Once we have located a property that looks like a "deal", we get that property under contract and form a Limited Liability Company (LLC) to organize the equity investors. At this time we also begin a very detailed due diligence process. If previously undisclosed items are discovered that negatively impact the value of the property we conduct further negotiations for the property. If all negotiations are satisfactory we move forward with the project.
Once the financial due diligence process is complete, investors are notified of the opportunity and given a brief property package describing the property, a project management plan overview, and projected rates of return based on that plan. At this time, potential investors are asked only for an expression of interest in participating in the project. Those Equity Investors who are interested in participating in the project will be given a Private Placement Memorandum (PPM) that provides the complete details for how the LLC will operate. Only after the Equity Investor has signed the PPM will the Property LLC accept funds into an escrow account that is dedicated to that property. If the project does not close then all escrowed funds are returned.
We are committed to regular and complete communication with our investor partners. Prior to closing the deal and immediately following the closing the communication will be frequent. After a month or two, if all is going as planned, we will move to regular quarterly meetings. Anytime a significant negative incident occurs, investors will be notified immediately.
Normally, projected cash-on-cash distributions are made on a quarterly basis but this will be specified in the PPM. When we execute our exit strategy or refinance, investors will be paid back part or all of their initial investments plus their proportional equity from the project.
Acceptance Into a Project
Acceptance into a project is based on the following criteria:
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An equity partner is offered ownership in the project with a projected rate of return that is higher, sometimes significantly higher, than debt partners receive. Equity partners assume risk because there is no guarenteed rate of return and they share in any potential loss. (Our current goal for annualized returns on investment is 20% or better.)
Our target buying criteria are based on years of real estate investing experience
a) Property must cash flow within 90 days of purchase
b) We look for a minimum cash on cash return of 10%
c) Cap rates of 10% or above
d) Minimum Debt Coverage Ratio of 1.3
e) Properties that offer instant equity are a big plus
• Property Characteristics
a) 100 plus unit properties preferred because they can support on-site management and great control b) Smaller properties, such as, 20 - 80 unit properties may offer greater profits because they are less sought after
c) B and C class properties located in A, B, or C areas
d) Property must have a value add components to drive property value higher
e) Preference given to properties with pitched roofs rather than flat roofs
• Regional Criteria
a) Strong job base for blue collar workers
b) Within 35 miles of a metropolitan area with
i) 100,000+ population
ii) Airport with at least one major carrier
iii) One Major highway coming through the area
iv) State Capitals, Universities, big box retailers, all a plus
c) Solid Infrastructure in place
d) Job Growth is a major plus
e) In the path of progress is a big plus
a) Buy at less than retail, usually 65% after repair value or less
b) Standard Bread and Butter homes (3 bedrooms 2 baths) preferable
c) Located in a good job market, at least a C neighborhood
d) multiple exit strategies (key for profit)
A debt partner is be paid an above average predetermined return on the money they loan. If loaned on a specific property the loan will be secured by that property.
Investing in You and Your Future!
The overall theories of successful real estate investing are straight forward: buy low, sell high, and collect positive cash flow during your holding period. Successful execution is another matter entirely. With proven processes and a solid team we create the best possible opportunity for successful project execution.
Our best successes are achieved by taking the time and making the effort to develop preferred relationships with investors, brokers, attorneys, contractors, property managers, and other professionals. Our emphasis on cultivating these key relationships occasionally affords us the opportunity to access great deals before the public has a chance to see them. When this happens, our investors have even greater opportunities to grow their wealth.
We are keenly aware that our relationships with those we work with is based not only on the specifics of the opportunity but their trust in us. We strive to conduct business in a conservative and highly ethical manner and thus allow us to earn the confidence, respect, and trust of our investors and team.