Safe or Not

by Tim
(Grand Falls-Windsor, NL)

I've been offered a chance at 25% stake in a building company that has purchased a plot of land and is developing an adult living area with approx. 100 living spaces (4 plexes) of various designs. The rental vacancy rate is less that 1% in the town of approx. 15000 which acts as a service center to outlying areas including healthcare. The building company is about to being construction of the second series of 3 four-plexes (12 apts). These are mine. Project cost for three buildings is 1.3 million. Bank mortgage is secured. The catch, maybe, for land purchase upfront the builder is offering 25 % stake in the remainder of the land sales. However, he needs money to continue to get the land to serviced lot status. The builder admittedly was not aware of the cash needed for land development as this was the first project of this type. He had invested approx. 250,000 of his own money to get the project where it sits. What should I be looking for. Along with this of course maybe the need to access funds to continue development, would self directed RRSP's as short term mortages with interest I set be smart (as the markets are currently costing me money).

Thanks

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Dec 01, 2011
RE: Safe or Not
by: Tom Karadza

Wow, seems complicated. Anything that is complicated like this tends to have problems from our experience. Having said that often there's money to be made negotiating in difficult situations.

But in this case because there may be a need for even more funds to complete the development, with what we know at this point, we'd shy away from this.

Tom

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