prosper-inc’s posterous

My first potential deal was for a pre-foreclosure property that could easily sell for $247,500 in good shape according to comps for that community.  My first offer was for $200,000 with $5000 towards closing costs paid by seller.  The bank informed my realtor that there was already a cash offer for $209,000 on the table.  So I figured in enough profit over their best current offer then made my second offer at $220,000 with $5000 towards closing pd by seller (to build fees into loan and reduce out-of-pocket).  

Since the seller/bank is handling the offers for this property in an unusually slow fashion, I haven’t yet heard anything back as to whether or not I will be getting the deal.  I’m crossing my fingers for an acceptance because this property would not need much in repairs and worst case I would profit $10-15,000 if I sold right away.  If I get it, I plan on renting it out and selling after a year which would bring in an additional $20,000 (figuring low) in appreciation.

My second potential deal turned into a done deal when an offer on an investment property in Costa Rica was accepted.  I and two other partners went in on a beach condo in Jaco that we plan on holding for 4-5 years.  The comps call for $550,000 but the developer lowered the price to $515,000 since he’s got several hundred other planned units up and coming all along the beaches of Jaco.  

Recognizing his need to move sales and needing more funding for his construction costs, I suggested to my partners (who were ready to make offers starting at $485,000) that we offer $450,000.  That offer was rejected; however, they signed the deal at $460,000!  This is $55,000 below the asking price and even further below comps.  

Following the trend of Costa Rican beach properties, we expect that in about 3-4 years our beach condo will sell for about $1,000,000 with no trouble whatsoever.  The condo will also come fully furnished and decorated; the developer has a management company (for a fee) that will handle all of the renting/bookkeeping of the unit, maintenance of unit & property/pool, & security (these expenses come out of the community ‘pool’ even if our unit doesn’t rent out, which is good); they handle opening a Costa Rican SRL (like an LLC) for us; and as part of the service they will file our annual taxes for us.  

The best financial benefit in this deal is that there are no government taxes when we sell (details too much for this letter), but that will enable us to pocket an additional $100,000 or more!  Another nice part about this deal is that the sales tax when the unit sells is only 1.5% (which buyer & seller split) and property tax is only 0.25%.  This is not a no-cash deal, so we will be putting 30% down (some of it still OPM as it will be taken temporarily from credit and HELOC) and construction won’t be completed until December or January ’07, but this will be great for future income.  And best of all…(listen)…NO taxes must be paid to the US!!!!!  This entire transaction is invisible to the US Government (and 100% legal, of course.) 

Long story short here Prosper Inc, it’s a great long-term investment that will require no work on our part, make us more money than if it were in the US, and we gained a gorgeous little getaway because we’ll be able to use it some during the off-season (which means getting out of the dry Phoenix summer heat for me!!)  Some may say that investing in another country is risky but one of the first things I learned since I began my coaching is that I have to be willing to do the things most everyone else is afraid to do.  I definitely did my homework on Costa Rica first, but I went one step further and defined myself from the majority.  I ventured. I broke some chains.  That’s where I feel my big success really is in this deal!

SUCCESS UPDATE

Originally I signed two new-build contracts for $249,501 and $266,821. The Phoenix market started sliding in 2006 and keeping an eye on what the second quarter trends meant for the third quarter, I was able to renegotiate with the builder getting them to lower the sales prices to $222,001 and $239,821, respectively. 

Additionally, the builder agreed to me using my own lender and to pay $7,650 towards my total closing costs. I sent in my own appraiser in order to obtain conservative values and they still appraised for $233,000 and $248,000, respectively; and these values do not account for landscaping and window shutters throughout, both of which are done now on each home. 

Based on the conservative numbers, there is already $19,178 total equity. Having experience in the mortgage industry and having a seasoned & savvy loan officer who keeps track of everything, I opted for neg-am loans (this is NOT recommended for just anyone) so that the rents would cover the mortgage payments. (In Phoenix, the average rent is much lower than a regular mortgage payment.) 

My plan is to lease them out and sell in 12 months. It is hard to say exactly what my total profit will be when they sell because the Phoenix valley housing market has slowed and sales prices are still settling down after 2005’s over-pricing; but overall, there will still be appreciation and the good news is that there WILL BE a profit! 

Kimberly H.

Scottsdale, AZ