Why does FIG sell at the price it does?Jun 01, 2021
Let's talk a little bit about why the Fourplex Investment Group sells a fourplex, duplex, triplex, etc. at the price that it does...
We get a lot of questions about this and people often refer to it, saying "why do you sell these multifamily units with equity in them?" Let's be clear, we don't want it to be construed that anybody is promising equity. It depends on what somebody would pay for it.
Yes, we have a pretty good track record and an idea of what people will pay for it. That's why it's often considered that we sell these units with equity. The reason that this unfolds the way it does, is, when you close on a construction loan, you become the owner of the dirt. Our builder team uses your construction loan to build your fourplex or duplex.
When that happens, you've taken a lot of risk away from the builder because they're not having to go borrow money, carry interest, and worry about all of that. You decided to do that and take on that risk.
In order for you to be crazy enough to wait through the entire build period and go through the construction loan financing process, there's needs to be a pot of gold at the end of the rainbow. There has to be a reason for you to do that.
Knowing this, the builder prices a FIG build-to-rent unit for lower than what they would have priced it if they were to sell it completed (stabilized and full of tenants).
A stabilized unit is a very known quantity and is easy to value at that point. So in short, the reason that the builder sells these at the price they do is because you are choosing to absorb some of the risk by going through the pre-construction process.