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Ask Dave

Sign On To Build

Suzie and her husband make a good income, but they'd be foolish to sign with a real estate investor to build more houses as an investment.

QUESTION: Suzie and her husband are debt-free except for the house and make about $400,000 a year.  A real estate investor wants Suzie’s husband to sign on with him to build more houses.  Should they do this?

ANSWER: Your husband would be borrowing the money to fund the builder, so if the house doesn’t sell you own the house and have to make the payments.  If the builder quits half-way through building the house, all of a sudden you’re in the building business.

Do not do this under any circumstances.  You’re risking $1 million to makes $25,000.  Not a good investment.

What usually happens is that the builder over-runs the budget, the interest rates go up, and you find yourself in a million-dollar, upside-down deal.