Luxury condo pre-con deal in Florida

Team -

Some of you know that I purchased a pre-construction condo near Miami/Ft Lauderdale last year. It was a typical speculation play, put down 20%, hope the thing goes up in value, sell the contract to someone else before closing, take your profit and run.

It is in a beautiful, high end development, right on the beach. But with the condo glut there, I was not able to move it at the high price I originally wanted. About a month ago, I got a notice in the mail that my closing was scheduled for September 14th.

I had put down 73K. Upon closing I owed the developer 292K more, for a total of 365K + a "developer fee" of 7K.

I scrambled to sell the contract, lowering the price by 10 or 15K on a weekly basis. No buyers, and those who were buying were vultures, waiting for a "squeeze play" during the last week before closing, to buy at or below my cost.

Making it even harder was the fact that no one (including me!) was allowed inside the unit to look at it..as I had not closed, I was not an owner, and could not go inside it.

I was using a broker, at 6% fee. So I had to find an end user who would pay around $400K for a one bedroom without seeing the place! Nearly impossible! They would rather just buy from someone who had already closed, so they could go inside, see the layout in person, the view, etc. And the "investors" and flippers had no interest.

My other option was to come up with 300K via a mortgage, close on the unit and keep trying to sell. But to close meant that between the developer fee, mortgage costs and all the other fees, I was going to be into this place for north of 380K.

This was a horrible option, for several reasons:

1) I would then need to sell it for 390-400K or so just to break even, WITHOUT using a broker

2) Using a broker to sell, I would need to sell it for something like $425K - just to break even.

3) Between taxes, insurance, condo fees, and my loan payments, I was going to be losing close to $3000 per month.

4) I couldn't rent it easily, with the huge inventory, for more than $1500-2000K per month. AND I would have to install floors and do at least some decorating work.

I decided to not close, and just sell the contract for whatever I could get. If I could sell it for 73K, I would break even. At 40K - I would lose 33K, etc. Given the lack of offers, and a short window of time until sep 14th I had to seriously consider the fact that I might lose the entire 73 grand.

I ruined my vacation in Florida by working this deal every day, looking for a buyer. I fired my broker, and started advertising it as a desperate seller. Which I was.

I decided I would not come back to NYC until I had solved this problem. Marketing it this way, I drummed up a lot of interest and talked to many potential buyers who were hungry to take advantage of some one else's misery, and pick up a deal.

Finally, after not being able to sleep for several weeks, I reached an agreement with a buyer to take over the contract at the original price that I paid. We closed the deal, I signed the contract over to them, and walked away clean.

All in all, I lost a $912 fee paid to developer to assign the contract, plus 15 months worth of opportunity cost on the capital.

But I was jumping up and down I was so happy.

Remember the old saying - the most important thing is the return OF your capital, not the return ON it.

I felt lucky to have been in that speculation game and gotten out alive. Every other one of my deals I add value to the property by changing it or building on it or rehabbing it. To "buy, hold, and pray" is not the way to go for me.

good luck,

Joseph Patton

Luxury condo pre-con deal in Florida - Part Two

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Luxury condo pre-con deal in Florida - Part Two
by: Joseph Patton Location: Hallandale Beach, FL Date: 2005-2006		Classification: Failure Views: 1595 Votes: 1 Rating: