Our mission is to create investment income through the purchasing and reselling of distressed homes. A targeted 50% profitability will be generated by performing cosmetic or functional improvements to single and multi-family homes. These renovations will significantly increase the value of the property and make it available for sale to a focused customer marketplace.
We are going to require a minimum $10,000 capital investment as we start from a private investor with a $25,000 investment being the ideal. A private investors return will be a % of profit equal to the % of their investment to the total costs (purchase price, holding costs, improvement costs, commissions and general contractors fee) of the project their money is invested in. One investor will be directly invested in an investment property and will be capped at 25% of total costs.
Example of a mock deal and Private Investor Terms (this is for illustration purposes only and does not reflect actual values):
| Example of a Rehab Investment | Payouts | |||||
| Sales Price | $ 289,000 | |||||
| Purchase Price | $(150,000) | Capital Investor | Return % | |||
| 13% | Improvement Costs | $ (20,000) | Capital Inv | $ 20,000 | ||
| 5% | Holding Costs | $ (8,500) | Return on Inv | $ 9,939 | 50% | |
| 4% | Sale Commision | $ (11,560) | $ 29,939 | |||
| 15% | General Contract Fee | $ (3,000) | ||||
| Total Costs | $(193,060) | |||||
| Gross Profit | $ 95,940 | |||||
| 10% | Investor Capital + Return Payout | $ (29,939) | ||||
| Reveal Investments Net Profit | $ 66,001 | |||||
Reveal Property Investments will operate in the state of Massachussets. This area will include the communities from South in Cape Cod, West to Worcester and North about Andover with our target price range of $50,000 to $250,000 with the ideal property being but not limited to a 3 bed, 2 bath in sq. ft range of 1,000-2,000 sq. ft.
Reveal Property Investments has developed a strategy around the purchase of homes in the $50,000 to $250,000 price range. This price represents homes on the lower end of home values in the targeted neighborhoods. A price differential of at least $70,000 between our purchase price and typical sales prices is necessary for each purchase. This will allow us to absorb a renovation and acquisition expense of approximately $10,000 to $20,000 and still net $50,000 to $60,000 profit from each deal. In order to appeal to the widest audience of homebuyers, these homes will be at least 3 bedrooms, located on side streets close to schools, beaches, and inclusive of certain amenities which are desired by young, professional families or vacation rental properties.
The target neighborhoods are also well populated with sellers that are significantly motivated to be creative in the sale of their property, in addition to purchasing foreclosed properties from banks. The "distressed" seller situation can be created for several reasons. The owner may be having trouble selling the property, or may be forced to move quickly to satisfy some pressing personal issue. We will attempt to locate sellers that fit one or more of the following profiles: divorce, estate sales, unemployment, property in disrepair, job transfer, property management problems, absentee ownership, investor washout, tenant problems, retirement, or any other emotional dissatisfaction with the property. It is anticipated that these homeowners will be willing to negotiate on price, terms, or possibly both.
To be successful in real estate investing, a strong partnership must be built with many service providers that have an intimate knowledge of the neighborhoods we have selected. This list of business contacts includes but is not limited to real estate brokers/agents, chamber of commerce, local investment clubs, financial institutions, utility company repair personnel, title insurance companies, local government personnel, and others. Our partnership also leverages the strong alliance with Next Level Realty Agency and Next Level Mortgage Brokerage Company.
The investment strategy for Reveal Property Investments includes a renovation for every property purchased. Obviously, homes that can be purchased well below market value with very little repair required are optimum investments, but difficult to find. It is anticipated that every home will require at least cosmetic improvements to bring the home up to maximum value and allow it to be sold quickly. To perform these renovations, Reveal Property Investments will enlist the help of building trade contractors to perform each of the tasks needed. Reveal Property Investments will act as the general contractor and manage each rehab according to rigorous project management and timeline processes. Once we reach our goal of two houses per month, the volume of work should keep a consistent crew of quality contractors busy nearly full-time. Each project is expected to be completed over a 4-6 week period, depending on the complexity of the renovation. During the last several years, extensive research into home resale value and consumer buying habits has yielded six specific cosmetic home improvements that significantly increase the desirability of a home. These tasks can become more difficult and costly in homes of severe disrepair, but the costs are usually more than accounted for in a lower purchase price. The six tasks and corresponding estimated costs for a typical 1,200-1,400 square-foot home are:
|
Kitchen cabinet and counter tops—cosmetic improvements are usually adequate but on occasion a complete replacement is necessary |
$1,000-$3,000 |
|
All vinyl and carpeted floors will be replaced or overlaid |
$1,500-$2,000 |
|
Bathroom fixtures (including vanities) will be replaced |
$1,000 |
|
Entire interior of home will be repainted |
$1,000 |
|
Vinyl siding will be applied to any house that is lacking in curb appeal |
$3,000-$4,000 |
|
Landscaping (seasonal) to improve lawn, trim shrubbery, plant flowers |
$500 |
|
Misc. "polishing" |
$500 |
Again, each house will be evaluated on its own merits but the renovation costs are expected to range from $10,000-$20,000. Any property purchased at $30,000-$50,000 below the market value of the neighborhood, will provide sufficient differential to achieve our 50% return on investment in a 2-3 month period.
The Reveal Property Investments renovation process model assumes that the above 6 tasks represent the majority of work to be done on the property. This assumption will be validated prior to purchase, due to a thorough inspection of the home to ensure mechanical and structural integrity. On occasion, however, a home will be available that represents a larger purchase—resale differential opportunity, but requires structural or other major remodeling expenses. These could be homes that are in terrible disrepair, natural disaster damage, or simply a small ranch home that is surrounded by larger colonial style homes in an affluent neighborhood. These cases do not meet our typical investment strategy, but could be considered, depending on the money needed and the longer time that the money will be tied up during the completion of the project.
Once the homes have been renovated, they will be placed back on the market through the traditional real estate sales process, which is possible through the strength of having a real estate broker as an equitable partner on the team. The terms that will be offered to prospective buyers, however, will be equally as creative as our purchase techniques. Since our target market is young professionals that have good earning potential but probably not much of a down payment, we expect to offer assistance with portions of their closing costs, and/or down payment, in order to make it easier for them to get into the home. The actual sale price of the home could be negotiated up as well if the buyer wanted to add some amenity to the home to suit their lifestyle, for example, central air, garage, appliances, furniture, or any other capital expenditure that they wanted to roll into the loan. The sales contract itself could be structured any way that works best for the buyer, as long as we can obtain our initial cash investment back out of the property at close.
It is expected that with the current low interest rates, most buyers will choose conventional bank financing to purchase the home. This works out well for all parties and provides us the money to immediately reinvest in another property.
As a real estate investing firm with a high technology flair, Reveal Investment Properties will be managed much differently than traditional small investment companies. Utilizing our significant expertise in information systems, financial controls, and project management, Reveal Property Investments will be a very tightly managed enterprise. In addition to the individual property financial analysis process mentioned earlier, a corporate financial control and reporting system has been developed for the business as a whole. Meticulous recordkeeping and continuous transaction monitoring will be accompanied each month by a profit and loss statement that would be used to track the performance of the company for all parties involved.
We will also be looking to provide a level of service to our private investors thru our website http://revealproperties.ning.com/. Our investors will be able to see up to date progress, pictures and videos with the properties in our portfolio. This in addition to a wealth of tools to help with our goal to build wealth for our clients.
Are you ready to start building additional investment income with a powerful team of experienced real estate professionals? Please contact us to take advantage of this great time to invest in real estate immediately.
Reveal Property Investments
John Herlihy - john.r.herlihy@gmail.com
617.304.4915