PARTNERSHIPS
Equity Partner Program
Many investors have wanted to get involved with real estate, but have not because of the potential headaches of being a landlord. The thought of advertising for and screening tenants, applying for financing, dealing with repairs and problems, negative cash flow, evictions and so on. While there are other ways of investing in real estate, such as buying foreclosed properties, short sales, rehabbing and many more methods, these opportunities require plenty of cash or credit, significant time, skills and education. However, there is a way to invest in real estate and earn excellent returns without any of the headaches or commitment of traditional real estate investing.
Just Real Estate Solutions has an Equity Partner Program where your investment is pooled with others to enable us to purchase undervalued properties and resell them for quick profits. Such properties include foreclosed properties or properties in the pre-foreclosure process, or properties that need to be fixed up before reselling. Typically, we seek out properties that can return a net profit of at least 20% on the amount invested. The property is purchased through a Limited Liability Partnership with Just Real Estate Solutions or one of our associates as the General Partner. The limited partners receive 40% of the profits from the resale.
If you have the investment capital to finance the purchase and rehab of a lower-priced property yourself, then we will set up a joint venture agreement between you and Just Real Estate Solutions or one of our associates. We purchase the property using your funds and have one of our rehab contractors do the rehab work at below-market costs. Upon completion, the property will be resold. You and the contractor will each receive 45% of the profits from the property. Your interest in the property is secured with a recorded first mortgage. We can also arrange a joint venture between you and another investor where you provide the down payment money to acquire a larger property. The investor qualifies for financing using a "hard-money" lender. Upon completion of the rehab project, the property will be resold and both you and the investor will each receive 50% of the profits.
For example, assume that a foreclosed house is purchased all cash for $60,000 using money from 2 investors and resold for $100,000. After broker's fees, transfer taxes and other closing costs, the net amount of the sale is $92,000, which leaves a $32,000 profit. The limited partners would share in $12,800 of that profit. As a percent of the $60,000 invested, $12,800 is a 22% return. The typical holding time before a property is resold is less than 6 months, meaning the effective annual return on your investment in this example is 44%! You receive your share of the profit in proportion to the amount your investment is to the total amount. For example, if you invested $30,000 and the total investment was $60,000, you have a 50% share of the limited partners' profits, or $6,400 in this example. Since you invested $30,000, your return on investment in this example is still 22%.
As an example of going it alone on an investment, suppose the purchase price of a rehab property is $25,000, the closing costs are $2,200 and the rehab costs are $11,000. The total investment on your end would be $38,200. After rehab, the property sells for $65,000, with an after-settlement proceeds of $59,800. This leaves a gross profit of $21,600. You and the investor would each receive 45% of this profit, with your share being $9,720, for a return on your investment of 25.44%. All in less than 6 months, on average, for an annualized return of over 50%!
What about the safety of your investment? We make purchase decisions based on an 8-step evaluation program:
•Comp Analysis by a Realtor. We get a complete comparable market analysis by a Realtor so we know what the property will be worth when it is rehabbed.
•Resale Velocity. We look for average time on the market for similar properties. This lets us know how long to expect the completed property to be on the market once it is rehabbed.
•Condition of Nearby Properties. We look at the condition of the other properties on the street. We will not purchase a property and fix it up, only to have it be the nicest property on a street with boarded-up or broken-down houses.
•Property Inspection. We do a thorough property inspection using a trained contractor, and, if a decision to purchase is made, a certified property inspector. Results of the certified inspection are used as a go/no go decision.
•Title Search. All offers are contingent on the seller being able to provide good title, meaning no liens, judgments, or other existing claims.
•Rehab Cost Analysis. We use our Property Analyzer spreadsheet to do a thorough analysis of what it will cost to rehab the property.
•Total Cost to ARV Ratio. We look for properties where the total cost of purchase and rehab is less than 70% of the estimated after-resale-value (ARV), as based on the market comps or from a certified appraisal.
•Insurability Report. We pull an insurability report from the Comprehensive Loss Underwriter's Exchange (C.L.U.E.), as offered by Choice Trust. This report gives us a loss history on the property, which can affect its ability to qualify for homeowner's insurance by the end buyer.
When we purchase properties, we are not speculating in properties or paying retail prices, hoping that the prices will go up. We also do not leverage our purchases, meaning there is no mortgage on the property (unless a hard-money lender is used to finance a more-expensive project). How do we find these deals? By working with experienced real estate agents who deal in what are known as "distressed" properties, ones where the owners want out and are willing to sell the home at a fair discount. We also find and investigate properties that are owned by banks, mortgage companies and insurance companies. We find properties that have been abandoned or are in need of repair. We also purchase properties from wholesalers who have found a great deal on their own. Regardless of how the property is obtained, we do careful research to determine what the property would sell for after it is fixed up. Thus, you can be sure that your investment is only going to a property that will have a much greater value in a short time. There is almost no chance that the value can go down. And remember, as a sole investor on a property, you will receive a mortgage on the property, ensuring that you are first to get your certified funds when the property is sold.
Unlike other limited partnerships, there are no upfront fees. Your full investment goes to work to obtain and perhaps fix up a property. We get paid only after we do our work and make money for you. You have complete access to any expenditures made on behalf of the property.
In summary, here are the benefits of our Equity Partner Program:
•Potential annualized returns of 50% on your investment.
•No headaches of property ownership.
•Short investment period of 6 months or less.
•Limited risk of principal loss.
•No upfront partnership fees.
If you would like more information on our Equity Partner Program, send us an e-mail or call us directly.
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