GOOD DEAL? or BAD DEAL? HELP!!!

[NewInvestorMe]

GOOD DEAL? To those who know Vegas and/or have experience renting investment property.........HELP!!!

• 485 sq ft Studio in apartment turned condo, in community that rents at around 95% occupancy
• built 1983, updated in 2003
• 1/4 mile from Palms Casino
• Sales price 110K, 10% down required
• 11K cashback at closing, if financing is done through preferred lender (covers 10% downpayment)
• Management takes care of all internal repairs
• Current tenant renting at 605/month, on lease through 3/1/08
• Developer offering leaseback of 770/month + no HOA fees or Mgmt fees for 2 years (guaranteed to net profit $90 per month after taxes for 2 years)
• After 2 years, owner receives whatever property rents for, plus is put in a "Shared Rental Pool": a quarterly check of [Going Rent of all comparable studios in community]X[% Occupied in community]-[losses/improvements of the community]. This amount is usually between $300 and $600, after its evenly divided.
• *Reason for incentives is because developer is refunding 10% down payment required and wants to hurry and sell units for a quick turnover. They purchased in mid 2006.*
• Nice landscaping--property does not fall under water ban restrictions so has plenty of green grass.

My goal is to refinance or sell in two years.
What do you think? Sound like a bargain? Ripoff? Should I take it and run? or just run? Please leave details!!!!!

[Dan Connolly]

Cash back at closing is not normally legal. Hence the "preferred lender" (smacks of loan fraud...red flags ripoff alert)

What about this rental pool after two years? Is that what you (or the new owner if you sell) gets? Not in addition to the rent but instead of the rent? If you sell does the new owner have to continue with the rent pool? The problem with these types of deals is that the losses/improvements of the community are not fixed costs so they can take your money and remodel the common areas etc and you would never see any profit.

[Eric Blackwell]

Like Dan, my LoanFraud-ometer went through the roof with the "10k back at closing with use of preferred lender.."

Would the preferred lender's given name be Guido? (grin)

Eric

[Malok]

So, basically 11k down - and if you use the "preferred lender", you get 11k cash back?

Wreaks of potential problems.

I'd be careful and recommend speaking to a "non-preferred lender" to get some guidance.

[NewInvestorMe]

Cash back at closing is not normally legal. Hence the "preferred lender" (smacks of loan fraud...red flags ripoff alert)

What about this rental pool after two years? Is that what you (or the new owner if you sell) gets? Not in addition to the rent but instead of the rent? If you sell does the new owner have to continue with the rent pool? The problem with these types of deals is that the losses/improvements of the community are not fixed costs so they can take your money and remodel the common areas etc and you would never see any profit.

Thanks for the reply...for the first 2 years, I would get $770/month through the leaseback. Following the 2 years, I would receive what the place rents for. (Currently the lease terms are between 6 and 12 months and is currently at 605-615/month) According to the seller/agent and the contract, the shared pool is optional, should I decide to have my unit managed by the management company/rental office. Should I go with the shared pool, my profits would be on top of the monthly rent.

But thats a great point.......well say I went with my own management co........what do you think?

[Wheatworks]

[*]11K cashback at closing, if financing is done through preferred lender (covers 10% downpayment)

This is the kind of thing that attracts the attention of the FBI: FBI.gov: The Rise of Mortgage Fraud

[Dan Connolly]

Have to be clear on the cashback deal. It's not normally legal! Proceed with caution.

I wouldn't touch it with a 10' pole, but tha's just me!

(Not being a lawyer myself, this is not legal advice! I would suggest you consult one!)

[NewInvestorMe]

Great Advice Everyone!!!!!!!

[escapeso]

I would also wonder why the developer is so desperate they are leasing it for 2 years at above market rent.