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Using Groupon Power to Purchase Real Estate

By Brad Andersohn

Education & Training with Retired Executive Director of Education at eXp Non-Licensed

September 08, 2011 11:12 AM

Recently I was invited to join this investing opportunity using "Groupon" buying power to purchase Real Estate. Is this a fad, a trend, or will it become a standard in the home purchase and selling process? I've used Groupon to make "deal" purchases for smaller material items in the past but never considered investing in purchasing real property in this manner?

I remember hearing that someone put their home on eBay and sold it. I was told another homeowner put an ad on Amazon, and I've seen hundreds of homes on Craigslist and other classified sites but Groupon power? I'm curious how many others have this happening in their areas and if so, what are your thoughts? is this something you would participate in?

Can they really do this? Dumb question: Looks like they already are...

Would your potential clients or past clients go for an opportunity like this? Would you?

Join us for a group buying discount & group leverage Meeting

"We have negotiated with the builder a discounted price on duplexes near Round-Rock (Austin). We are combing the group buying power to get better prices and create a rent protection concept. The duplexes' (2 units each) price is based on a group purchase."

NEW Concept: “Groupon” Purchase of Duplexes
Tue. 9/13/11 7PM - In the room & via web
RSVP for details

Investment Highlights

Regular price: $260,000 – $270,000 per duplex ($130,000-$135,000 per door)
“Groupon” price: $249,900 – $259,000 based on a minimum purchase of ten duplexes (20 doors)

Myself and others could sure use your help, advice, and feedback here.

This is happening right here in the Bay Area, just about an hour away and I'm curious what my ActiveRain friends would advise or do themselves? No need to pull punches here, give me your honest thoughts and opinions. Usually, I'm the one trying to give information and advice but this time I need yours? Thanks.

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Michael Setunsky

Woodbridge, VA

Your Commercial Real Estate Link to Northern VA

Brad, I'm not familiar with Groupon. I've seen investors pooling their resources, but through Limited Partnerships and LLC's. I think there is more to it than a bunch of people getting together and buying a property.

Sep 09, 2011 01:25 AM

Cheryl Ritchie

RE/MAX Leading Edge www.GoldenResults.com - Huntingtown, MD

Southern Maryland 301-980-7566

My gut reaction is small savings for big unknowns and risk and whole new concept.

Sep 09, 2011 02:13 AM

Mark Welsh

Kirkland, WA

You have to love in inititive and new way of thinking. I hate the term thinking outside the box, but I think this one has done it. Very interesting concept

Sep 09, 2011 02:18 AM

Rebekah Radice

Imagine WOW! Digital Marketing Agency - Burbank, CA

Social Media Marketing, Coaching & Training

Very interesting Brad! I had no idea Groupon was now into real estate. I have to say I'm intrigued!

Sep 09, 2011 02:42 AM

Barb Van Stensel

Chicago, IL

Raised in this arena but never have boughten homes with such a low discount. I have had people walk into Dad's office and in trouble with the court and sell the property for the outstanding water bill, and utilities. Quick Title Search, fast driveby and SOLD. 10 Acres of farm land worth $10K an acre. Desperate farmer walks in and says 10 acres for $10K - SOLD.

That's not a deal Brad. I look at carrying costs, what is the marketing currently doing, where is it heading this spring, what is the PLA vs others that are selling similar in the area. You want an opinion and I will say ... this is not a deal. I can understand stopping people from investors buying and renting these out but if that happens, what happens to the resale value for your units?

It's a numbers game and logic. No emotion.

Here's my word of caution: a builder got $384 PLA per square foot on an awesome home here in Chicago. Another resale of a new home that is three years old closed out at $212 PLA per square foot. Both of these homes were within 3 blocks of each other. Same median. No external obsolescence.

That builder still has room to spare and I am not being cut throat here. I am talking business. Look at that PLA and look at others similar that have closed. Bottom is ... if others go into rentals .... what does that do to the neighborhood on resale? Kind of like having a high rental factor in a condo building.

Sep 09, 2011 03:04 AM

Lawrence Evans

Team Limejuicer/Remax - Germantown, MD

This is the first time I have heard of this. Would be interested in any post action reviews you or your readers find out. Thanks for the post.

Sep 09, 2011 03:25 AM

Jill Sackler

Charles Rutenberg Realty Inc. 516-575-7500 - Long Beach, NY

LI South Shore Real Estate - Broker Associate

I'm also hearing about this for the first time. I'd be interested in hearing about a real-life scenario. Has any AR member participated?

Sep 09, 2011 03:34 AM

Zachary Strong

Coastal Properties Group International - Belleair, FL

Adventure-Clearwater to St. Pete, Florida Real Est

I like the 'outside the box' thinking! Obviously a lot of details need ironed out but it seems it cold work. I would certainly encourage a buyer to try and negotiate a better deal than what is being offered.

Sep 09, 2011 04:03 AM

Greg Nino

RE/MAX Compass - Houston, TX

Houston, Texas

Great subject for conversation. Who the hell really knows. Sounds far fetched for me.

Sep 09, 2011 04:27 AM

Brad Andersohn

Retired Executive Director of Education at eXp - Boulder Creek, CA

ActiveBrad - 707.646.1876

NEWS UPDATE: This Just In....

Dani just responded to my email with the following message, and I just spoke with him on the phone. He was very professional and extremely passionate about this idea and concept. This is becoming a pretty exciting story, I'm looking forward to watching it unfold and then sharing the "Breaking News" with all of you.

Date: 9/09/2011

Subject: RE: Groupon Real Estate Investment Opportunity

Brad,

Thank you for reaching out.

Let me explain it in a nutshell, we have incorporated two simple concepts into this deal:

First we went to the builder and asked for a discount for buying in bulk. Simple buying power, which he agreed if we bring buyers to buy 10 duplexes.

Second, since we establish long term relations with our buyers, we have incorporated a "rent safety net", this means that if you buy in this pool and want to join the safety net we will collect all the rents into a one pool and divide it proportionality to each owner. This means if you end up w/ a vacancy you will not "suffer" 100% loss of rent for the vacancy period. There is some complexity to this concept as down-payments, actual rents, and ongoing expenses are not equal - but we were able to create a plan that will provide you with your share of the collective rent.

Keep in mind:
A. You don't have to join the "rent pool"
B. The investor owns the property out-right.
C. The properties, area, and builder's quality all work out and make perfect investment sense. Our pre-negations and "pool" concepts are just built in on the top to make it a better investment.

Hope I was able to answers your questions and establish some more clarity/transparency to the idea.

I too get skeptical about ideas such as this one. Mostly because there are sleazy people out there. But I have been assisting investors to invest since 2004 and if there is one theme I can personally attest to is that all through the years I have worked and continued to explore ways to improve the program/s for the investors so they get a better deal.

Thanks,

Dani
650-440-5544

Sep 09, 2011 04:46 AM

James Loftis

RealEstate911.com - West Palm Beach, FL

RealEstate911.com

Groupon have some very good coupons another website that is use is retailmenot.

Sep 09, 2011 06:33 AM

Bill Somerset

Re/Max Realty Group - Dover, NH

ABR, e-PRO - Realtor - NH Real Estate Agent

I can honestly say I have never heard of such a thing. I of course have heard of Groupon, but never even put a thought to listing a property for sale there.

Sep 09, 2011 06:40 AM

Dan Beit-Or

Simply Do It - Cupertino, CA

Brad, thank you for putting this post.

I agree with many of the comments here.

This deals requires experience & creativity to establish a better investment position for every investor.

Years of experience have taught me that investors want to get better deals and when it comes to rentals the number one concern is vacancy. There are other concerns as well but vacancy has always topped the charts.

I, and the teams I work with, always try to find ways to make such opportunities better and safer for investors.

Dani

www.simplydoit.net

dani@simplydoit.net

650-440-5544

Sep 09, 2011 06:53 AM

Amy Robinson

London Pierce Real Estate - Scottsdale, AZ

Realtor, Scottsdale Arizona Homes For Sale

OH MY! This seems crazy to me. I am sure it wont be the last of crazy real estate transactions.

Sep 09, 2011 01:34 PM

Keith Lawrence

Christie's International - Mahwah, NJ

ABR, SFR

Interesting post on Groupon.

I use them for local coupons so this is interesting how to apply it to real estate.

Sep 10, 2011 03:02 AM

Joan Whitebook

BHG The Masiello Group - Nashua, NH

Consumer Focused Real Estate Services

This is a very interesting discussion. I had never thought of this concept, but on first blush it looks like a concept that might work.

Sep 12, 2011 02:39 PM

Brad Andersohn

Retired Executive Director of Education at eXp - Boulder Creek, CA

ActiveBrad - 707.646.1876

This is the latest update:

Quick Update
Currently 5 duplexes out of 12 have been sold. Only 7 more left.

Details & Photos

The “Group Power” Factor

1. Price reduction by $10,000 per duplex
2. Negotiated management fee of 5% instead the typical 8%-10%
3. Negotiated leasing fee of 50% instead the typical 65%-100% of the first month rent
4. $1800 towards title policy should you chose to work with preferred lender
5. One month of PITI (principal, interest, taxes and insurance) if property is not fully leased in the first 30 days following completion

Details & Photos

Property Specifications

New construction duplex (two doors)
High End Finishes and Fixtures w/ Complete Appliance Package
Builder Warranty

Details & Photos

Intimidate Area

Gulf course community
Easy access to large employment centers
7 minutes from Dell’s Round Rock Headquarters
Right off of TX-130
Less than 20 minutes from Downtown Austin

Details & Photos

About Austin-Round Rock

#1 Best Big Cities for Jobs
#1 America’s Fastest Growing Cities
#1 Next Biggest Boom Towns in the U.S.
#2 Best Cities for Finding Employment
#3 America’s Biggest Brain Magnets
#7 Best Places for Business and Careers
#11 Next Decade’s Fastest Growing World Cities

Details & Photos

Financial Information

Average Unit Size: 1298 square feet per side
2596 square feet in total
Sales Price: Plan 2596 = $259,900 per duplex
Projected Rent/Month: $1,400 per unit
$2800 total per month
Taxes: Williamson County: 2.959%
Travis County: 2.913%
H.O.A.: $63 per duplex monthly
Insurance: $75 per duplex monthly
Leasing Fee: 50% first full month’s rent
Management Fee: 5% gross collected income
Utilities: All utilities are paid for by the tenant
Projected cash-on-cash return*: 11.16%
* Based on 25% down-payment and 5% interest rate

Details & Photos