Frequently Asked Questions
We all have questions on day one. If you’re in that boat—check out our FAQ below. You can also schedule a conversation with one of our agents by clicking here.
Common Questions
With every development, there are calculated risks and rewards. The principals at FIG believe by creating a win-win strategy where the buyer can retain equity and have a solid cash flow we can control the risks of costs within a project. When FIG can approach subcontractors, suppliers, and vendors regarding the community they can get bulk pricing which lowers the overall risk and cost control issues that can come up in a project. Thus is born the win-win which all parties benefit from. We call it the magic of FIG and it keeps our investors coming back again and again.
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Because these properties are managed by an HOA, the insurance on the structure is covered. Therefore, your insurance will solely be a contents policy and possibly an overriding liability policy. This should save you approximately 50%-75% of a traditional hazard insurance policy on a structure not in an HOA.
Note: Please confirm with your insurance agent/recommended provider per project to ensure this is the case with the particular investment you are purchasing.
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This is specific per project, but for starters, we typically will have a reservation contract signed both buyer and seller, a deposit held for reservation, and an approval letter from the preferred lender or proof of funds statement justifying the ability to purchase.
For an example flowchart on the entire process of a new FIG investment being bought “pre-construction” CLICK HERE
An HOA serves the purpose of protecting your investment. When there is a professional management company in charge of maintaining the exteriors of the buildings, the landscaping, snow removal, getting bulk discounts (in water, sewer, garbage and amenities for the community), etc., you’ll end up paying far less and the appeal of the community will ensure a draw of quality tenants for years to come.
Keep in mind that an HOA is a not-for-profit venture collecting bulk costs much like Costco. When you have mass volume, you pay far less per door in maintenance.
Original Article: https://bit.ly/3wPYG6w
Your FIG real estate investment will come with a one year builder’s warranty, which covers all materials and workmanship from defect but not from damage. At the conclusion of your build, you receive a final walk-through to hand off the completed property to you as the new owner. You will then sign off on the property and in the event of a warranty claim will be given a link to file a warranty claim in which all emergencies are handled and smaller items are completed within a timely fashion.
For our warranty document given at Certificate of Occupancy check out the warranty here.
Each project will have a standard features list that will show both the mechanical standard features and the aesthetic standard features of the investment property. These standards are enough to have a move-in-ready home for your tenants. However, many clients like to choose options, so we also create a predetermined options sheet for each community with pricing so you can have some room to customize your investment.
Note: Selections are the same for every unit per investment, so each unit in a fourplex has the same options and upgrades if you choose to select. If you buy more than one investment in a development you can vary your selections per investment property as well.
Original Article: https://bit.ly/3Ac0gm2
Financing
There are several factors that influence our recommendation:
These transactions have several complexities (PUD’s, attached investments, HOA’s, new construction lending, occasional out of-country borrowers, timelines of entitlements, and deadlines to be met).
When the construction is taking place it’s very inconvenient for FIG to go to several institutions for draws and also to learn the new ways in which invoices are submitted and how timelines to pay subcontractors and suppliers are created.
The communication between parties (buyers, seller, builder, investors behind the land, title companies, agents, lenders, etc., can be streamlined with one voice).
FIG can offer better pricing to the investor as our process is more streamlined and takes less time.
First of all, there are no guarantees of this possibility, and the FIG model is to sell stable buy-and-hold investments for long-term multifamily real estate investors. On occasion, there is the potential to subdivide the individual units to establish a “highest and best use” of re-sale through selling off the units as townhomes.
It is recommended that the owner do a subdivision amendment to their property to outline new parcels with an engineer, verify the legitimacy with the local government and HOA and then record their parcel with the county. Some lien holders may have deed restrictions to subdivisions of a property with a loan associated with it so it is wise to seek a loan that allows for such action.
Original Article: https://bit.ly/3g1cODo
In this event, we can help line you up with partners (legal and financial) to set up a limited partnership which can facilitate two or more parties to buy together on an investment (either as individuals or through a self-directed IRA, or 401(k)). Typically this type of setup has a higher down payment requirement and interest rate and will most likely require an “arm’s length” transaction, so you will have to have a property manager manage the asset for you as well.
Original Article: https://bit.ly/3w3dxKT
These contracts are “fixed bid” contracts, so they cannot go up for any reason (for example, because the cost of light bulbs doubles during the build). You will never be handed a bill for a cost overrun.
We are completely fine with the preferred lender being “shopped” to ensure you’re getting great pricing. We don’t financially benefit at all from the preferred lender. As explained in our previous answer to the previous question, our only purpose is to streamline the process and manage expectations among all parties.
If you do choose to use your own lender, be aware of the following:
You may not get first priority in reservations due to the complexities a new lender brings and the extra work involved to train a new lender on how FIG’s process works.
It may delay construction and/or closing if it is allowed on a special exception.
Some contract guarantees or incentives offered when the preferred lender is used may disappear with an outside lender.
FIG specializes in finding, entitling, and creating value in a solid rental property that will deliver results beyond the typical real estate market found on your local MLS. Because of the equity position being handed off from builder to buyer, the buyer then pays to finance the property to obtain the equity and return on investment being offered.
On occasion, FIG may decide to fund the construction for a buyer but there is a premium to have this option, which is more expensive than the traditional financing that is available with our preferred lenders.
The contract will state penalties that FIG agrees to in the event of an extension that will favor the risks involved on the consumer’s end.
John Harker, Certified Public Accountant in Provo, Utah:
“If it’s a rental then any taxable profit is taxed by Utah and their investor’s resident state, and there is normally a credit in the other state for the income taxes paid to Utah. If it is sold for a profit, the gain is taxable by Utah and the resident state and the same credit would apply to the other state. The net result is that usually it is only taxed once, but it creates the complication of reporting in multiple states.
If there is no profit or gain from the Utah property a Utah return wouldn’t be required for a non-resident.
Ultimately, it depends on the state of residence. Someone in WY, NV, TX, or another no-income-tax state wouldn’t have a resident state tax but could have Utah tax liability.”
Property Management
The founders of FIG also own MAXX Property Management which was created for the sole purpose of helping FIG investors yield the highest return on investment by hiring a property management company that specializes in FIG Multifamily investment developments.
You can visit MAXX Property Management at maxxpm.com
When the building is within 60 days of completion, you will be notified to start lining up your long-term financing to refinance out of your construction loan. At completion, you will have a final walk-through to pass off the quality control of your investment and will get a homeowner orientation from the builder.
You will need to establish your relationship with the HOA at this point, get a certificate of occupancy, and transfer from a construction loan to long-term financing prior to allowing anyone to occupy the building. Doing otherwise will put you and your tenants at risk of extra liability.
Original Article: https://bit.ly/3w5dxtb
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FIG’s Disclaimer: All investments with FIG vary by location, scope, and description. Investors are advised to seek their own personal legal and accounting counsel to ensure the expected outcomes are clear and in the best interests of the investor. This FAQ is not exhaustive or all-inclusive to every investment that FIG offers and, therefore, FIG represents these FAQ’s as a general help. Please verify with FIG marketing representatives on the particular investment of interest to ensure the most complete and accurate information is received for your specific investment interest.
