New Construction Turnkey and 0% down portfolio loan - Is this too good to be true?

[Jamie Stone]

So I'm currently looking at a deal for new construction in Alabama. It is a Turnkey company that specializes in new construction. They are the builder, the listing agent, the title company, and the property managers (they have four companies). However, you are not obligated to use their title company or property manager. 

If you use their title company, they will cover 2% of the purchase price for closing costs, and if you use their property management, they will provide a 12-month builders warranty plus an up to 12-month lease back if they can't find you a tenant.

They are partnered with a credit union offering a portfolio loan with 0% down (interest rate will probably be 8-10%). It is a 10-year term amortized over 30 years.

Essentially instead of putting a chunk of money down, you are negatively cash-flowing for several years while your equity is building. They increase rents by about 5% each year, so at some point, you will stop negatively cash flowing. When rates improve and you have some equity, you can refinance.

The contract seems pretty aggressive, though, and not many ways that you can back out and recover your earnest money deposit.

[Jamie Stone]

@Chris Davidson@Chris Davidson

@Chris Davidson