|
Summary
Alamo City Investment Property will be a low-end, residential, wholesale real estate, startup company
operated independently by me, John Lydic. Currently residing in Cleveland, Ohio, I am actively seeking a
private investor to help relocate my business to San Antonio and act as a passive, cash partner in a low-
end, quick-turn, wholesale real estate operation. This operation will be new only with respect to the
advantages and organization a cash partner will provide. I have been sharpening my skills, fine-tuning my
strategies and broadening my knowledge as a single-family, residential real estate wholesaler since 1999.
Structure:
- Investor dedicates, or earmarks, $200,000 in liquid funds for the purchase and resale of single-
family, residential investment property in San Antonio
- Investor will maintain control of funds by wiring all substantial monies directly to 3rd party title
agencies or closing attorneys licensed in the state of Texas where all transactions will be executed.
- Funds will be allocated for the purchase and resale of (4) properties, essentially dividing the total
investment into (4) individual allotments at approximately $45,000 each. Investment covers all costs
to acquire and sell property including purchase price, closing costs, hazard insurance and marketing
expenses.
- An inventory of (4) properties will be established and maintained on a rotational basis. For example,
when one property sells, another is purchased.
- Upon sale of any given property, total investment including all expenses for that particular property
is returned to investor, and net profit is split 50/50. Returns are realized throughout the year.
All properties are bought and sold through a Land Trust. The Land Trust will serve primarily as the
agreement between you, the investor/beneficiary, and me, the Trustee/beneficiary. The Land Trust simply
describes a partnership, provides protection and allows for anonymity.
- Investor’s name is kept off public record.
- Income reporting is the sole responsibility of each beneficiary.
- Judgments or liens against an individual's name are not a lien against the land trust property.
- Partners can easily continue a project without legal entanglements if one is divorced or, respectfully,
dies.
Return on Investment
An 18% to 30% return to investor is projected annually, or, numerically, $36,000 to $60,000 on a $200,000
investment, which represents 50% of total, net profit.
Total Net profit per property will typically range from $6,000 to $10,000. Projections are based on first-
hand experience, having personally bought and sold more than 50 properties over the course of several
years in Atlanta, Georgia.
- $6,000 divided by 2 (50/50 split) = $3,000 each
- $3,000 x 4 properties = $12,000
- $12,000 x 3 (properties turned tri-annually, every four months) = $36,000
- $36,000 divided by $200,000 = 18%
- $10,000 divided by 2 (50/50 split) = $5,000 each
- $5,000 x 4 properties = $20,000
- $20,000 x 3 (properties turned tri-annually, every four months) = $60,000
- $60,000 divided by $200,000 = 30%
Turn-around time is estimated conservatively at 4 months. I have bought and sold houses in less than a
month, while a smaller few have lingered up to 6 months. Overall, my turn-around time in Atlanta has
averaged 3 months.
First year expectations should be estimated conservatively at the lower-end. As I work to establish a
foothold in the San Antonio investor market, through innovative marketing, the development of a strong
buyer’s list and establishing working relationships with banks, asset managers, realtors and other real
estate professionals, we should expect to meet or exceed a 30% return on investment in our second year.
Startup Costs
First, all identification, documentation and verification, such as, driver’s license, social security, proof of
current address, VIN number on vehicle, references, whatever is necessary to confirm my legitimacy, is
expected and will be provided. (Itemized startup costs available upon further inquiry.)
Initial startup costs have been allocated within the $200K investment and NOT in addition to: Startup costs
include $10,000 for relocation and business setup, plus subsequent, short-term bridge funds at $2,000
per month (for three to six months) until profits begin to flow.
One-quarter ($2,500) represents your commitment to the operation, puts me on the road and is required
as an earnest deposit to initiate our partnership. Another $2,500 is required upon my arrival when we
shake hands and will allow me to secure a modest living arrangement where I can launch the business.
After a permanent address is established and verified (within 10 days), the final $5,000 of initial startup is
required to cover immediate business expenses, allowing the business to be fully plugged in and
operational within the first month.
All initial startup costs as well as all short-term bridge funds are recouped by investor. Bridge fund
requirements are estimated conservatively at 6 months and may be dispersed monthly beginning in the
second month. However, it is realistic to expect that bridge funds will no longer be required as early as the
first few months, and repayment of balance will begin. For example, any profits on my side over $2,000
per month will be applied to the startup/bridge fund balance until all startup costs are paid in full.
To simplify, estimated startup/short-term bridge requirements are $16,000 to $22,000, again, all within the
$200K dedicated total.
Logistics
Although out-of-state investors may be considered, the ideal candidate will be local, from San Antonio or
Austin. I state this simply for ease of doing business as well as your comfort level. As a local investor, you
will have personal access to me, see where I live and work and attend closings, if desired.
If you have interest, I do not mind sharing the nuts and bolts of what I do. However, the primary role of the
investor I seek will be that of a passive partner. In other words, I will require complete freedom of judgment
regarding purchases within the parameters I have described above.
You will be kept in the loop to some extent, regardless. Email will be the primary means of communication.
I will provide periodic updates and generally keep you posted with progress.
Funding Coordination:
- Actual purchases will begin by the second month, if not sooner.
- Contract offers on various houses, primarily through realtors who represent bank owned properties,
will be submitted.
- All offers must include proof of funds and a copy of the earnest deposit check.
- The easiest way to show proof of funds is to provide me with a bank statement with account
numbers obscured. I attach a letter connecting you to the Trust and explain that you are the
contributing beneficiary funding the transaction. It will be a good idea to establish a separate, basic
checking account in your name or business entity showing funds at approximately $50,000. After an
offer is accepted, it doesn’t matter where the funds come from and can be wired directly to the
escrow agent.
- I, too, will maintain a separate business account specific to our business for less substantial funds to
be used for immediate expenses, such as, earnest money, marketing expenses, insurance, etc.
Initially, you are more than welcome to control the less substantial funds as well. This will simply
mean more frequent contact, often on a day’s notice, to arrange for various funding. We can tweak
this as we go, toward an ever-increasing convenience for both of us. (I will never ask you for funds
sufficient enough to flee to Tahiti!)
- Ideally, I will maintain $2,000 for each property yet to be purchased, $1,000 for earnest money and
$1,000 for marketing expenses. Some banks require 10% earnest money for all-cash offers; in
which cases, we will make arrangements for additional funds.
- Prior to closing any accepted offer, I will forward the HUD1 settlement statement and wiring
instructions provided by the escrow agent. Banks are the primary source of all properties and
typically require the use of their own closing attorney or escrow agent.
- Upon closing the sale of any property, I will notify you of the closing date and forward the settlement
statement. Again, you are welcome to attend closings, if you wish. I will also provide you with a
breakdown of all costs and gains to determine net profit. You will receive a check for all expenses,
plus 50% of net profit.
- Checks will be disbursed in one of two ways. Some closing attorneys will allow disbursement
instructions; in which cases, we both will have checks cut by the escrow agent in the amounts we
have predetermined. In most other cases, a single check will be cut in the name of the Trust. The
easiest way to deliver your part is to cut a check from the Trust account. Or, initially, we can both go
to the bank from which the escrow check is written and have the check divided into two cashier’s
checks.
- The ease of this entire process is up to you. Initially, I would expect that you would want a closer
handle on the flow of your money. Again, we can tailor the implementation and coordination as we
go.
San Antonio Housing Forecast
2007 was comparable to San Antonio’s “second best year” for resale single-family homes. The San
Antonio Board of Realtors calls 2008, “The year of opportunity” and cites job growth, affordable interest
rates, continued price appreciation and plentiful mortgage funding as positive indicators for the year to
come. With its diverse economy, an occupancy rate of 93% and the prospect of adding thousands of jobs
over the next year, the outlook for real estate investing is bright.
Despite the housing crunch that has swept much of the United States, there are many cities that are viable
for investment. NuWire Investor analyzed data from 98 cities nationwide in order to determine the top 10
places to invest in the U.S. for 2007. San Antonio had ranked #1.
A report released by the Office of Federal Housing Enterprise Oversight shows that San Antonio remains
one of the healthier U.S. real estate markets, with prices appreciating 8.4 percent between the third
quarter of 2006 and the third quarter of 2007. This comes at a time when prices have fallen in many
markets nationwide.
High cap and moderate vacancy rates, low price structure and stable market conditions all contribute to
low risk for San Antonio real estate investors. San Antonio has recently gained national notoriety from
Fortune, Forbes and HomeVestors magazines as one of the best places to invest in residential real estate.
Despite the positive outlook, nobody is going to be talking about the real estate boom of 2007 and 2008.
Instead, they will remember the crash of the sub-prime lenders. The fact is easy financing and refinancing
has become harder to come by for the real estate investor. More restrictions, higher credit requirements
and lower loan-to-values are a reality.
Nevertheless, investors are still buying and selling real estate. The market will correct itself; it always
does. And the invaluable sub-prime lenders will be back, in one form or another, as they provide a much
too necessary niche in the housing market. In the meantime, San Antonio is arguably one of the best
places to be right now for real estate investing.
References
Both Steve Connelly and Jim Greeley are leaders in the industry with whom I have come to know and
respect as friends. Although I have worked primarily as an independent wholesaler in Atlanta, I have
partnered with both Steve and Jim in one form or another, from time to time.
Steve Connelly is a full-time Real Estate Investor and the author of "Guerrilla Real Estate Investing" as
well as the author of numerous articles on Real Estate Investing. He is the creator of the Guerrilla Real
Estate Investing course material and seminar. Among his many accomplishments, Steve is the founder of
Metro Management and Investments, Inc., the founder of Real Estate Investors of Atlanta, the founder of
Haves and Wants, the founder of Endless Promotions International, Inc., the founder of Finders and
Networkers of Clearwater, FL and the former Vice President of the Suncoast Real Estate Association, Inc.
Steve is also a certified speaker and consultant with the Association of Speakers, Authors and Consultants
and is certified with Y2 Marketing as a Marketing Consultant. Steve does mentoring in the Real Estate field
and specialty marketing with several companies.
Jim Greeley is one of the friendliest, most down-to-earth and genuine individuals you will ever meet. Jim
is a full-time real estate investor and owner of Greyhound Properties, which is actively involved in property
acquisition, renovation and development as well as real estate investment education and consultation. Jim
is a natural mentor and is involved in the real estate education industry through Real Estate Navigators,
the largest Real Estate Investors Association on the Gulf Coast, co-owned with Top 10 Properties.
More recently, I have had the opportunity to work with burgeoning real estate entrepreneurs, John and
Paty Opron, through a couple of real estate deals here in Cleveland, Ohio. Paty has recently acquired
her real estate license, and both are sure to succeed in all of their future real estate endeavors.
Contact information available upon further inquiry.
Ready to Hit the Ground Running!
|
|
|
|
|
|
