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Using Groupon Power to Purchase Real Estate

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.

 

     

"Learn More. Get More. Do More. Be More."

Comment balloon 60 commentsBrad Andersohn • September 08 2011 06:12PM

Comments

I think it shows a lot of creativity.  My only question would be if they don't sell, that those who "bought" would not have to go through with the sale at the higher price--a contingency.  If all the units sold, everyone would benefit, so why not?

Posted by Peggy Chirico, REALTOR® 860-748-8900, Hartford & Tolland County Real Estate (Prudential CT Realty) almost 8 years ago

I get Groupon offers everyday, but never for real estate!  Perhaps this will be the next trend for REO's!

Posted by Jayne Esposito, SRES, GREEN (Coldwell Banker ) almost 8 years ago

It's creative, but I'm skeptical of it catching on.  But hey, strange things happen in real estate all the time :)

Posted by Liz and Bill Spear, RE/MAX Elite Warren County OH (Cincinnati/Dayton) (RE/MAX Elite 513.520.5305 www.LizTour.com) almost 8 years ago

Who knows? The times they are a changing-right? Never, say never.

Posted by Debb Janes EcoBroker and Bernie Stea JD, REALTORS® in Clark County, WA (ViewHomes of Clark County - Nature As Neighbors) almost 8 years ago
Hi Brad - That is very interesting. I'm going to try and follow this to see what happens - even though there is some sense to the concept, there are so many questions about the practicality and mechanics of it. You never know where the next big thing will come from.
Posted by Dick Greenberg, Northern Colorado Residential Real Estate (New Paradigm Partners LLC) almost 8 years ago

A group discount off of "list price" ? I don't know your market, but how would that price compare to a single buyer negotiated offer ?

Melville

 

Posted by Melissa Ostrom & Melville Capps Newton MA - The Mel and Mel Team ((617) 388-3151 | Century 21 Commonwealth) almost 8 years ago

Interesting, since it would show up in soooo many emails!    and can be targeted!

Posted by Dagny Eason, Fairfield County CT, CDPE Homes For Sale and Condo (Dagny's Real Estate) almost 8 years ago

Brad - That is an interesting concept.  It might work, if people are using their IRA funds, or cash for the purchase, but if they need financing it could get really messy.   Also, not sure where all the closing costs are going to be in the picture.  Melville makes a good point, that is not even a 5% discount, and in today's market a lot of buyers are doing better than that.

One other issue that can create a problem.  If there are multiple names on the contract - what happens when one of them needs their money out?  Does their unit have to be sold, do all the units have to be sold, do the other owners have to buy them out???   Sounds like a couple of lawyers could be busy.

Posted by Steven Cook (No Longer Processing Mortgages.) almost 8 years ago

Brad I find this interesting, how many people has any one sold over time properties site unseen? If I had to be generous in my 15 + years I have maybe sold three properties like that. Most people need to see the property as well as the neighborhood, so I am skeptical that this will be the wave of the future, but what do I know, I am just a struggling Beverly Hills Realtor:)))

Posted by Endre Barath, Jr., Realtor - Los Angeles Home Sales 310.486.1002 (Berkshire Hathaway HomeServices) almost 8 years ago

Is this a fad, a trend, or will it become a standard in the home purchase and selling process?

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)

It sounds like a gimmick to me but to each their own.  IMHO a good real estate agent can negotiate a much better deal for a buyer than an $11,000 discount for buying 20 units. I don't think $200K off $5.18M is so great. I've been able to negotiate $200K off a listing asking price of $1.6M for only one unit and only one buyer.

Posted by Mitchell J Hall, Lic Associate RE Broker - Manhattan & Brooklyn (Compass) almost 8 years ago

This is the first time I've ever seen anyone try this approach, wondering if it will fly or die?  

Guess I might have to register just to follow the story and give an update on 9/13.  I got some advice from Jay Thompson over on Facebook, he says he wouldn't touch it with a ten foot pole.  Now I'm just more curious than anything.

BTW - I have contacted the person heading this up, he's from the Valley Peninsula Real Estate Investing group. I'm waiting to hear back from him to see exactly how this whole thing will play out?  (This could end up one way or the other being a great story or even "breaking news")

stay tuned....

Posted by Brad Andersohn, ActiveBrad - 707.646.1876 (Executive Director of Education at eXp Realty) almost 8 years ago
Great idea thinking out of the box I love this !!!!!! How can I do this in my area!!!!
Posted by Ken's Home Team LLC. | 360.609.0226 | Portland, OR & Vancouver, WA Real Estate Team, - SOLD IS OUR FAVORITE 4 LETTER WORD - (Ken's Home Team LLC.) almost 8 years ago

Hi, Brad - The group purchase seems a viable cash investment strategy to me, providing the details of closing and managment can be cleanly worked out. Individual LLCs are often set up by a small of people to purchase investment real estate. But I agree with others here, that there would need to be a much better discount negotiated before I'd buy in.

Posted by Elva Branson-Lee, CDPE - Atlanta Real Estate & Short Sale Agent (Solid Source Realty GA) almost 8 years ago

I guess for some folks, a possible $11,000 dollar savings might just be enough to bite the bait, especially if they're already interested in the property?  It will be interesting to see how this plays out...

Great feedback everyone, thank you.

Posted by Brad Andersohn, ActiveBrad - 707.646.1876 (Executive Director of Education at eXp Realty) almost 8 years ago

Real Estate Investment Trusts faded dramatically in popularity about a decade ago.  This sounds even less certain.  I'm dubious...but intrigued.  I'll be following this.

Posted by Vic Steele, Broker/Consultant (Vic Steele, Broker CA BRE 01349863) almost 8 years ago

What Mitchell said.. just doesn't sound like that much of a discount being offered for that large of sale when you combine all of the units..  You will probably have more answers after the scheduled meeting.

Posted by 1~Judi Barrett, BS Ed, Integrity Real Estate Services -IDABEL OK (Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745) almost 8 years ago

I have not seen a groupon deal in my area.  It does seem interesting...its the type of market where you have to be creative.

Posted by Chuck Carstensen, Minnesota Real Estate Expert (RE/MAX Results) almost 8 years ago

It's different. I will catch someone's eye. But I think it boils down to how much  you will spend on the ad. Will it get you more exposure? Yes. Does the cost justify it? Maybe

Posted by Donald Reich (Prudential Centennial) almost 8 years ago

My advise...Don't give up your day job and save your money. Groupon has been around a while....are they just grasping for money on their way down? So they are going to try Real Estate...Why does something about it not seem ethical or right?

Posted by Sherry Scales, Realtor, for Austin, TX and surrounding areas (Austin Texas Homes, LLC) almost 8 years ago

Brad - I don't know about getting enough people together to do this though it sounds interesting.

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) almost 8 years ago

Interesting concept, but you'd need a property manager and there would be other expenses.

Posted by Yvette Chisholm, Associate Broker - Rockville, MD 301-758-9500 (Long & Foster Real Estate, Inc.) almost 8 years ago

I agree with Mitchell #10. It doesn't seem like that good of a deal on the surface. When I think of Groupon, I'm thinking of a savings of 50% - a really good deal. A deal that is too good to pass up. So, perhaps they are just using the "Groupon" term to make it sound interesting & generate attention? Thanks for sharing.

Posted by Stacey Johnson-Cosby, Selling Kansas City-Real Estate & City Blog (Reece & Nichols Realtors-Kansas City) almost 8 years ago

I never would have considered groupon for selling a home.  Perhaps the problem..... other people are and are being far more creative than I.  New challenges I am sure.... but what a concept.

Posted by Vickie Slade, Service You Can Trust ~ Someone You Can Depend On (Colorado Landmark, Realtors) almost 8 years ago

Hi Brad - Good post, I'm not too far away from you over in Napa.... and I've actually heard of agents promoting themselves on Groupon offering a few hundred dollars from their commission (I believe it was a client who brought it to our attention).  I thought it seems really shady because our client then expected us to do the same thing otherwise they would go with the other agent.  Different situation - I know - but I approach the topic with a skeptical point a view, and I'm extremely interested to see how it pans out. Good luck to you!

Posted by Team Lesti, Napa Valley Real Estate Experts (Windermere Napa Valley Properties) almost 8 years ago

Brad,  I would sell bu auction before I would use Groupon.  That said, I only recently learned about Groupon. 

Posted by Kathleen Daniels, San Jose Homes for Sale-Probate & Trust Specialist (KD Realty - 408.972.1822) almost 8 years ago

I take part in daily Groupon emails, and some of the deals are really good. That is a very interesting take on Groupon. Just a way to reach more buyers? Maybe a group of investors?

Posted by Jon Quist, Tucson's BUYERS ONLY Realtor since 1996 (REALTY EXECUTIVES TUCSON ELITE) almost 8 years ago

I wonder if it would work for a developer who has a large inventory that needs to be sold....hmmm...interesting concept. Please  keep us posted.

Posted by Ann Nguyen, Lake Tahoe Truckee Homes For Sale (eXp Realty of California, Inc.) almost 8 years ago

Brad - I've used groupon discounts but I've never heard of anyone doing it with real estate before ..... it will be interesting to see if they get their 20 doors sold.

Posted by Kathy Clulow, Trusted For Experience - Respected For Results (RE/MAX All-Stars Realty Inc. Brokerage) almost 8 years ago

I too was invited to one of these recently.  Frankly, the discount didn't "wow" me and i wondered if as an experienced buyer, might I be able to negotiate better terms.

I'll be curious to see how it all plays out.

Thanks for sharing this.

Posted by Anthony Daniels, SF Bay Area REO Specialist (Coldwell Banker) almost 8 years ago

Well this seems like an interesting concept in theory but would it work in life!? I also wonder about the financing aspect of it! 

Posted by Rosalie Evans, The Evans Group, Sioux Falls, SD Homes For Sale (Meritus Group Real Estate) almost 8 years ago

There was a real estate company that did a Groupon and pulled it. Some question about legality. I would be sure that it's run by attorneys.

Posted by Vickie Nagy, Vickie Jean the Palm Springs Condo Queen (Coldwell Banker Residential Real Estate) almost 8 years ago

My advice...Go find an agent that is familiar with this subdivision, and ask them to pull comps. Even if comps aren't available (i.e. not enough recent sales), shoot the seller an offer that is substantially lower than what Groupon is offering.  See what they come back with, and you'll have a better feel as to whether the Groupon deal is really a deal.

Like many others, I love some of the deals I get with Groupon from local restaurants and other service-based companies.  Personally, I think you'll find out that they've bitten off more than they can chew when it comes to real estate investments.  But, I've been wrong before.

I have a feeling that Jay's advice might be spot-on, but you never know until you try!

Posted by Bob Hertzog, Designated Broker (Summit Home Consultants) almost 8 years ago

I'm not sure what type of input you are asking for? Surely you realize that they are using the word "groupon" as a play on words, which has nothing to do with the groupon discount website. As far as the deal, put a pencil to it and if it makes sense it is a good deal and if it does not, it is not. Make sense?

Posted by John Michailidis, Real Property Management of Sarasota & M (Real Property Management of Sarasota & Manatee) almost 8 years ago
Interesting concept. Good for the builder to be assured of occupants but unsure how good of a deal for the buyers.
Posted by Maria Morton, Kansas City Real Estate 816-560-3758 (Chartwell Kansas City Realty) almost 8 years ago

What an interesting concept and if a builder where doing this and could use bulk sales to create instant money, then why the heck not try it.





Posted by Respect Realty LLC, Brokers - Oregon / SW Washington Real Estate (Respect Realty LLC) almost 8 years ago

Interesting sounds like a way for the builder to move a lot of inventory. a different form of Bulk Sales.

Posted by Susan Goulding, Northern CA - Tracy & Mountain House Real Estate (Crown Key Realty, Tracy & Mountain House Real Estate) almost 8 years ago

Brad,

I'll be following this. 

Posted by Tom Meyer (Exit Advantage Realty) almost 8 years ago

Brad-how is this different than real estate investing groups that pool their funds to buy property?  Just adding the name "Groupon" to it would make me think of a 50% discount not 5%.  There are a huge range of legal complications that would come into play.  Are these properties in an HOA association which limits the number of units that can be owned by one enitity.  What about lease restrictions on the number of units that could be rented in the community?  How would the group purchase effect FHA or VA mortgages for buyers looking to purchase in the neighborhood?  Lots of questions and it will be interesting to see what answers you come up with.

Posted by Cindy Jones, Pentagon, Fort Belvoir & Quantico Real Estate News (Integrity Real Estate Group) almost 8 years ago

Brad,

Getting a group of people to stay like minded and all agree on buying a block of properties is worse than herding cats. I don't place much faith in this catching on, I do however believe our industry is being changed by all the current foreclosures and shortsales. 

-Brent

Posted by Brent & Deb Wells, Prosper TX (LivingWell Properties) almost 8 years ago

 

 

Brad, I heard Groupon discontinue catering to real estate brokerages/agents, not really sure what reason. .. but I do think the concept is intriguing and I'm not being short-sighted about it. .

Posted by Fernando Herboso - Broker for Maxus Realty Group, 301-246-0001 Serving Maryland, DC and Northern VA (Maxus Realty Group - Broker 301-246-0001) almost 8 years ago

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.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA almost 8 years ago
My gut reaction is small savings for big unknowns and risk and whole new concept.
Posted by Cheryl Ritchie, Southern Maryland 301-980-7566 (RE/MAX Leading Edge www.GoldenResults.com) almost 8 years ago

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

Posted by Mark Welsh almost 8 years ago

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

Posted by Rebekah Radice, Social Media Marketing, Coaching & Training (Imagine WOW! Digital Marketing Agency) almost 8 years ago

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. 

 

Posted by Barb Van Stensel almost 8 years ago

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.

Posted by Lawrence Evans (Team Limejuicer/Remax) almost 8 years ago

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?

Posted by Jill Sackler, LI South Shore Real Estate - Broker Associate (Charles Rutenberg Realty Inc. 516-575-7500) almost 8 years ago

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.

Posted by Zachary Strong, Adventure-Clearwater to St. Pete, Florida Real Est (Coastal Properties Group International) almost 8 years ago

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

Posted by Greg Nino, Houston, Texas (RE/MAX Compass, formerly RE/MAX WHP) almost 8 years ago

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

Posted by Brad Andersohn, ActiveBrad - 707.646.1876 (Executive Director of Education at eXp Realty) almost 8 years ago

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

Posted by James Loftis, RealEstate911.com (RealEstate911.com) almost 8 years ago

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.

Posted by Bill Somerset, ABR, e-PRO - Realtor - NH Real Estate Agent (Re/Max Realty Group) almost 8 years ago

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

Posted by Dan Beit-Or (Simply Do It) almost 8 years ago

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

Posted by Amy Robinson, Realtor, Scottsdale Arizona Homes For Sale (London Pierce Real Estate) almost 8 years ago

Interesting post on Groupon.

 

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

Posted by Keith Lawrence, ABR, CDPE, SFR, 203K Specialist (RE/MAX Properties) almost 8 years ago

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.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) almost 8 years ago
This is the latest update:
 
 


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

 


 
 

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

   
 
 
 

Property Specifications

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

   
 
 
 

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

   
 
 
 

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 

   
 
 
 

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 

   
 
 
 
Next Step
Interested in more details or to be a part of this group purchase?
Contact Dani Beit-Or: dani@simplydoit.net or 650-440-5544

   
Posted by Brad Andersohn, ActiveBrad - 707.646.1876 (Executive Director of Education at eXp Realty) almost 8 years ago

Brad , have any of your listings sold?

Posted by Team Lesti, Napa Valley Real Estate Experts (Windermere Napa Valley Properties) almost 8 years ago

These aren't my listings, they are properties being marketed and sold using the Groupon concept.

Posted by Brad Andersohn, ActiveBrad - 707.646.1876 (Executive Director of Education at eXp Realty) almost 8 years ago

Interesting twist, investigating.

Posted by Lorraine or Loretta Kratz, Certified Negotiation Consultants (Crescent Moon Realty, Inc. & Land N Sea Auctions.) almost 8 years ago

Participate