you
close on the property.



The reservation period

Reservation periods typically last six months. During this stage you have the
opportunity to reserve the type of condo you want based on square footage,
floor plan and location within the building. The developer will show you a site
plan and proposed floor plan and you can select the exact unit you want.


At this time, you will down a deposit to reserve your unit. Deposits are typically
10% of the market value of the condo at the time of reservation. Thus, your
deposit will range from $5,500 to $10,000 or $20,000. Most are around
$10,000. Your money is held in an interest-bearing escrow account and you can
get a refund in 2-3 should you decide this investment is not for you.


This payment entitles you to first rights of refusal on the unit you have selected.
That means that you will be offered the unit first, for the price you lock in minus
your deposit. Be aware that unit prices, square footage and floor plans can
change during, but this is rare.
Your deposit is fully refundable during the reservation period. Should you decide
you want your money back, you have the option to receive 100% of your money
back at any time during the reservation period.



Right of recission

The reservation period ends when the developer finalizes the details of the
project and sends you your package of condo documents. You then have—by
law—15 days to review these documents. This is where you will lock in purchase
price, square footage and floor plan.


If you are satisfied with the documents, you can sign them and begin the
process of funding a hard contract on your unit.



Hard contract

Once you decide to move ahead with the purchase of your condo, you will need
to provide a down payment of 20%, but only half of that needs to be cash.


If you like, you can provide a Letter of Credit (LOC) from a third-party letter—
such as a bank—for half of the down payment. An LOC is basically a statement
that you are good for the rest of the money. Most lending institutions will issue
an LOC for a fee of around $500, assuming you have assets in your portfolio
equal to twice the amount of the LOC or more and that you have good credit.


There are no fees or payments to make, since the LOC is not a loan or note. It
is merely the bank’s opinion that you are good for that amount of money.
How does this work? Let’s say you reserve a condo with a purchase price of
$500,000. Your deposit is $10,000, which goes towards your down payment. At
the time you sign the contract, you will need to provide 20% of $500,000, which
is $100,000. Since you’ve already paid $10,000 in the form of a deposit, you will
need only $90,000.


This $90,000 can be in the form of $40,000 in cash and an LOC for $50,000. If
you have assets in your portfolio valued at $100,000 or more, the bank will issue
you an LOC for $50,000.


So you pay $40,000 in cash—in addition to your $10,000 down payment—and
provide an LOC for $50,000.


You now control $500,000 worth of destination resort real estate with a cash
outlay of only $50,000.



Construction

There is nothing for you to do during this phase, which typically lasts 18 to 20
months. You make no payments, pay no takes, and have no ownership hassles.
The unit is being built, and you can wait for completion, or sell your investment
at a healthy profit—the choice is yours.



Closing on the unit

After construction has been completed, the developer will get a Certificate of
Occupancy. At that time, you will be offered the opportunity to do a walk-
through of the condo, complete with punch list, just like you would with any
other property you have built.
The price you pay was locked in when you signed the hard contract, along with
any homeowner’s association dues. Even if the beachfront has become a very
popular area and prices have risen 30-40%, you still pay the locked-in price. It
is not uncommon for an investor to sign a hard contract for a $500,000 condo,
only to watch it become a $700,000 condo by the time closing time rolls around.


Note, too, the tremendous leverage you enjoy: the $500,000 condo is controlled
with a 10% cash down payment of $50,000. If the market value is $700,000 at
closing, that’s a profit of $200,000 on a $50,000 investment—which is 400%.


If the property meets with your approval, you can arrange financing for the 80%
of the purchase price that is due and close on the property. You may then begin
enjoying the property yourself, or have it furnished and start receiving rental
income.




What happens if you change your mind?


If for any reason you decide that pre-construction financing investment and the
opportunity to own a destination resort condo is not for you, you can receive a
100% refund of your deposit at any time during the reservation period. The
refund process typically takes 2-3 days.


When the condo documents arrive, you have the right of recission for 15 days.
This means that you can review the documents and if you do not wish to sign a
hard contract, you can receive a full refund of your deposit.
After you have signed a hard contract and paid a 20% down payment—either
with all cash or with half cash and an LOC—you can flip the property by selling it
to another investor for a nice profit.


Once you close on the property, you own it, so if you change your mind you can
either sell it for a profit or rent it out and receive income.
How do you get started with this investment?

Pre-construction financing investment is a very hot segment of the real estate
market and condos in destination resort areas are going fast. To have the best
chance to reserve the unit of your choice, call the industry specialists at Price
Morgan today at 1-888-251-0850 or email them at info@pricemorgan.com to
reserve your unit now.
What does a typical transaction look like?


Mark Pierce sees an attractive brochure for Vue Crescente in Biloxi Mississippi,
located in the back Biloxi Bay area. This project is part of the historic rebuilding
of the Gulf Coast, and it will set the standard for luxury condos in the area with a
statuesque 30-story building with abundant amenities.


After reviewing floor plans, Mark selects unit 10G, which features a 1,400 square
foot 2-bedroom, 2-bath floor plan that faces the bayfront. Mark puts down a
$10,000 deposit.


Four months later, Mark’s condo documents arrive. He already has an offer from
a fellow investor to purchase the rights to the condo for $12,000, but Mark
decides to hold. After reviewing the documents, he signs a hard contract to
purchase the unit for $500,000.


Mark puts down $40,000 in cash and gets an LOC for $50,000. Adding in his
$10,000 deposit, he’s now put down $100,000 on a $500,000 condo…at today’s
market values.


Fast-forward to two years later. The condo is now worth $700,000. Two other
investors have made offers to Mark—one for $700,000 and one for $720,000.
But Mark’s wife has fallen in love with the condo and wants to use it as a
vacation spot.


The Certificate of Occupancy is issued. Mark arranges for $400,000 in financing
and closes on buying the condo.
A year later, Mark receives an offer of $800,000 for the condo he paid $500,000
for and he sells for a 60% profit. He takes his $300,000 profits and puts
deposits down on 10 new pre-construction condo units and pockets the rest.


Mark is sold on the value of pre-construction financing.
Conclusion

Pre-construction financing investment is the darling of real estate investors
worldwide because it offers high financial leverage, zero holding costs, and the
opportunity to get in on the ground floor of some of the world’s most beautiful
vacation properties.


Unlike most property ownership strategies, you pay no debt service, no taxes,
and no insurance for 18 to 20 months while your unit is constructed.


You have multiple exit strategies and as far as profits are concerned, time is your
friend. For a low deposit of $10,000 and a down payment of 10% cash, you
could reap rich rewards or own your very own piece of paradise.


Make the smart choice and call Price Morgan today at 1-888-251-0850 to
purchase a piece of paradise.

				
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Description: This is an example of real estate right of recission. This document is useful in conducting real estate right of recission.
Mary Jean Menintigar Mary Jean Menintigar
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