How to Get the Best Real Estate Deals at the Lowest Prices

Monday, December 21, 2009

Dear Reader,

“Off market” deals are where a select group pays less and/or receives preferential terms for a real estate buy. Sometimes to participate in these deals you will be required to sign a confidentiality agreement. Your lips have to stay sealed. You cannot brag about the deal you got.

This way of doing business is 100% legal and regular practice for well-connected investors.

If I make it sound mysterious, it’s actually not. In fact, this is a pretty boring way to potentially make a lot of money.

Here’s how it works.

Today, “off market” deals fall into two categories:

1. Crisis investing means buying when everyone else wants or needs out. At an aggregate level, markets overreact and overshoot both on the up and downside. Assets become mispriced. Mispriced assets = profit opportunity.

After years of massive growth, certain markets are in a state of crisis. Banks are squeezing failing developers…something’s gotta give. That’s where off market deals come in. A fire sale of units in foreclosure, or a bank forced sale. However, you’ll rarely see deals like this publicly advertised (certainly not the good ones). These units will be discreetly offered to a small group of investors—like us. You might pay 50%, or even less, of what your neighbor paid. The banks and developers will want to keep this type of deal quiet. You get an amazing deal for playing ball with them.

Today some of the best crisis deals are in Europe and they are always off market. My Real Estate Trend Alert group has been able to get in on this type of deal. We have been able to get in on high-end complete units in Spain and the UK for as little as 52 pence on the pound or cents on the euro. Finance of up to 90% was available. These units can throw off positive cash flow from day one. Offering off market deals to our group makes sense for the banks and developers involved. The prices never need to be advertised. Readers just get an e-mail alert from me. You won’t be bumping into your new neighbors down the pub or in the supermarket. Developers and banks like this. They don’t want your new neighbors to know how little you paid.

2. Market segmentation is where different customers are charged a different price or offered different terms for the same product or service. We see this everywhere in our daily lives. Airlines, for example, will try to segment the business traveler from the leisure traveler, and charge the business traveler more.

In real estate, the developer will have two targets: The investor and the end user. The end user is buying because he has fallen in love with a project or area. He wants to spend time there. The investor, on the other hand, is looking for a deal. He wants to be up money from the minute he signs on the dotted line. The investor will make his mind up quickly and selling to him takes much less time and resources than dealing with an investor. An investor is also willing to get on board at an earlier stage in the project. He is guided less by personal preferences.

The developer doesn’t care about what an individual buyer pays. He cares about the total amount he can sell his inventory for juggled with his cash flow considerations.

It makes perfect sense for him to offer some of his inventory to investors at better pricing and terms while maintaining an “official” price list for end-users. He needs to do this discreetly though. End-users won’t pay full whack if they know someone else is getting a better deal. That’s where Real Estate Trend Alert comes in.

Last year, for example, we got pre-release discounts of 15% at one of the finest projects in Fortaleza, Brazil, while putting only 1% down. We enjoyed pre-release discounts of up to 29% at Uruguay’s first high-end community targeted at the North American market with the added benefit of interest free financing. In Belize, if you wanted to borrow you would pay 12% interest. Not for members of our little group. We have just got in on a deal with 10% discounts and interest-free financing.

Have you ever been to a new condo release only to find the best units are no longer available? If yes, you have been on the disappointing side of “off-market” deals. Our little group are the people who don’t stand in line…just pick their unit from the comfort of their own home, pay less and get better terms.

Roll on 2010. The Real Estate Trend Alert group is becoming the go-to place for off market deals. Our leverage is increasing—this means the deals are getting better. Check out the full details of our latest “off market” deal here.

Ronan McMahon