Business Overview and Strategies for Investors

As a result of the ongoing economic uncertainty and the current weak housing market, there exists a rare window of opportunity for real estate investors to acquire high grade properties at very favorable prices and terms. Well chosen, properly managed investments made from 2011 through 2013, will have great potential for substantial profits in both the short and long term. Although either investment strategy can stand alone, the higher returns and lowest risks result from the synergy achieved by merging short and long term investment concepts.

Concept 1 – Short Term Investments:

These opportunities consist of purchasing single-family homes that are foreclosures, short sales, or bank owned properties with 100% financing. The goal is to purchase each single-family property at a 30% to 40% (or higher) discount from the true market value, with banking institutions providing 70% loan-to-value financing. These properties will be rented for 3 to 5 years, then sold. As part of a cohesive real estate investment strategy, the short term profits will be used to pay down debt financing on the long term investments to improve long term cash flow and cash positions.

Concept 2 – Long Term Investments:

Investment grade apartment complexes with a reasonable market price are difficult to find and finance. Broadening the market search area to include all of Massachusetts, Rhode Island and Southern New Hampshire will ensure finding the right properties. Forming a Real Estate Investment Group, with an initial capital investment of $5,000,000, will facilitate the acquisition of these properties. The group will target individual properties with a purchase price of approximately $5,000,000, with a 10% down payment from the real estate group, 10% secondary financing from the previous owner and 80% mortgaging from banking institutions. With $5,000,000 as seed money, the group could acquire $35-$40,000,000 of real estate over 5 years with a subsequent holding period of 10 to 15 years. Based upon a 2-3% annual inflation rate, over ten years, properties could generate $8 – $12,000,000 of profit. In addition, amortizing the mortgages over 30 years would alleviate cash flow challenges; while actually paying down the mortgages on an accelerated 15 year pay-off schedule could provide an additional profit of approximately $12,000,000. Rents over time could also provide an annuity to the investment group.

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