2010-06-17T20:33:00ZLast month, we told you about a company called National Realty Investment Advisors that advertises real-estate deals on the radio.
We are skeptical of most investment schemes advertised on the radio. One of the issues we had with National Realty's ads is that they seemed too good to be true--promising guaranteed rental income for 5 years and "$100,000 of bank-certified equity" with only a $7,500 downpayment.
Our follow-up call to the number repeated in the radio ad didn't help boost our confidence. Nor did the company's web site, which said the company was located on Fifth Avenue--when in fact this turned out to be just a mailing address.
After we published the article, we were invited by National Realty to visit their Hoboken, NJ offices and go over some of documents and plans. We met with VP Nick Salzano and managing member Rey Grabato who sat down with us and explained how their operation works.
National Realty made clear that it only works with high net-worth clients: Doctors, lawyers, business owners, and other successful individuals.
The company only invests in Philadelphia and targets areas near universities and hospitals. It finds land available for purchase that fit into one of three categories: sheriff sales, Philadelphia redevelopment authority, or For-Sale-By-Owner homes.
National Realty then puts together builders, banks willing to give mortgages, and the investors. The company collects a 3.5% fee of total closing costs and then receives additional property management fees every month.
National Realty says that one reason its business works is that builders are hurting right now. They need bids and therefore will work for relatively low prices. A 10-year property tax abatement in Philadelphia are also helping.
So, in summary, National Realty says that it is not too good to be true. It argues that it can take advantage of low land prices and building costs in Philadelphia and help its investors earn strong returns.
Below, a PDF of one of National Realty's finished homes and the text of the radio advertisement. And, below that, a letter we received from the company after we published our original article in May 2010.
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RADIO AD:
Attention Investors:
Did you know with only $7,500 down, you can own a Half Million Dollar Investment Property in today's down market?
Did you know - your Investment Property is purchased deeply below market value and includes $100,000 of Bank Certified Built-In Equity?
A Half Million Dollar Investment Property normally requires 30% cash or $150,000 down. But, today qualified investors can get approved - with only - $7,500! That's right - only $7,500 cash in for a Half Million Dollar - 5 year Rent Guaranteed Investment Home from National Realty!
Your Property is 100% New Construction, is Cash Positive monthly, has Rents Guaranteed for 5 Years paying down All Expenses and is Professionally Managed by National Realty!
With $100,000 of Built-In Equity and 100% financing you have almost no cash in! PLUS there is NO PROPERTY TAX for 10 years!
There has never been a cheaper time to own NEW Investment Property!
Call Now for FREE INFORMATION
Call - 201-683-8800
That's 201-683-880
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AFTER - 414_Federal_Street_Final Inspection_Photos 3-9-10
Here is a letter we received from the company after we published our original post:
Dear Vince: I was sorry to learn you were treated rudely and abruptly by one of our phone staff and to see your writing not including the correct due diligence information about our firm. Your blog does however, jump to numerous unfounded allegations and innuendos.
We are specifically appalled at your reference to us as too good to be true. We hereby demand a retraction from you. We are a very client service oriented firm – for those who know us and spend the time to meet with us and study our investment property strategy in detail. We are successful because we have our very high level clients interests aligned with our own in how both parties earn money.
The phones however do get very busy with investors seeking properties daily and so again, I do apologize you were treated rudely and without proper courtesy. You may visit us here at our new Hoboken NJ offices at any time to review dozens and dozens of recently completed and fully documented finished property files and settlement statements for yourself.
You are invited to review our voluminous collection of 4 years of actual Client Settlement HUD Statements from the Banks who provided the clients 100% financing on the properties directly, and the “take out refinance” independent bank’s Final Appraised Value of the home after it was finished 6-7 months after breaking ground.
Each of these independent bank appraiser files from Wells Fargo, Bank of America, Weichert Realty Finance, Trident Mortgage, Lincoln Mortgage, First National Bank of PA etc. verify client built in equity earnings of over $100,000 with 100% financing on the property – even throughout the credit crisis. Because we are very conservative in how these projects are managed, and because the lending bank does its own independent valuation and due diligence process on each project very conservatively, the safety in our properties has been well proven – over years of experience and success.
We have a very happy client list of satisfied customers who repeat with us new projects every quarter or six months. That does not happen if you are doing something “shady” – when full auditable documentation of all project activities is provided.
Now, your writing was very disturbing because it is inaccurate and makes unfounded claims against us that are NOT supported by the facts, so I ask you to reconsider based upon the following facts of our operations documented in our files. To clarify:
1) We never say "NO MONEY DOWN" - not anywhere in our literature, web site, e-mails or verbally. Clients are clearly asked to and required to put in $7,500 cash plus their homeowners insurance. We have a 3.5% Project Management Fee on the total Built in Equity Value our clients EARN - of which our clearly stated $7,500 deposit goes towards. NRIA is very clear about that $7,500 fee deposit and the fact that licensed professionals at independent banks approve the financing of the actual realty project and properties on 100% credit to clients who are full documentary well qualified borrowers. The high level clientele we serve are approved on a case by case basis by the individual independent Construction Banks Lenders we refer them to – not by us. NRIA does not loan money at all and all of our work is independently audited and checked by the particular lending institution involved.
2) All NRIA clients and their spouses attend the bank’s real estate closing to personally sign their own 100% financed Construction Loan and Land Purchase Agreements themselves. Clients are fully disclosed in advance by the licensed bankers they are applying to for credit the unique case by case approval of credit terms. They turn over to the banks loads of full asset and income documentation. To state that somehow NRIA "uses someone's credit to shadily develop real estate" is a totally false statement. The client applies for their loan from an independent lending institution and “uses” their own credit to own a valuable real estate investment property 100% deeded to them and purchased under its current fair market sales value as documented by the institution. There is nothing “shady” about that audited process.
3) NRIA Project Managers meet face to face 2- 3 times over 8 hours of meetings and arrange for the client to tour and visit their Philadelphia property and other just finished properties there before they sign any binding Project Management Agreement or have their closing at a final Philly visit. Any and all client questions are answered in those in depth meetings – and clients never have any misunderstanding about what the value of our services are or the process flow involved in managing and obtaining their investment property.
4) We do not build anything ourselves - we project manage, supervise and audit the licensed and insured builders in Philly that win client contracts. We are hired to coordinate as the clients Project Manager all the realtor, legal, title, banking, property management and architectural licensed professionals required for the project - something our busy professional clients do not have time for.
5) We do NOT FINANCE anything ourselves - all financing is provided by Local Philly Banks who do their own INDEPENDENT Due Diligence on the Real Estate involved and which make their 100% Loan on the Construction Budget and Purchase of Land directly to the client and are licensed professional Bankers to do so.
6) The use of credit is fully disclosed to clients from the bank they are borrowing money from and they sign all their mortgage documents themselves directly including their note and deed.
7) The banks do their own independent audits, valuations, and appraisals of all distressed and undervalued property deals we submit through their own independent appraisers and audit function and verify whether they agree the investment is valuable and contains built in legitimate equity – before they lend a dime to a client. Normally, an unknown client would need to put down 30% cash or $150,000 and pay closing in cash to do a project like ours. With our method – they put down only the $7,500 clearly advertised.
8) When the right piece of land is purchased below market value and built with current wholesale building costs 50% or more below retail market pricing, the property obtains a legitimate and proven built in Equity Value. NRIA has simply harnessed the standard successful Developers Model used by many public development firms (such as Hovnanian or Toll Brothers) and brought it to the small investor. It is our clients who enjoy that development profit directly themselves on title. When you buy undervalue, coordinate construction building far under retail market costs, and help coordinate the Property for 100% Financing from the Lending Bank – you have a true created value proposition. Now just add the HOURS and HOURS of hard work to make it so! That’s what we do every day – make it so.
9) Anyone who calls our phone number will find the address of our new Hoboken Office at 79 Hudson St and is invited to come visit us here - since we moved from NYC. We do not keep that a secret and we told the caller that. We are EASY to find and have clients here in person every day to allow them to perform due diligence on actual files and completed deals registered with the County of Philadelphia recorder.
10) Our Tenant rents are guaranteed by us - as we state in all ads and literature- for 5 years. The strength of the Philadelphia Rental Market is unsurpassed on these beautiful 100% new construction homes we supervise. We have a great property management firm successfully performing this function on hundreds of properties managed with 15 staffers on the street every day in Philly managing. The fact the properties come with 10 Years of Virtually NO PROPERTY TAX – makes the rents cash positive in every case.
11) NRIA makes no commissions on “land, spreads on loans, or construction” as you state. The licensed professionals we coordinate for our clients make all those fees - not us. We do make our 3.5% Project Management Fee on the total project value created when finished of which the $7,500 fee deposit IS THE ONLY CASH IN REQUIRED (plus homeowners insurance).
12) We are not "A Middleman" of any nature - we are independent Project Managers paid a consulting fee by our clients to perform these laborious tasks managing the project and the professionals necessary to make it all work WELL for them. Our interests are directly and completely aligned with our clients - because we make money when they make money. Finally, to state that NRIA "uses someone's credit to shadily develop real estate " is a totally false statement as proven by the mortgage and voluminous client credit documents each customer submits to the bank, the application and initial weeks of due diligence period where everything is reviewed in depth by all the professionals involved, later signed by the clients themselves at the closing in the presence of the bank, title officer, attorneys, realtors, sellers and NRIA personnel there. In four years and hundreds of successful properties completed, we have the distinction among firms of happy clients we care about who achieve solid safe results and then repeat with us. We are only successful when our client’s EARN Independent Bank verified EQUITY from the independent banking appraisal process in effect today, our tenants pay down their mortgages $500 per month or $6,000 or so more per year in rental profits, there is no significant property tax on the home for 10 years, clients get their own CPA approved tax deductions, and clients get what we promised them, and then do it again.
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