July 2015

We specialize in providing flexible short-term hard money and transactional loans for real estate projects. We also invest in equity of strong real estate projects with proper leverage and strong sponsors.

Welcome.

It is our goal to keep our investors, borrowers, closing agents, and other stakeholders informed and in-touch with the latest developments at TF Management Group LLC. We aim to accomplish this by providing you updates, education and industry news through this Monthly Newsletter. We hope you enjoy it and welcome your feedback.

This month features:

  • Recent deal examples
  • Commonly asked questions

Mike Zlotnik, Managing Director


Recent Deals Examples

  • Philadelphia Pennsylvania - Real Estate Deal
  • Philadelphia, Pennsylvania
  • Purchase price $34,500
  • Rehab $15,000
  • After repair value $72,000
  • Loan Amount $52,000
  • Funded March 25, 2015
  • Resold June 22, 2015
  • Nashville, Tennessee - Real Estate Deal
  • Hudson, Florida
  • Purchase Price $66,000
  • Rehab $35,000
  • After repair value $150,000
  • Loan Amount $95,000
  • Funded January 28, 2015
  • Resold June 10, 2015

Commonly Asked Questions.

I hope your Summer is going well.

In this issue of our monthly newsletter, I would like to talk about Turn-Key investment properties.

Last week I travelled to Jacksonville, FL to meet with a provider/operator of a strong Turn-Key investment properties business. The principles of the business are Jim and Brian. We’ve known these guys for multiple years now, and referred a group of foreign investors who bought 100+ properties from them over a few years time. The group has been happy with the quality of the properties and ongoing turn-key management.

Finally, I pulled the trigger myself this Spring, buying 3 properties from them, and looking to buy more now. I believe the Jacksonville, FL market provides a balanced mix of cash-flow and the appreciation upside.

I met with the management company that manages my 3 properties there, and was pretty impressed. They have over 800 houses under management, and a good redundant operation that supports that volume. Their responsiveness has been good so far, and I think they can scale up as needed.

Furthermore, I saw a few completed typical rehabs, and discussed what Jim/Brian typically do with each house. They buy only in decent areas – working class renters or first time home buyers mixed neighborhoods. Lots appeared to be of good size, around 100x100ft. Houses range from 1200-1500 sq. ft, and configured usually 3/2 or 4/2 in most cases. They buy houses built in the 50s, 60s, 70s… and do mostly complete gut out jobs. Typically, they change roofs, electrical, bathrooms, kitchens, flooring, and some plumbing as needed. They buy them 35-50K, and invest 30-50K in the rehab, with target cost basis at 80K or so, and sell them at 100-110K. These houses are typically sold with rental tenants in place and the complete turn-key management, with monthly payments $950 to $1050.

Monthly Rent / Price ratio is 0.95%, just slightly below 1%. After expenses, houses generate 8-9% CAP rate. If you add mortgage leverage with 25% down, and 75% loan at say, the bank rate of around 5% you’ll see Cash-on-Cash Return about 12%. It’s a pretty solid number.

Note: Jacksonville has been appreciating at a decent 8% rate recently, and it is probable that the appreciation will continue a similar pace. However, let’s say the appreciation slows down to 4% per year. So, 100K house would be worth 104K a year later. 4K appreciation on say 30K cash in (25% down + closing cost) and  over 13% per year. Let’s just reduce it to 10% – leveraged appreciation return. Leave 2% in cash-flow as reserves. So, what the picture looks like:

  • 10% in cash-flow with leverage PLUS
  • 10% in appreciation with leverage

That’s 20% annualized estimated ROI. This is a really powerful number.

Are there any risks?

For sure, there are risks. We’ve seen a massive crash in prices in 2008-2009. We’ve recovered significantly since then, and are still recovering/ appreciating. But the growth cycle is not over yet. Jacksonville feels like a value play with a strong affordability index. Can the local economy tank, depressing RE prices? Anything is possible, but not likely given a diversified employer base: It’s a mix of a Government driven economy with 2 military basis, large port, and many private businesses.

We were introduced to a VP at Fidelity National Financial (FNF), reporting to their CEO, and he hosted a lunch for us while there, and showed us the executive headquarters floor of FNF. It was impressive to see that FNF is headquartered in Jacksonville. FNF is the largest Title insurance company in the US.

In summary, I believe that the time is right to invest in Jacksonville, FL as both a diversification play, a good market to enjoy a healthy mix of appreciation and immediate double-digit cash-flow. Our connection to the strong turn-key investment property operator helps make these investments easy, convenient, and reliable. If you are interested to explore this further, please let me know. I would be delighted to introduce you to both Jim and Brian, and you can take it from there with them. Also, I would gladly share my connection to the mortgage broker in FL who helped me.

 

Enjoy the Summer!

Mike Zlotnik

Managing Director / Co-Manager

TF Management Group LLC

Inspire Capital Management Group LLC

Tempo Funding LLC

Mike@TempoFunding.com

917-806-5029