Investors/Advice Needed

[BuySellCincy]

Hey Guys!
I am brand new to this forum and a 19 year old Realtor out of Cincinnati, Ohio. I absolutely love Real Estate, and have been obsessed with it well forever? Sick eh? . Anyways myself and two of my close friends have formed a company known as Buy Sell Cincy Development. Our website which has just been thrown up quickly (not the final product) can be found at buysellcincy.com

Basically here is the outline of what our company is. We have created a bit of a hype here in Cincinnat already and have a very strong 20 page business plan if any investors are interested please email me at drobertson@buysellcincy.com

This is an extract from the business plan, some of the names of companies and names of individuals have been removed to protect their confidentiality and privacy!

BUYSELLCINCY DEVELOPMENT LTD. Description

BUYSELLCINCY DEVELOPMENT LTD. is to be founded in 2007 by ====, ==== and ====. The company will be a real estate investment firm with a focus on residential renovation and sale for profit. The company will accomplish this goal by purchasing houses, condos and/or apartment complexes below market value that are in need of repair, repair them with excellent craftsmanship, and make the property ready to be put on the market. These properties will then be sold under ==== or ==== via ====, depending on the project.

The homes to be bought will be thoroughly researched through area analysis, D.O.M, Demographic information, and potential. The renovations will all be completed by professionals who will be working exclusively on these projects. All companies employed will be thoroughly checked to ensure they have liability insurance, etc. Crews will be working back to back in order to ensure maximum profit in a minimum time frame.

In regards to time frame, the “flip” will take between 4-6 weeks depending on the individual needs of the property. The home ideally needs to be purchased with cash, as this puts us in the ideal situation financially to obtain the maximum amount of profit. If the home is purchased with cash it is one investment, and we would not have to finance with banks, etc. In addition if we were to go through the traditional bank financing we would need to take out a loan which takes months to obtain, an FHA loan to cover the home and repair costs. This would be costly in regards to application fees, and the likelihood that we would loose the home to other investors is high. Paying cash allows for a quick closing (i.e. 1-2 weeks) compared to the traditional 45 days. With a traditional loan as well we would do an interest only loan to keep carrying costs to a minimum however this is simply money thrown away. Paying with cash eliminates all of this and allows for maximum profit, as we would not have to pay interest on a loan.

The homes to be purchased will mainly be bank owned due to bankruptcy/foreclosure, etc. These lenders negotiate low prices as they do not want to have the homes on their inventory. Many of the homes need repairs/updates. This is where we come in and purchase the home for cash quickly, turn around and “flip” the home reselling it for a major profit within 1-2 months.

The developmental aspect of BUYSELLCINCY DEVELOPMENT LTD. will be handled by ==== in correlation with ==== Urban Development team out of Mt. Adams in Cincinnati, Ohio. This team is that is to be established will be finding properties in the Cincinnati area that are in need of rehab and then bring them to the team for discussion and planning. A team decision will then be made on whether or not to acquire the property or to pass on the property. Extensive research done by both ==== and the === will be conducted in order to see if the property is worth the acquisition. These properties that will be considered for rehab development will consist of condos, office buildings and apartment complexes. The amount of work that is needed to rehab these properties will be determined by the BUYSELLCINCY DEVELOPMENT LTD. team at an Executive Meeting.

Once a decision is made to acquire the property, at the Executive Meeting, the development team will then begin to construct an Executive Report for that specific project which will include plans from start to finish on the project and future projections. Once the Executive Reports are completed the BUYSELLCINCY DEVELOPMENT LTD. team will present the report to investors, the city and area businesses that will potentially help in funding of the project. The BUYSELLCINCY DEVELOPMENT LTD. team will be working very closely and under contract for an un determined period of time with the === Urban Development office to provide the necessary resources to complete the project in an efficient and timely manner. Their services include finding us architects, designers, city funding, marketing and guidance through the projects. They will stand essentially as the BUYSELLCINCY DEVELOPMENT LTD. brokers.

The company will be run by three individuals, ====, ===, and ===. === will be in charge of all matters involved in the real estate aspect of the business, including negotiations, contracts, and the actual work being done on the homes, condos, apartment and office buildings. He will also act as the listing and purchasing agent as he is a licensed Realtor with ====. The flipped homes, rehabbed condos, apartments and offices will be put back on the market and advertised after all work is completed, in order for the professional photographers to come in and take pictures. Some advertising will be handled by ==== realtors, however part of it will be included in a budget the price of which is to be determined.

Our Vision

BUYSELLCINCY DEVELOPMENT’S LTD. vision is to create community relationships through the success of our projects. Our vision is providing properties that are AFFORDABLE, SAFE AND EFFICENT. When the BUYSELLCINCY DEVELOPMENT LTD. sets out to pursue a project this is what is the project is based around and the solid foundation of our company. If we can provide all of these things and make them the core to our Development company and this his how we will build client loyalty this way.

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I would love to hear your feedback and advice. We have taken months in preparing everything, etc and the investors we have talked to so far have been beyond impressed. If you are interested in investing I would be more than happy to fill you in on the details of the projects we are looking at, simply get in contact with me!

Thanks

David
Buy Sell Cincy

[Young Spark]

Sounds like a promising business, but I have a question or 2:

1. How would you propose paying back the money provided by the investor's and of course, many would want interest back on their money invested in the property.

2. Have you thought about possibly being under ownership of a parent company? Just a general question cause I know under a parent company (a company that own's your business (becomes the owner), but management and everything remains the same) will allow them to use their funds to purchase the property and everything and you don't have to pay them back because the more they invest, the bigger their business capital will rise.

Send me a PM, maybe we can talk something.

[JoshH]

Hey

I am a 24 year old real estate investor myself. Overall I think your idea sounds good,but I am also curious as to the answers to the same questions young spark mentioned.

Josh Houghton
2nd Chance Houses
The Real Life Real Estate Blog

[BuySellCincy]

Thanks for the quick answers guys.

In responce to your questions we are contemplating several options with potential investors:

A) Paying them their money back plus a percentage of the profits (10%?) once the properties have sold. This would be for large commercial sized properties such as large scale condo conversions, etc.

If it were residential "flips" the split for profit would be 60% to us 40% to the investor for the first 3 months, if the property had not sold by the agreed number of months then the investors profit increases by 5-10% every month to show we are serious about getting in, out, and money in everyones pocket.

B) Paying them back almost like hard money lenders with an interest percentage on the over all loan.

We are hoping more for the first option as it will have the investors more "involved" in the project, as the outcome directly impacts them. Hopefully that gives you guys a little bit more information about what we are looking to do, and like I said I would love any advice/input you guys would have.

We are also hoping to do a documentary/blog or something maybe with TV coverage of our attempt to help revitalize this historic area of Cincinnati back to its former prestige. It is officially called Cincinnati's first "neighborhood", so it would be nice to be able to bring it back to its former glory!

[BuySellCincy]

In responce to the question about a parent company. That might be something we may be interested in at least at the beginning stages of the company.

The only thing is finding such a company here in the Mid West. If you know of anyone who may be interested and also has the financial backing to be able to provide us let me know!

[Young Spark]

Sounds like ya'll have a good plan in mind, shoot me a PM and as I said, we'll talk a something.

[BuySellCincy]

Thanks sent you a PM with the business plan etc.

Anyone else have thoughts/comments etc?

[DrMoney]

Not bad, but how is the market where you live?

[BuySellCincy]

the market is actually very strong here in Cincinnati. As a lot of the nation has experienced naturally the market has cooled a little bit, but so far we have been having record sales this year.

Luckily as well the rehab business has not been explored too much here in Cincinnati and the surrounding areas, at least not by people who have the knowledge to do it successfully, maybe by some who have watched too much Flip this House!!

Like the famous Mark Twain Quote "If the world ever ended, I would move to Cincinnati, they are 10 years behind the times"!

[jasaunders]

I find it strange that in your first situation for large commercial deals, the investor is taking 100% of the risk by investing the entire amount needed, but is only going to get 10% of the profits.

In regards to: "In regards to time frame, the “flip” will take between 4-6 weeks depending on the individual needs of the property."
- This is very, very optimistic. Most flips take much longer. In markets all over the country, houses are staying on the market longer before being sold. Assuming from the time a contract is finalized until closing is usually at least 30 days, you are pretty much saying you are going to buy a house, repair it, and sell it within 0-2 weeks.

"In addition if we were to go through the traditional bank financing we would need to take out a loan which takes months to obtain"
- It does not take months to get a loan. Typically, banks prefer about 30 days for mortgages, but only to give them time to check things out in your application. If you are in a rush, banks are often able to approve a mortgage within 1-2 weeks. I think the bigger problem is likely that you and your partners are young, have no assets, and no credit to get a mortgage at a reasonable rate.

"The homes to be purchased will mainly be bank owned due to bankruptcy/foreclosure, etc. These lenders negotiate low prices as they do not want to have the homes on their inventory."
- These are also very risky because often times when houses are being sold in foreclosure, you are not able to do a walk-through with a home inspector. You might end up having to do a lot more repairs than anticipated.

In general, there is a lot of ambiguity in your business plan. You often use the word ecetera when you should be describing everything in detail. There are lots of details missing from your b-plan.

Just some constructive criticism.

[Young Spark]

^^ Josh, you made some good points, I must say honestly that is some questions that should be answered (that I biasly didn't sit down to review.) So what are your responses BuSellCincy? j/w

[BuySellCincy]

JaSaunders,
Thanks for the questions! Like I said we definately appreciate the constructive criticism. I definately understand where you are coming from. I guess it was kind of my fault for only posting a portion of the business plan as it is a lot longer and explains a lot of the things in more detail.

I know the 10% profit doesnt seem like much. That was one proposition we had for the overall large commercial deals. But since we have re-thought that and decided to make it a 60-40 split with 60 going to us. However the investors split will go up by 5% per month if the property has not sold by a certain agreed upon date. That shows our motivation to sell the property, etc.

In regards to the time frame for the "flips" I was meaning for the actual work projects to take between 4-6 weeks. This was not inclduding marketing time which we would like to keep to within an additional 2 weeks. The way we plan on doing this is by heavily researching the property through recent sales, area demographics, location research, etc in order to ensure that there is a large profit margin (50k +). Then we would price the home about 5% below its after repair appraised value. This will allow for a quick sale, as I have done this many time with Investors I have represented as a Realtor in the past here in Cincinnati.

You are correct in regards to obtaining the bank financing, we are young and being not 2 years in the Real Estate business hurts me being able to get a loan. This is mainly as we are independent contractors as Realtors and therefore there isnt really a proof of income or W-2, however you need to do a limited-doc form which requires 2 years job experience. We would like to avoid the very high interest rates that come with hard money lending, points, etc.

In regards to the bankruptcy/foreclosure homes I unfortunately feel this is a typo by my partner who put most of the plan together in its final state. We would never buy a home without a whole house inspection as it simply isnt worth the risk especially as a lot of the foreclosed homes have been neglected by their owners, etc. This can lead to unforseen repair costs which double or even triple your original budget. As I mentioned before all of the homes will have thorough research done about what they truly can sell for, etc. This narrows down the number of properties we are willing to go after however the profit margin is a LOT higher on these properties. Hopefully that all makes sence as I am typing this while eating my breakfast!


Thanks again for the constructive criticism I really appreciate it and I will work on getting the business plan a bit more descriptive in those areas. Hopefully I have answered the questions more, etc.

[BuySellCincy]

bump bump bump

[rush1169]

Almost sounds like you could have your potential investors watch a few epsiodes of "Flip this House" and tell them you are going to try to copy that team to a 'T' - and there you have your business plan. . .

Seriously, between you and two friends you are not able to figure out a way to buy a property with your own assets and credit worthiness - just one cheap crack house to prove to at least yourselves that you can pull this off, why would an investor be remotely interested? Tell me about your experience in doing this stuff. . .