Here's my advice - forget this deal. You're not in a position to do it.
From what you write I'm guessing this is some sort of syndication. I will tell you to only invest in a syndication if:
1) You personally understand the business the syndicate is engaged in well enough to run the project yourself,
2) You have access to enough information that YOU could step into the deal and start running it, and
3) Your investment is less than 10% of your nest egg.
IDK about 1 and 2 in this case. Number 3 sounds like its 200% of your nest egg. Bad, bad idea. The chances of losing this investment entirely are significant. I have investments in three syndications. One is great - hard money lending, which I understand thoroughly. One has a chance of returning something, but is currently worth maybe a third of what I put in, and has returned nothing in the last seven years. That's the way it goes with down payments when property values fall. The other one is even worse. It was a $50K investment in a development deal. Lots of things went wrong, including the main guy in the underlying deal stealing some of the money. The guy who stepped in and tried very hard to salvage the deal (see #2) recently informed us he had accepted an offer for the land. The net back to investors? $0. Complete loss. It can and does happen, no matter what sort of grand tales the syndicator tells up front. A properly done syndication will require you to sign a form that says, among other things, "This is a bad investment. You will likely lose your entire investment. Only a fool would invest in this deal." That protects the syndicator against lawsuits if things go bad. You would be wise to heed those words.
Jon Holdman, Flying Phoenix LLC
Are you nuts?! This has all of the red flags imaginable for you. I'm with Jon - forget it!
@Elizabeth Maille Did you do this deal? How did you acquire the DP? Did it spell trouble or triumph for you?
Eric Harris | 210.310.9196
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