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8 Replies Latest reply: Nov 23, 2011 1:10 PM by Moderator_MoniE RSS

Is it a good time or a bad time right now?  Financing?

Nathan Novice
Currently Being Moderated

I have been remodeling homes for 6 years.  I live in Columbia, Missouri and it is the #1 growing city in the United States and the third wealthiest city in the United States.  I know that bumps in the road will happend, but I truly believe I can make this work.

 

The company is a start-up business venture developed by myself for the sole purpose of investing in residential real estate. My business plan lays out a simple strategy for developing a long-term real estate investment company by leveraging an initial investment of $83,000.      My business model is to market the company to a consistent stream of motivated sellers that are willing to accept discounted wholesale prices for their property or foreclosed properties.  The properties are primarily resold at retail prices to generate working capital for the company. We pay all closing costs and do not use real estate agents to execute the transaction, thus eliminating agent’s fees. Often, there is not a substantial difference between our offer and the net cash an owner would receive by listing their property with an agent. The owner will pay 6% of the sales price in agent’s fees and 4% in closing costs. We can close on a property in as little as seven days, while the average days on the market for a house listed with an agent is fifty to sixty in our region, in addition to a thirty-day escrow. Our value proposition of an all-cash offer with a fast escrow close is often a good option for the owner/seller who recognizes the benefit of speed to cure their financial situation. As home prices rose dramatically in the past several years, individuals who were only marginally qualified to purchase increasingly expensive homes resorted to zero-down and low-down mortgages, along with adjustable rate mortgages, made available by the mortgage industry. The result was an affordable, low monthly payment on properties that had little or no equity. As interest rates rise and balloon payments come due, marginally qualified property owners are less able to meet their mortgage obligations. It’s these property owners that become motivated sellers and the primary focus of our marketing efforts. The financial goal is to leverage $43,000 in seed money into a stable company with a Balance Sheet in excess of $1 million in assets after the first three years of operations. To achieve this goal, we intend to buy twenty-four properties by the end of our third year, generating net revenue of $532,000 from the sale of nineteen properties and equity of $150,000 from holding five rental properties. Primarily, revenue is forecast from two primary streams of income.

 

The company’s revenue for the first twelve months is $112,000, consisting of net sales from the sale of four of four properties acquired in that year. Revenue increases to $242,292 in the second year based on acquiring an additional eight properties, selling six of the properties and retaining two as long-term rental properties. Revenue rises only moderately in the third year to $296,822 based on acquiring an additional twelve properties, selling nine of the properties and retaining three as long-term rental properties. The company’s net profit in the first year is $94,680 in the first year, decreasing to $44,792 in the second year due to payroll and benefit costs and decreasing slightly again in the third year to $11,692. The company’s Total Liabilities and Capital for its first three years of operations are $138,018, $517,529, and $1,107,697 respectively.

 

I have discussed my business plan with my attorney.  I have discussed plans and came to terms with 17 Realtors.  I have a team of birddogs that will help me spot potential properties.  I have a CPA that will work with Alton Innovations as well.

 

Alton Innovations will initially focus on two primary models for generating a consistent stream of profitable business. We will concentrate on these two models exclusively for the first 6 to 12 months so se can develop a solid foudation of revenue to further build the business for the future.

 

Our two primary profit models will revolve around:

 

1. Rehabbing distressed properties found from foreclosures, vacant properties and deal buys with an end goal of selling to retail buyers within 6 months of purchase.

2. Wholesaling distressed properties found from foreclosures, vacant properties and deal buys to our team of rehab partners for a consistent profit.

 

These two methods of real estate investing will help Alton Innovations to build a solid company which is focused on becoming the area’s experts in rehabbing and wholesaling foreclosures and vacant properties. Our business model will expand to include other types of real estate investing activities to further broaden our revenue streams within 12 months of starting the business. As of now, our plan is to continue to focus on rahabbing and wholesaling foreclosures and vacant homes as our primary area of expertise and source of revenue for at least 24 months. During that time we will expand our revenue streams, but will keep our focus on our primary area of expertise.

 

 

My Unique Selling Proposition puts my company above the rest.

1.) Extremely fast closings and high price offers.

2.) A combined 10 years in the real estate and rehab industry.

3.) I am connected with a full service real estate company including financing, realtor services and property management.

4.) 10years in marketing expertise that will result in more qualified prospects and house offerings.

5.) Fastest decision and deal makers in the market.

6.) Best quality in the industry.

 

 

This is a small part of my business plan.  If anyone has any suggestions or ideas for financing, please let me know.

  • Re: Is it a good time or a bad time right now?  Financing?
    LUCKIEST Master
    Currently Being Moderated

    Per my crystal ball,  The good news is that we’ll soon enter a brand new era of prosperity.

    The bad news is, things will get far worse before that can happen.

     

    Happy holidays, LUCKIEST

    • Re: Is it a good time or a bad time right now?  Financing?
      Nathan Novice
      Currently Being Moderated

      Thank you Luckiest.  I'm glad this site has real knowledgeable members like yourself to guide and influence site newbies like myself.  Much appreciated...  Have a wonderful Sunday.

      • Re: Is it a good time or a bad time right now?  Financing?
        Bridge Expert
        Currently Being Moderated

        Any type of Real Estate investment is generally out of favor with investors right now - especially residential.  The market keeps drifting lower and there is more supply than demand.  The supply/demand inequality will continue until the economy stablizes.

         

        I have read estimates that residentail real esate will not fully recover for up to 8 years.

         

        That being said, you may want to try the thhee F's for financing; family, friends, fools.  It is the basis for most small business start-up financing.

         

        Best of luck.

        • Re: Is it a good time or a bad time right now?  Financing?
          LUCKIEST Master
          Currently Being Moderated

          Timely strategies to consider for year-end

           

          As the year comes to an end, there are important decisions you need to think about with regard to your portfolios

          and other wealth planning objectives.

           

          You need a checklist to help you keep track of specific items that you plan on addressing.

          There also may be several tax-related opportunities that you'd like to review with your legal or tax advisors.

           

          Now is the time, before the end of the year.

        • Re: Is it a good time or a bad time right now?  Financing?
          Nathan Novice
          Currently Being Moderated

          Bridge no offense, but I am not buying that..  If I have two houses that will bring $150k profit each then does your answer change?  Ressessions I believe can either be a entrepreneurs wet dream or it could also be a nightmare.  I know even when you do your research and have a plan in place things can still go south, but isn't that part of it?  Compulsion thinking is a pronlem of mine, meaning if I see or think of something that makes my brain generate business thoughts then I go after it.  Basically what I am saying is if the three F's  are out of the question then am I supposed to just give up because right now is not the best time to invest in real estate?  Or not start a business because money is tight right now?  The economy will sprout back up, and honestly I wouldn't mind having a hand in the process.  Besides the real estate investing I would love to build a solid foundation and bring jobs to America. 

          I know I originally asked the question, and I apologize if my comment makes no sense or sounds rude.

          • Re: Is it a good time or a bad time right now?  Financing?
            Bridge Expert
            Currently Being Moderated

            Nathan,

             

            The reality is not what you are buying, it's what you are selling.  Right now, people are not looking to invest in what you are selling.  If you can not raise any money from the 3 Fs take that as a hint.

             

            My post was just my opinion as to the original "business plan" you posted seeking financing.  I am sorry you do not like it.  If you elect to seek funds for your venture, I would suggest you run both a grammar and spell check.

             

            Best of luck.

            Greg

            • Re: Is it a good time or a bad time right now?  Financing?
              Nathan Novice
              Currently Being Moderated

              Thank you Greg.  Point taken.  I appreciate it. 

               

              Real estate investment is not my venture.  Running a successful business is my venture.  I was testing the waters as far as the real estate industry. 

               

              Greg, it's not that I did not like your answer, but instead it's that you do not like questions.  I understand that I am new to this site and that I am not affiliated with a large corporation or large venture capital firm that has been successful in the past.  But I do have heart and ambition!  When is the last time you have given a member some positive feedback?  Something other than, nope not going to work, or use grammer and spell check!  Since you are someone that is regarded as "prestige" or "a main contributor" on a SMALL BUSINESS WEBSITE, why don't you try giving out some hope, strength and direction to people like myself that have the willingness and desire to succeed?

  • Re: Is it a good time or a bad time right now?  Financing?
    Expert
    Currently Being Moderated

    I would like to take the time to remind everyone of the SBOC Community Guidelines; in particular, please note the first expectation of community members which would be:

     

    Keep it clean, keep it professional. Every post should make a positive contribution to the community and should be suitable for all users. The community is open to all points of view on the intended business-related topics; mature, polite debate is encouraged. But we will remove any post or reply that includes derogatory, abusive, offensive, obscene, violent or inappropriate content of any kind. Always interact with other users respectfully, as you would in any professional setting.

     

    Obviously, we live in a very diverse world and from that will come unique differences of opinion. It is those unique insights that are what makes this community such an interesting and helpful place to be. I respectfully request that we leave our egos and sarcasm at the door and instead practice respect and professionalism. Sometimes we don't get the answers we want to hear but instead the answers we need to hear. Sometimes we won't like the answers we get but still we need to remain professional and, in the very least, agree to disagree.

     

    I thank you for your understanding and cooperation.

     

    ~Moni

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