Flipper Alert: Burnham Pointe Investors Already Trying to Bail
As I’ve talked about before, it’s apparently become common to try and list your investment unit for re-sale in new construction buildings in Chicago about three months or so before the closing. We’ve seen this happening in several new construction buildings in Streeterville.
But this investor in Burnham Pointe, at 730 S. Clark in the South Loop/Printers Row area, is trying to get out of his contract a full YEAR before the units are supposed to close.
According to an ad on Craigslist, he’s asking $402,990 for a 2 bedroom, 2 bath, that is only 1030 square feet with a NW facing view (Sears Tower/financial district) on the 24th floor (there are 26 floors total.)
He says:
This unit now sells for $463,990 (due to the price increases). Burnham has 2 more price increases scheduled before building completion (end of 2008).
I am an investor and have 3 units in the building. I need to let one go.
My loss is your gain. There is already $60,000 equity in this unit. I also won $1000 Free Upgrades at the Grand Opening ceremony. You can choose your finishes now (before end of October).
The developer’s website says the building is only 50% sold. Maybe it’s just me, but how do they think price increases are going to sell more units?
It’s always interesting when investors try and get out of the flipping game early. There is no reason he should have to “let one go now” because he isn’t paying a dime until it closes. And with two more supposed price increases, he would only increase his equity in the unit before next November.
Who would walk away from “guaranteed” money?
Except, of course, it’s not.
The flippers are getting very, very nervous out there. In some of these buildings that are only 50% or 60% sold- they will be competing with the developers to try and unload their units. Not a great situation to be in.
There are a lot of new buildings going up in the Printers Row area that will be competing for buyers including The Vetro and Library Towers.
Per BP proposed pricing sheet, if the unit does not sell, they would sell it for $388,000. When this investor purchased the unit 2 years ago, I am sure that the price was 10-15% less. You do the math. He is making money on this condo.
Aleks: Please tell us more.
Burnham Pointe is guaranteeing sales prices to investors who try to flip who cannot do so?
No, that’s not what I meant. There is a proposed price for every unit (and thats true for every condo development) that THEY think is a reasonable price for the unit once the building has been completed. When pre-construction condos are sold, they typically are priced 10-15% below that price. As the construction goes on, the developer raises the prices on the units, (usually there are 4 phases) and more often than not, going beyond their established price.
Okay, I see. Thanks for the explanation.
So the Burnham Pointe developer is basically saying, “see how much money you’ll make in three years!” – when, in fact, you might make nothing (or will lose money if real estate price declines.)
Obviously, the earlier you get into a development, the better (if you’re an investor.) But in this type of market, it’s going to be interesting to see if these buildings have appreciated enough to allow a flipper to make any money.
Is BP still expected to start closings next fall?
Lower unites are expected to begin closing in Oct 08, at least that’s what I’ve been told a year ago. BTW, I do not own a unit in the building.
Thanks. They are now closing on units in the Vetro. That will give us some idea of any price appreciation as it’s only a block away. Yes, different style building- but the original price points weren’t that different.