Deal or No Deal?

Here's a question that a reader posted the other day followed by my response.  After reading their question, try to come up with your own thoughts before reading my response and determine how you would have handled this situation.

Dear Scott,
There is a property that I am really interested in. I would like to take action to put it under contract. This will be my first deal.
How do you go about purchasing Multiple Properties?
example: This is a 5 House Package ( 5 Houses can be purchased for $8K)If I buy them all,I can get a bonus of a $245,000 uptown condo for $204,000. These condos are still under construction and the option was bought for $10,000. The five house package buyer gets this $51,000 value equity pack for free! Also, this is a "wholesale/assignment" deal that requires all cash. I would be dealing with another investor.

Now, this truly appears to me to be an exceptional deal! Nevertheless, I need to do my due diligence; I also need a private lender to secure funding for this deal; in addition, I need to structure this deal with an "exit strategy"

Scott, what real estate strategy (ies) would you recommend that would help me get this property under contract?
An immediate response would be greatly appreciated.

P.S.
Any suggestions for finding reputable private money lenders or hard money lenders?

Ira,

Warning bells are going off in my head reading this. 5 houses for $8k??? If and only if you buy a condo for $204,000??? And I don't know where you picked up the term "$51,000 value equity pack" but that sounds like a salesperson if ever I've heard one.

First of all, I would not be buying anything off-plan at the moment.  With house prices decreasing you do not want to be paying for something that you will not have access to for some months. Buying off-plan works best in hot markets as it is really based on the "greater fool" theory. And it sounds like someone is trying to off-load this condo by throwing in some (not so great) bonuses. I don't have enough information to make a good decision on this but it SOUNDS as though the 5 house deal might be a swampland kind of deal. I could be completely wrong – I'm just telling you what my instincts are saying with the information you've provided.

If you feel in your gut that what I'm saying is probably right, just dump it and move on. If you feel that I'm wrong and this really is a good deal, the number one thing you need to do is a financial analysis with REALISTIC numbers. Make sure that the condo is and will be worth what you say it's worth. Think about who gave you that value, by the way.  And always verify your numbers!!!

As far as your questions about finding the money go, please check out these posts:
http://www.investing-secrets.com/no-money-down/
http://www.investing-secrets.com/hard-money-loans/

Closing Thoughts

Especially as new investors we want to believe we have found the deal of the century; the one that will make us rich.  I can't tell you how many times I found it.  The problem is, that creates hype in our own minds and we start to act on emotion and make bad decisions.  Realize that good deals are not all that hard to find (or create) and always give yourself permission to walk away.  It's better to miss a fantastic deal or two and still have the means to continue investing than to act rashly and end up in financial ruin.

As you mature as an investor you will realize it's much more a game of steady progress rather than finding these strike-it-rich kind of deals and you'll be much more able to keep your emotions in check and act with clear-headed confidence.  And always act based on a financial analysis using verifiable numbers; never on a hunch.

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