Short Term Investment

[irf77]

I got an intersting call recently and would appericate your comments

A managment company called me (they are not real estate agent offically), stating that they look into market to find slightly under teh price apartments adn purchasea these, wehre by intially one will only have to make 10% of downpayment and have grance period of 30 days to make balance 90%.

So within 30 days they are able to sell the property at the profit rate so e.g. buy for 350 K, pay only 35 K in start, with in one month sell fro 360 K and on total investment of 35 K you make 10 K profit with in a month.

Not a bad deal but risk is that if u are unable to sell with in month u have to pay balance or else lose ur entier 35 K.

Any comments sugguestions"?

[wayneis]

Sounds like no risk to them all risk to you....I would not be comfortable with this arrangement.

Why not make the offer conditional subject finance within 30 day period with a refundable deposit, that ties the property up if the company are able to off load it make sure it is not conditional, any deposit goes to you not the company.

Few other clauses you could place, but you get the idea, crazy if you commit to a deal that you did not want in the first place and not all property sells like hot cakes any more.

[irf77]

Right you have correctly pointed out all risk is to me, also they seems to be would like to get 50% of the profit, amazing, even if i enter in this arrangment i will not give them more than 10% but will put forward to them the sugguestion that you put foward.

Thanks,k

Has anyone done similar stuff in past?

[Ameer]

Sorry, but this is really stupide. I have never heard of it and would never get into such a scheme. One month to sell...? looks like gambling to me.

[eyeC]

will the management company do it for free ? you need to pay them for buying and selling the property for you and you have to subtract all the costs from the 10,000 DIRHAMs + plus all the going and coming from your part
will not be worth it

[irf77]

Thanks all for feedback, they will basically loke to take 50% of the profit that I make, with ZERO risk to them. !!!!
So I have basically decided that it is not worth the risk, since i do not have balance 90% in hand, so i may end up losing all my money with this game. so time now to collect balance 90% before I can start playing this.

Any other sugguestion options in real estate will be appericate.

Regards, Irfan.

[georgihh]

Here is something more sensible

2006
- 280000 cost studio
- 20000 interest% to the bank
+ 0 rent
2007
- 20000 interest%
+ 35000 rent

2008
- 20000 interest%
+ 40000 rent

2009
- 20000 interest%
+ 40000 rent

2010
- 20000 interest%
+ 40000 rent
2011

+ 500000 net sale

275000.00 total profit for doing nothing

[Don.W]

If you guys want to work out rate of returns, pull out excel and use a function called 'IRR'. It will tell you what rate of return you are getting given your holding period. Just need estimated cash flows from today to when you sell it.

[georgihh]

IC prices are cheap

I have bought a studio 2005 mid for 237000 DHS
At the end I have paid total of 258000 inclusive of all the charges from building owners
Government and agents
OK 260000DHS
With 10% interest per year that’s makes it 300000DHS.
Today if you get net 340000DHS its OK
So 40000DHS profit – not bad but not much
The rent is almost 42000DHS at the moment.
So if I don’t get 420000DHS net I won’t sell.
And even for that price I still get 10% out of the selling price
And this is the only place in Dubai with that much return

Conclusion – The prices for a studio will pass 400000DHS in a very short time.
Do you agree?

[Ameer]

Yes, I do agree with georgihh.

Eventually the reurn on the rental will decrease or stabilize because of capital gain. That is the prices of the appartments in IC will increase further. This I believe has already occured with, for instance, villas in Dubai where (annual rental/sale price) has decreased. The prices in IC are still relatively speaking very low and can only go up.