What are your thoughts on Condo Conversions?

[Paul Cordero]

I would like to get some feedback on this investment pitch that was given to me a few days ago. A developer has done a condo conversion in a very prestigous area of Phoenix. They didn't skimp on these converstions, every unit is highly upgraded with granite, tile, berber, crown molding, stainless, etc. Comming from a lending background, I have tried to find flaws with this investment but it seems really solid. The only flaw that I can find is potential resaleability, but for someone who is looking to keep these properties for many years, the investments seems failproof, plus the area they are in is top notch.

Give me your thoughts on weather or not you would do something like this.

• Strong Rental Market!
• Area Vacancy Rate of 2.9%!!!
• Waiting List for Renters!
• Rents are increasing 10%-12% per Year!
• 130,000+ New Residents Annually!
• Growing Economy!!!
• Growing Job Market!!!
• Stable Appreciation!!!
• Guaranteed Rents for 1 Year!
• HOA Dues Paid for 1 Year!
• Taxes Paid for 1 Year!
• Home Warranty Paid for 1 Year!
• Seller Pays Closing Costs!!!
• Positive Monthly Cash Flow of $100 plus!!!
• INSTANT EQUITY POSITIONS Up To 30%
*All Investors Must Meet Three Requirements:

1. 640 Mid FICO or Better

2. Verifiable Liquid Assets of $20,000

3. W2/Self Employment Verification

Comparison:
Traditional Property @ $250,000

*10% Down Payment = $25,000
*2.5 to 3% Closing Costs = $7,500
*HOA, Taxes, Expenses = Add $$$
*(NOO) Investor Loan Rate: 7.25%+PMI

Minimum Investment Cost = $32,500+

*Equity Position: $0.00
Total Cost = min. of $32,500.00

Wholesale Condo Conversion @ $250,000 ea.

*100% Financing = Down Payment = 0$
*Closing Costs = Paid by Builder! = 0$
*HOA, Taxes, Expenses = Paid 1styr = 0$
*Investor Loan (Stated) 5.25%!!!

*“Wholesale Fee”: ONLY $5,000

*Equity Position: $50,000+!!! (values have been verified by local appraisers)
*Total Property Cost = $5,000!!!
• 6 Wholesale Properties
with Instant Equity would cost the same as (1) property
with NO Instant Equity and NO Cash Flow...

• Leverage your $$$ into (6) Wholesale Properties @ $250,000 equals $1,500,000 in “Wholesale” Property! Now, add the
Instant Equity: (6) X $50,000 (Min.) = $300,000 in Equity!!!
Now, add the Positive Cash Flow: (6) X (est.) $100 monthly
X 12 Months = $7,200 Positive Cash Flow (Pre-Tax)!!!

Now, calculate Tax Savings: Depreciation over 27.5 Years on $250,000 X (6) properties = $54,000 (est.) Reduction to your Adjusted Gross Income!
NOTE: Real Property with 7% annual appreciation will double in value in 10 Years. (Nat. Avg. since 1968 is 6.34%)

*Property Value: $1,500,000 plus $300,000 equity = $1,800,000 FMV

*Appreciation: Your $1,800,000 portfolio will DOUBLE in VALUE
in 10 years with 7% Annual Appreciation making your portfolio worth $3,600,000!!!

*NET WORTH INCREASE: more than TWO MILLION DOLLARS in 10years!!