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Creating Strong Returns and Passive Income For Investors

THE TRUSTED NAME IN REAL ESTATE INVESTING. Creating Strong Returns and Passive Income For Investors. BEFORE WE BEGIN…. Meal after the presentation Q&A at the end Notes. BEFORE WE BEGIN…. Multi-Family Real Estate. Family Business. Proven Business Model. Strong Returns & Passive Income.

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Creating Strong Returns and Passive Income For Investors

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  1. THE TRUSTED NAME IN REAL ESTATE INVESTING Creating Strong Returns and Passive Income For Investors

  2. BEFORE WE BEGIN… • Meal after the presentation • Q&A at the end • 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: • Make your life better • Educate & attract • Get to know you better

  5. BEFORE WE BEGIN… Who Am I? Jesse Worcester Paul Worcester Joel Worcester • Real Estate Investors • Specialize in Multi-Family (apartments) • 51 Properties since 2008 • 20 Million of Real Estate • 750 Units • 4 Million in private money

  6. WHAT WE’LL COVER The next three years are projected to be an ideal market for • Multi-Family Real Estate • Family Business • Proven Business Model • Strong Returns & Passive Income We are a With a Providing For our investors.

  7. Four Asset Classes MULTI-FAMILY REAL ESTATE COMMODITIES BUSINESS • Oil & Gas • Silver • Gold • Food • Any Industry • Restaurant • Manufacturing • Tech PAPER ASSETS REAL ESTATE • Stocks • Mutual Funds • Bonds • CD’s • Single-Family • Commercial • Multi-Family • Office • Industrial • Retail

  8. 1. CASH FLOW MULTI-FAMILY REAL ESTATE 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. 2. INHERENT BENEFITS MULTI-FAMILY REAL ESTATE 10 Reasons We Like Multi-Family Real Estate • Loan pay down • Refinance • Depreciation • 1031 Exchange

  10. 3. SECURITY MULTI-FAMILY REAL ESTATE 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. 4. CONTROL MULTI-FAMILY REAL ESTATE 10 Reasons We Like Multi-Family Real Estate • Value-adds • Rehab, utilities, occupancy • Cutting costs, raising rent • In-house management • Decision making

  12. 5. DEMAND MULTI-FAMILY REAL ESTATE 10 Reasons We Like Multi-Family Real Estate • 2nd most basic human need • Population growth • Emerging markets

  13. 6. LEVERAGE MULTI-FAMILY REAL ESTATE 10 Reasons We Like Multi-Family Real Estate • Bank/debt financing • Other investors • Management

  14. 7. ECONOMIES OF SCALE MULTI-FAMILY REAL ESTATE 10 Reasons We Like Multi-Family Real Estate • Easier management • Less maintenance • More profitable

  15. 8. LOW VOLATILITY MULTI-FAMILY REAL ESTATE 10 Reasons We Like Multi-Family Real Estate • VS. stocks • Easier to forecast • Less fluctuation (Midwest, Kansas City)

  16. 9. APPRECIATION MULTI-FAMILY REAL ESTATE 10 Reasons We Like Multi-Family Real Estate • Value-adds • Emerging markets • Inflation

  17. 10. MARKET TRENDS MULTI-FAMILY REAL ESTATE 10 Reasons We Like Multi-Family Real Estate • Today’s market conditions • The next three years

  18. MULTI-FAMILY REAL ESTATE Today’s Market Conditions • 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

  19. MULTI-FAMILY REAL ESTATE Today’s Market Conditions • What Does This Mean? • OPPORTUNITY!

  20. MULTI-FAMILY REAL ESTATE Today’s Market Conditions • “Be Fearful When Everyone Is Greedy, Be Greedy When Everyone Is Fearful!” • - Warren Buffet.

  21. MULTI-FAMILY REAL ESTATE The Next Three Years • 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……..

  22. MULTI-FAMILY REAL ESTATE The Next Three Years • There is an excess of distressed debt projected to hit the market from… • 2012 - 2014

  23. MULTI-FAMILY REAL ESTATE The Next Three Years

  24. MULTI-FAMILY REAL ESTATE Recap • 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 • Multi-Family Real Estate • Family Business • Proven Business Model • Strong Returns & Passive Income

  26. FAMILY BUSINESS Our Story - Early years • Show U of O (where we grew up) • Show mud football photo • Show childhood sports • Show dad Pastor/church/family camp • Show all three on the court • Show championship photo • Show small college basketball/education • Show Rich dad poor dad book • Show entrepreneurship: T-shirt business

  27. FAMILY BUSINESS Our 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. FAMILY BUSINESS Our Story – Real Estate • 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

  29. FAMILY BUSINESS Principal Partners Paul Worcester • Director of Acquisitions • Constantly scouring the market for the best deals • Locates, analyzes, and negotiates • Presents qualified deals to partners

  30. FAMILY BUSINESS Principal Partners Joel Worcester • Co-Director of Fundraising • Director of Partner Relations • Facilitates all communication with Partners • Refinance specialist

  31. FAMILY BUSINESS Principal Partners Jesse Worcester • Co-Director of fundraising • Director of Marketing • Co-Director of Operations • “Spackle of the business”

  32. FAMILY BUSINESS Principal Partners Doug Worcester • Pastor of 35 years • Spiritual and ethical leadership • Director of “Oregon Division” • Oversees construction and property management in Oregon

  33. FAMILY BUSINESS Principal Partners Joe Isenberg • General Manager • GM of largest janitorial company in Lane County for 31 years • Oversees property management company, Worcester Investments • Policies, procedures, efficiency

  34. FAMILY BUSINESS Meet Our Families Paul Worcester Joel Worcester Jesse Worcester Doug Worcester Joe Isenberg

  35. FAMILY BUSINESS Core Values • Serve God & our families • Honesty & integrity • Help others • Make someone’s life better

  36. FAMILY BUSINESS Benefits 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 • Multi-Family Real Estate • Family Business • Proven Business Model • Strong Returns & Passive Income

  38. PROVEN BUSINESS MODEL Philosophy • Focus, specialize, master • Apartments in the Kansas City area

  39. PROVEN BUSINESS MODEL 3 steps Know the market Identify a property Offer an opportunity Manage the asset Brokers, owners, reputation Strict buying criteria Negotiate Build relationships Know available funds Send property package Fund the deal Property takeover Improve management Send out profit checks Complete oversight

  40. PROVEN BUSINESS MODEL Example 1: • The Frederick Apartments • 96 Units • December 2009 • $1,442,000 Projected Cash-Flow: $10,282/month ACTUAL Cash-Flow: $14,903/month Projected Return: 20.19% ACTUAL Return: 29.25%

  41. PROVEN BUSINESS MODEL Example 2: • The Gene Field Apartments • 107 Units • June 2010 • $1,862,000 Projected Cash-Flow: $7,949/month ACTUAL Cash-Flow: $9,335/month Projected Return: 12.00% ACTUAL Return: 14.06%

  42. PROVEN BUSINESS MODEL Example 3: • The Northcrest Apartments • 150 Units • November 2010 • $3,000,000 Projected Cash-Flow: $9,410/month ACTUAL Cash-Flow: $18,525/month Projected Return: 11.50% ACTUAL Return: 22.57%

  43. PROVEN BUSINESS MODEL Example 4: • Maple Estates • 185 Units • July 2011 • $3,750,000/$4,250,000 Projected Cash-Flow: $13,932/month ACTUAL Cash-Flow: $30,412/month Projected Return: 10.20% ACTUAL Return: 20.93%

  44. PROVEN BUSINESS MODEL Property Management • Owner-managed VS third party managed • 750 units, 25+ employees • VP/Takeover Specialist : 20 years experience • Full service • PM Software • High standards

  45. WHAT WE’LL COVER • Multi-Family Real Estate • Family Business • Proven Business Model • Strong Returns & Passive Income

  46. STRONG RETURNS & PASSIVE INCOME Kyosaki Principles Example: Doctor • Employee • Hospital • Military • Business Owner • Hire other doctors • Ownership E B S I • Self-employed • Private Practice • Investor • Invest in a practice • Passive Passive Income = Goal

  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 INCOME Typical Investor

  48. 1. Private Lending STRONG RETURNS & PASSIVE INCOME Two 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 INCOME Two 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. High Cash on Cash Return 29.25% Low Cash on Cash Return 14.06% Average Cash on Cash Return 21.70% STRONG RETURNS & PASSIVE INCOME Apartments: Equity Partnership Returns

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