Lies, Damn Lies …and Realty!
What is behind the story?
What is worse – an outright lie or a half truth?
An outright lie can be verified, and the liar can be (eventually) exposed…or elected to higher office!
A half-truth, particularly in investment real estate, can do far more damage. A portion of the statement contains some truth, and often we find ourselves making decisions based on facts which are tenuous at best, because we “trust” the person presenting to know and tell the truth.
POLITICS vs. PROPERTY
Your broker / seller / sponsor may have a BIG track record and claim outstanding consistent success (like many political candidate ads). Somewhere in that story is SOME truth, along with some puffery…and often some outright outrageous lies!
Here are some statements which are true (“T”) along with “the rest of the story” (“TROTS”). The names have been changed to protect the guilty, and I’ve taken some license to combine more than one story in a statement, for my ease and entertainment!
THE REST OF THE STORY
T: APARTMENTS – All residents are paying $2600/month for a 2B/2B.
TROTS: All got 2 months free rent at the beginning of their lease, which all competitors are still offering to new and renewing residents.
T: DEBT FUND – All loans payments are current.
TROTS: Most of the borrowers will be soon going under
T: RETAIL CENTER – Grocery tenant has remained open 24/7/365.
TROTS: The shelves are unusually bare (due to loss of credit with suppliers) and there is a new Foodlion opening a block away and the entrance to this center will be closed for road repairs.
T: TIC SPONSOR – No investors have ever lost their equity.
TROTS: Several properties were propped up with loans from the sponsor for over a decade; when finally sold, once the additional debt and interest was repaid and time value was calculated, the investor got back about 30 cents on each dollar invested.
T: OFFICE – Vacancy for “A” quality properties is at 5%.
TROTS: Over 12% of vacant, but leased, space coming back to market.
T: DST SPONSOR – Highest projected first year cash in the industry.
TROTS: I/O for 10 years, no reserves, and fees backloaded
T: DEVELOPMENT – County needs 30,000 workforce housing units.
TROTS: Adjacent county has superior schools, lower taxes, better roads and retail options.
T: SPONSOR – This sponsor has never lost money for investors.
TROTS: Sponsor operated in past under a different corporate name, and offered investments in a different structure, and their law firm and third-party due diligence firm is VERY accommodating!
T: ECONOMIC DEVELOPMENT – Our county has historically been very pro-growth in zoning.
TROTS: This is an election year with strong anti-growth competitors for all seats.
BOTTOM LINE.
Everyone wants to look good on a first date; generally better than they are in real life. Welcome to the world of investment real estate!
It is our jobs to question everything, even with some of what we hear we have reason to believe is true. This is a world of buyer beware. Ask layered questions useful to determine right from the not exactly right!