J&M Investment Pool Standards 101

Concepts of investing real property, what you need to know…

A Pooled Fund is the combined funds of multiple investors which, when added together, create greater purchasing power (and thus more diverse and rewarding investment opportunities), through simple economy of scale.

The concept of pooling private money is widely accepted and has been around for decades. It doesn’t requires precised legal planning and tax advice before taking action.

  • Real Estate Investments are NOT federally protected

There are two types of investors:

  1. Accredited: One with significant net worth or annual income
  2. Sophisticated: One with sufficient investing experience and knowledge
  • These type of investors do not have the same level of protection as for example a new investor. It is up to the individual to weigh the risks & merits of each real estate investment opportunity because they do not have any federal protections.
  • LLC & REIT’s:

REIT’s (Real Estate Investment Trust’s) is known to be an easy option for adding real estate into and investment portfolio. REIT’s may invest in one area of real estate, location or mortgage investments.

LLC (Limited Liability Corporation); when it comes to LLC’s it’s important to structure it such that the investors have a vote over which properties to invest in if they want that level of control.

  • Three Types of Offers in Real Estate Investing

RE Investments are a security and must be registered.

  1. Specified: the proposed investment is for a specific property
  2. Semi-Specific: Is a proposed entity; will invest in a particular property and conceivably in other similar types of properties.
  3. Blind Pool: proposed investment based solely on the decisions of a sponsor.

Note that it is important to be fully aware of what you’re getting into before handing over your cash. Making these types of investments are risky, but are legal and totally worth it once the correct knowledge has been obtained to support your real estate investment.

Comparative Market Analysis

WHAT IS CMA?.

 

Comparative Market Analysis is an examination the prices at which similar properties in the same area recently sold. Real estate agents perform a comparative market analysis for their clients to help them determine a price to list when selling a home or a price to offer when buying a home. Since no two properties are identical, agents make adjustments for the differences between the sold properties and the one that is about to purchased or listed to determine a fair offer or sale price. Essentially, a comparative market analysis is another sophisticated version of a formal, professional appraisal.

 

THE BREAK DOWN

 

For example, a couple might be considering writing an offer on a four-bedroom, three-bathroom, 2,100-square-foot, single family home on a quarter acre of land. The house is listed for sale at $300,000. The couple’s real estate agent performs a comparative market analysis and locates three similar properties that recently sold in the same subdivision. The first is identical in every way to the subject property except that it is located on a busy road; it recently sold for $275,000. The second has four bedrooms, three bathrooms, and is located on a quarter acre of land but is 2,400 square feet because it also includes a screened-in porch; it sold for $315,000. The third has has four bedrooms, is located on a quarter acre of land and is 2,100 square feet, but it only has two bathrooms, both of which are outdated; it sold for $265,000. Based on the differences in the properties examined in the comparative market analysis, the real estate agent determines that $300,000 is a fair listing price. Her clients decide to offer $290,000 in the hope of negotiating with the sellers to purchase the property at $295,000.

 

A comparative market analysis can also include currently listed properties, especially if no similar properties were recently sold. However, listing prices only indicate what the seller hopes to get for the property and do not necessarily reflect what it is actually worth.

Asset Based Loans

What is an Asset Based Loan?

An asset based loan is a type of business financing that is secured by company assets. Most Asset based loans are structured to work as revolving lines of credit. This structuring allows a company to borrow from assets on an ongoing basis to cover expenses or investments as needed.

Who uses Asset Based Loans?

ABL’s are used by companies that need working capital to operate or grow. Often, companies that request an ABL have cash flow problems. However, many of these cash flow problems stem from rapid growth. The asset based lending facility helps companies manage the rapid growth issues and positions the company for growth.

Who qualifies for asset based lending?

Typically, Asset based financing is offered to small and mid-sized companies that have assets that can be financed. The company’s assets must not be pledged as collateral to another lender. If they are, the other lender must agree to subordinate its position. The company also must not have any serious accounting, legal, or tax issues which could encumber the assets.

  • Most Asset Based Loans have a minimum of $750,000 to $1,000,000 in utilization requirements.¬†

 

New investors getting their feet wet with 1031 Exchange.

Our new investor sells a property, which would have been a regular sale if they did not include a 1031 exchange intermediary to prepare them for their new property.  They have 45 days to target their next investment with equal value of the last property sold. Once invested, the property is renovated and leased through a property management company. They repeat this process to build wealth, gain assets, defer property taxes, and avoid capital gains.

What do we did we do for this investor?
  • We referred abstract and title attorneys
  • We referred 1031 exchange qualified intermediaries
  • Consulted and supplied them with targeted inventory within the exchange allowed amount (which is equal value or less of the property he just sold)
  • Provided them with demographics, with over 50% above the market value in properties
  • Referred property management

As a result, we do all the work supplying our investors with the numbers they are looking for to make a better decision knowing their calculated risks.