Investment property deal - too good to be true?

Hi

I have a colleague who paid a 20,000 euro deposit for an investment duplex apartment in Adamstown. Since then the builder has agreed to drop the price from 330k to 300k because of the downturn in the market. But, alas, he can no longer release equity from his own place to buy. He doesn't want to lose his deposit to the builder who still gets to sell the apartment. He has offered me his 20,000 euro deposit as a gift just so that the builder doesn't "win". Does anyone think I'm out of my mind to release equity in my own apartment in order to service the rest of the deposit for 25k? It's a "free" 20k Im getting from him. alternatively, am I out of my mind doing this if I could come up with the cash without a release of equity, say borrowing from my parents for example. Much appreciated for you advice.

Darren


This is what he wrote:

Hi Darren. Ref our telephonic discussion regrding the apartement in Adamstown.Some details are as under.

I booked this two bed room apartement in 2007 at 330,000. And paid 20000, as advance booking.

Apartement was ready in September, i spoke to builder regarding the price and we agreed a price of 300000, after independent Valuation.
Builder agreed to give a furrniture allowance of 5,000 .

Unfortunately i was unable to get the mortgage due to reasons i told you. I have two options either i call off the deal and Builder will take my 20000. Or some one else can utilise the 20000. for this reason i Put up the add.

This is a two bed Duplex apartement in Adamstown square, With two entry doors at two levels. Ground floor has abed roon with ensuite bath room completely tiled.

Upper level has abed room, completely tiled bath room , living room with balconey, and a integrated kitchen with all the appliances installed.
Upper level has its seperate door, aplus point for Renting.
All in all this is an excellent oppertunity especially if you take in to account the area, which has now its own dedicated bus routes and train station, with trains every hour to heuston station.

Regarding the price you are only paying 280000, plus you are getting 5000 for furniture.You can check on daft .ie all the duplex apartements are in the range of 300000.
I had asked a management company to about rental potential , and they told me that i can get around 1200 /month as rent because it is a Duplex apartement.

I am ready to discuss if you need any further information, i can also take you to see the apartement.

There are no free's in life. If it's too good to be true than what do you think? Your friend is desperate to get out of the deal because not only will he lose the deposit of 20K the builder will come after him for the balance. That's my reading of it. Maybe you could go to the builder and purchase an apartment for 200K. Prices on daft are only asking prices, they are not selling prices. Of course maybe it's a steal at 300K.

You have to consider why your colleague is doing this. What are the consequences of him not being able to complete the sale; will the builder take him to court etc.

Your colleague may also be viewing you as someone to pass his potentially much bigger problem to. It costs him 20k now to get out of this deal or many times that in the coming months.
What makes someone 'gift' 20k to a colleague in a situation like this (I don't believe a word of the 'so the builder doesn't win'. Its nonsense). I've never heard of this even happening with family members, mainly because if it all goes pear-shaped you'd feel responsible. Your colleague on the other hand, probably won't.

And finally, do you really want to buy this place in Adamstown?

If it seems too good to be true, it always is.

If the 20k is a deposit that has been paid to the Builder, it is refundable. Unless contracts are signed the deposit means nothing. Also the rental market has become pretty flat at present.

Judging by the colleagues post I would imagine contracts are signed and he has no way out. If he fails to complete the builder is entitled to sell the apartment for whatever he can get and pursue your colleague for the balance. This is possibly why he is putting a deal that looks too good to be true to you.

I dont think that now is a good time to be buying anything. Walk away. You can be sure of one thign - that prices are only going to continue to fall, certainly by another 10-20%, so that will give you the 20k he is offering.

Many thanks for all the opinions. I think I will be shelving this one.