HOW IS THE MONEY USED?

On a new home purchase requiring renovations. The cost will be allocated to the purchase price, renovations, carrying costs, cost to resell, and also a small buffer for unexpected expenses.

HOW CAN YOU AFFORD TO PAY SUCH HIGH RETURNS?

We make our money on the purchase, and this allows us to purchase 20-30% below a retail purchaser. This instantly creates thousands of dollars in equity. Typically, we also cut out the middleman in a transaction, i.e., commissions, mortgage broker fees, loan fees. Our attorney costs are usually also lower, because there is less paperwork to review.

WHAT IF THE MARKET GETS WORSE AND HOME VALUES GO DOWN?

This is a great question and valid concern. However, our strategy is not to speculate 3 years down the road. Our goal is to purchase quickly and sell even faster. Most of our projects are complete in 12 months. The market doesn’t tend to shift that dramatically in a matter of months - it’s typically a longer process for an area to decline. Remember, we’re buying in strategic areas where inventory is already low and demand is high; this greater minimizes our risk.

WHAT RATE OF RETURN I DO YOU TYPICALLY PAY YOUR INVESTORS?

Most of our investors are paid from 10%. Our rates depend on the purchase price of the property and rehabilitation involved. The lower the purchase price, we can sometimes afford to pay a little higher rate to make sure our investors make it worth their time.

HOW LONG WILL MY FUNDS BE HELD?

The majority of our projects are set up on an 12 month term, but it depends on the size of the project. If we are doing a teardown and rebuild, we will have to wait on the county inspectors for approvals. This will cause delays. But we account for all of those details upfront and will give you estimated time frame for the return on your investment beforehand.

WHEN WILL I RECEIVE PAYMENTS?

Typically, we pay one large lump sum at closing on a short-term deal. On a longer note, we will pay monthly, just like a typical mortgage.

IS THERE A GUARANTEE ON YOUR INVESTMENT?

No. There is no government backed guarantee on these privately held real estate investments. However, if at any time we were to default on the loan, investors may have the legal right to take the property depending on the agreed upon investment terms and the structure of the deal.

WHO BUYS INSURANCE?

We do. We pay for a title search and also a title policy on the home, just as we would in a typical transaction.

WHAT KIND OF INSURANCE POLICY DO YOU GET ON THE HOME?

If we purchase a renovation, we get a builders risk policy (Vacant Dwelling Policy). In case of any damage, insurance distributions would be used to rebuild or repair the property, or used to pay investors.

WILL MY MONEY BE POOLED WITH OTHER INVESTORS?

It depends on the investment strategy. For single-family unit investments, we may not pool funds as the purchase price for these properties is usually on the lower end of the spectrum. For multi-family deals, we pool investor funds as these require significantly larger equity investment.

IF YOU DEFAULT ON THE LOAN, HOW DO I ACQUIRE THE PROPERTY?

In this unlikely scenario, we would simply transfer ownership of the property to you, depending on the investment terms agreed on.