Download - Creating Strong Returns and Passive Income For Investors THE TRUSTED NAME IN REAL ESTATE INVESTING
Creating Strong Returns and Passive Income For Investors
THE TRUSTED NAME IN REAL ESTATE INVESTING
2
BEFORE WE BEGIN…
1. Meal after the presentation2. Q&A at the end3. Notes
3
BEFORE WE BEGIN…
Multi-Family Real Estate Family Business
Proven Business Model Strong Returns & Passive Income
4
BEFORE WE BEGIN…
My goals for this evening:
1. Make your life better2. Educate & attract3. Get to know you better
5
BEFORE WE BEGIN…
Real Estate Investors Specialize in Multi-Family (apartments) 51 Properties since 2008 20 Million of Real Estate 750 Units 4 Million in private money
Who Am I?
Jesse Worcester
Joel Worcester Paul Worcester
6
WHAT WE’LL COVER
1. Multi-Family Real Estate
2. Family Business
3. Proven Business Model
4. Strong Returns & Passive Income
The next three years are projected to be an ideal market for
We are a
With a
Providing
For our investors.
7
Four Asset Classes
Oil & Gas Silver Gold Food
COMMODITIES
PAPER ASSETS
BUSINESS
REAL ESTATE Stocks Mutual Funds Bonds CD’s
Any Industry Restaurant Manufacturing Tech
Single-Family Commercial 1. Multi-Family 2. Office3. Industrial 4. Retail
MULTI-FAMILY REAL ESTATE
8
MULTI-FAMILY REAL ESTATE
1. CASH FLOW
10 Reasons We Like Multi-Family Real Estate
• Tenants pay their rent
• Rent pays the mortgage, taxes, insurance,
etc
• The remainder is cash-flow….
• Passive cash-flow
9
MULTI-FAMILY REAL ESTATE
2. INHERENT BENEFITS
10 Reasons We Like Multi-Family Real Estate
Loan pay down
Refinance
Depreciation
1031 Exchange
10
MULTI-FAMILY REAL ESTATE
3. SECURITY
10 Reasons We Like Multi-Family Real Estate
Insurance(s)
Real asset
Below replacement value
Strict buying criteria + LTV + Cash-flow
Hedge against inflation
“Investors widely consider commercial real estate an asset class that can help offset the impact of inflation over the long term. In fact, that benefit is regularly cited as one of the advantages of adding real estate to a mixed-asset portfolio of investments. “
- David J. Lynn, Ph.D, managing director and head of U.S. research and investment strategy with ING Clarion based in New York.
11
MULTI-FAMILY REAL ESTATE
4. CONTROL
10 Reasons We Like Multi-Family Real Estate
Value-adds
Rehab, utilities, occupancy
Cutting costs, raising rent
In-house management
Decision making
12
MULTI-FAMILY REAL ESTATE
5. DEMAND
10 Reasons We Like Multi-Family Real Estate
2nd most basic human need
Population growth
Emerging markets
13
MULTI-FAMILY REAL ESTATE
6. LEVERAGE
10 Reasons We Like Multi-Family Real Estate
Bank/debt financing
Other investors
Management
14
MULTI-FAMILY REAL ESTATE
7. ECONOMIES OF SCALE
10 Reasons We Like Multi-Family Real Estate
Easier management
Less maintenance
More profitable
15
MULTI-FAMILY REAL ESTATE
8. LOW VOLATILITY
10 Reasons We Like Multi-Family Real Estate
VS. stocks
Easier to forecast
Less fluctuation (Midwest, Kansas City)
16
MULTI-FAMILY REAL ESTATE
9. APPRECIATION
10 Reasons We Like Multi-Family Real Estate
Value-adds
Emerging markets
Inflation
17
MULTI-FAMILY REAL ESTATE
10. MARKET TRENDS
10 Reasons We Like Multi-Family Real Estate
Today’s market conditions
The next three years
18
MULTI-FAMILY REAL ESTATE
Recession High unemployment Dollar losing value (inflation) Real Estate prices are at historical lows Home ownership at its lowest since 1965
Interest rates at record lows
Today’s Market Conditions
19
MULTI-FAMILY REAL ESTATE
What Does This Mean?
OPPORTUNITY!
Today’s Market Conditions
20
MULTI-FAMILY REAL ESTATE
“Be Fearful When Everyone Is Greedy, Be Greedy When Everyone
Is Fearful!”
- Warren Buffet.
Today’s Market Conditions
21
MULTI-FAMILY REAL ESTATE
61% of all commercial mortgages (1.4 Trillion of debt) are projected to go into default by the year 2012 (congressional report)
What Created this? 2004 – 2006 (real estate boom) Overleveraged mortgages Due in 5-10 years from creation
So now……..
The Next Three Years
22
MULTI-FAMILY REAL ESTATEThe Next Three Years
There is an excess of distressed debt projected to hit the market from…
2012 - 2014
23
MULTI-FAMILY REAL ESTATEThe Next Three Years
24
MULTI-FAMILY REAL ESTATERecap
• Four asset classes• Real estate = passive cash flow
• Next three years• 1.4 trillion commercial debt• Bank owned properties• Undervalued apartments• Inflation…RE is a hedge
25
WHAT WE’LL COVER
1. Multi-Family Real Estate
2. Family Business
3. Proven Business Model
4. Strong Returns & Passive Income
26
Show U of O (where we grew up) Show mud football photoShow childhood sportsShow dad Pastor/church/family campShow all three on the courtShow championship photoShow small college basketball/educationShow Rich dad poor dad bookShow entrepreneurship: T-shirt business
FAMILY BUSINESSOur Story - Early years
27
FAMILY BUSINESSOur Story – Real Estate
• 2004: Began investing in real estate• Started in new construction in Eugene, OR• Saw the benefits of the rental business• Analyzed property all over Oregon• Moved to the Kansas City area for cash-flowing rental property
28
• Started in smaller-unit properties • Transitioned to large Multi-Family in 2009• 750 Units in Missouri• 20 Million in Real Estate• Poised for significant growth in the coming years
FAMILY BUSINESSOur Story – Real Estate
29
FAMILY BUSINESS
• Director of Acquisitions • Constantly scouring the market for the best deals• Locates, analyzes, and negotiates• Presents qualified deals to partners
Paul Worcester
Principal Partners
30
Joel Worcester• Co-Director of Fundraising • Director of Partner Relations•Facilitates all communication with Partners• Refinance specialist
FAMILY BUSINESSPrincipal Partners
31
Jesse Worcester
FAMILY BUSINESS
• Co-Director of fundraising• Director of Marketing• Co-Director of Operations• “Spackle of the business”
Principal Partners
32
Doug Worcester
FAMILY BUSINESS
• Pastor of 35 years• Spiritual and ethical leadership• Director of “Oregon Division”• Oversees construction and property management in Oregon
Principal Partners
33
Joe Isenberg
FAMILY BUSINESS
• General Manager• GM of largest janitorial company in Lane County for 31 years• Oversees property management company, Worcester Investments• Policies, procedures, efficiency
Principal Partners
34
FAMILY BUSINESS
Joel Worcester Jesse WorcesterPaul Worcester
Doug Worcester Joe Isenberg
Meet Our Families
35
FAMILY BUSINESSCore Values
• Serve God & our families
• Honesty & integrity
• Help others
• Make someone’s life better
36
FAMILY BUSINESSBenefits of Having a Family Business
• Unity
• Understand each-other
• Competition
• Support system
• When giving a presentation, I can tell people that I am my brother’s boss
37
WHAT WE’LL COVER
1. Multi-Family Real Estate
2. Family Business
3. Proven Business Model
4. Strong Returns & Passive Income
38
PROVEN BUSINESS MODELPhilosophy
• Focus, specialize, master • Apartments in the Kansas City area
39
1. Identify a property
2. Offer an opportunity
3. Manage the asset
PROVEN BUSINESS MODEL3 steps
Strict buying criteria
Brokers, owners, reputation
Know the market
Negotiate
Send property package
Know available funds
Build relationships
Fund the deal
Send out profit checks
Improve management
Property takeover
Complete oversight
40
PROVEN BUSINESS MODELExample 1:
• 96 Units• December 2009• $1,442,000
The Frederick Apartments
Projected Cash-Flow:
$10,282/month
ACTUAL Cash-Flow:
$14,903/month
Projected Return:
20.19%
ACTUAL Return:
29.25%
41
Example 2:
• 107 Units• June 2010• $1,862,000
The Gene Field Apartments
Projected Cash-Flow:
$7,949/month
ACTUAL Cash-Flow:
$9,335/month
Projected Return:
12.00%
ACTUAL Return:
14.06%
PROVEN BUSINESS MODEL
42
Example 3:
• 150 Units• November 2010• $3,000,000
The Northcrest Apartments
Projected Cash-Flow:
$9,410/month
ACTUAL Cash-Flow:
$18,525/month
Projected Return:
11.50%
ACTUAL Return:
22.57%
PROVEN BUSINESS MODEL
43
Example 4:
• 185 Units• July 2011• $3,750,000/$4,250,000
Maple Estates
Projected Cash-Flow:
$13,932/month
ACTUAL Cash-Flow:
$30,412/month
Projected Return:
10.20%
ACTUAL Return:
20.93%
PROVEN BUSINESS MODEL
44
Property Management
• Owner-managed VS third party managed
• 750 units, 25+ employees
• VP/Takeover Specialist : 20 years
experience
• Full service
• PM Software
• High standards
PROVEN BUSINESS MODEL
45
WHAT WE’LL COVER
1. Multi-Family Real Estate
2. Family Business
3. Proven Business Model
4. Strong Returns & Passive Income
46
STRONG RETURNS & PASSIVE INCOME
B
S
E
I
Passive Income = Goal
• Employee• Hospital• Military
• Self-employed• Private Practice
• Business Owner• Hire other doctors• Ownership
• Investor• Invest in a practice• Passive
Kyosaki Principles
Example: Doctor
47
• Wants to be passive• Looking for a higher return/better use of money
• Equity Partners• Want the benefits of owning RE: tax benefits,
appreciation, value-adds, sale)• $250K - $5 Million
• Private lending:• Simple, easy to understand• Flexible terms• $50K – $1 Million
STRONG RETURNS & PASSIVE INCOMETypical Investor
48
1. Private Lending
STRONG RETURNS & PASSIVE INCOMETwo Investment Options
• Typical Investment Amount: • $50,000 - $1,000,000• Typical Rate of Return: • 6-12% • Based on amount and duration of the loan
• Set return with a set duration• More conservative • More conservative returns
49
2. Equity Partnership
STRONG RETURNS & PASSIVE INCOMETwo Investment Options
• Typical Investment Amount: • $250,000 - $5,000,000• Projected Year 1 Cash on Cash Return: • 8-12% • Projected Annualized Cash on Cash Return:• 18-25%• Benefits of owning real estate: • Tax benefits, loan pay down• Value-ads, rent raises, sale, etc
50
STRONG RETURNS & PASSIVE INCOMEApartments: Equity Partnership Returns
High Cash on Cash Return29.25%
Low Cash on Cash Return14.06%
Average Cash on Cash Return21.70%
51
WHAT WE’LL COVER
1. Multi-Family Real Estate
2. Family Business
3. Proven Track Record
4. Strong Returns & Passive Income
52
CLOSING
1. Multi-Family Real Estate
2. Family Business
3. Proven Track Record
4. Strong Returns & Passive Income
We are a
With a
Providing
For our investors.
The next three years are projected to be an ideal market for