I need advice on a new built property that i paid down payment on

[Ramez Qubain]

Hi Bigger Pockets, i need your advice on this off plans property that i already put a down payment on.

Background information. last year i joined BiggerPockets premium with the intent to invest in real estate no matter what. i am currently living overseas (US Citizen) and given the pandemic it was not easy to find a distressed property which i can flip or fix and then rent out. however i came across an alternative option which offers both some kind of safety in terms of the property's condition and the risk associated of buying remotely and incurring lots of hidden problems while at the same time getting some upside on the deal . 

so i found a developer in NC who is willing to sell me at a discount for a property that will be finished next December, i.e. 8 months from the now. the property information is as follows

City: Durham

Development: 25 Townhomes, 5 buildings and 5 townhomes in each building. there are end units and middle units.

Property Type: Middle unit Townhome

Size: 2,600 SQF, 3 ensuite bedrooms, 3.5 bathrooms, 1.5 garage

Listed Price: 529k

Handover Date: December 2021

Down payment to hold the townhouse and price paid to the developer: 5%, i.e. 26.5K

The development is different than anything in that area in terms of design and quality and they have already sold (under contract) 15 out of the 25 units. 10 units will be delivered this May. 

I opted for the last units because it would buy me time for appreciation (the market there is very hot, very limited supply) and to come up with the rest of the down payment should i decide to close. 

These are my options

1- Cancel the purchase before the closing and get 50% profit, i.e. the difference between the purchase price of 530k and the market value at the time, i.e. the developer is nice enough not only to give me back my down payment but to also to share the appreciation

2- Close on the house and then sell right away at the new market value and keep 100% of the appreciation minus the closing costs and capital gains taxes

3- close on the house and rent it out with a zero positive or negative cash flow. i did the rental calculation. then sell anytime in the future. either two years later to avoid capital gains tax or before when i feel is the right time to exit.

so my question is two fold. what do you think of this deal (let me know if you need more information) and which option would you opt for?

[Account Closed]

If I were you, I would go for option 2 (this depends on your investment goals). I am an investor/agent who has worked in high appreciation markets with little cashflow (San Diego, CA) and currently in a middle-of-the-road market regarding cash flow and appreciation (Charlotte, NC). I would cash out on the property as the current market conditions have short days on market, and almost all the properties are getting list price or above with multiple offers. You will be selling in a slower part of the year, but considering you are overseas and only paying 26.5k to get the property, this would be a great entry point with lower work on your end while you get more local market knowledge.

I would leverage that into two properties with a goal of another appreciation play that pays it bills and a cashflow deal to help you with anything that might come up (it’s a bummer when a repair wipes your income from the appreciation play for the rest of the year) So the cashflow deal should help cover any minor repairs instead of coming out of pocket.

My current play is three flips a month, with one being kept for cashflow or an STR geared towards appreciation as I have found that is the best way to break above even in desirable/competitive markets.

I am interested to hear what others think!