REAL ESTATE STRATEGY

A Brief Overview of the Real Estate Strategy that will be employed.

February 2020
Table of Contents

Section 1 Deal Acquisition

Section 2 Operating Prospectus/Investor Match

Section 3 Loan/Financing

Section 4 Contract

Section 5 Closing

Section 6 Exit Strategy

1 Deal Acquisition
Deal Acquisition Phase

§ The first and most important phase that is part of our real estate strategy is this deal
acquisition phase. This phase is where we plan out how we want our property to look
like, the median valuation of the property, its neighborhood, asset class, as well as
unit size. From that point on, we then go onto the market place and contact brokerage
firms for their off-market deals in order to find the top 10 deals that would suit us the
most. Our initial pick can range up to 100 properties scattered across our desired
market.
§ Our 10 deals are comprised with 3 of our favorite deals, 4 of the deals that we would
find doable, and 3 of the deals that would act as a safety net. We judge the deals that
we have starting from the financials that we are given, then from that narrowing to the
value of the property, the quality of the property, as well as the market it is in.
Deal Acquisition Phase

§ The deal acquisition phase for the projected three members of the LLC are split into
the main acquisition and general underwriting phase given to the 2 members of the
LLC, whom will do the daily underwriting and research for properties both on and
off the market. The third member of the LLC is there to track the progress of the deal
acquisition phase, and to make sure that everything is going as planned.

This phase will also require the top 10 deals to each go through rigorous
underwriting and research. Furthermore, the deals will also be submitted to
the necessary and recognized third-parties for further scrutiny and
investigation.
2 Operating Prospectus/Investor Match
Operating Prospectus/Investor Match

§ This phase is when the 10 deals that are most wanted will be packaged into their own
operating prospectus that will be used to find investors willing to invest for the sum of
the equity of the down payment of the property(typically a 30% down-payment of the
total perceived value). Furthermore, works with third-parties will be initiated at this
point, such as making offers to sellers, finding lenders, and more. Also at this point, the
LLC will submit a set of personal financial documents as a way for potential
lenders(commercial banks) to verify the legitimacy of the borrowers.
§ This phase requires the three partners to frequently look out for P-Type investors(more
about that can be discovered through our business plan) as well as meet up with
potential investors in order to pitch to them about our idea. This also requires us to
vigorously market/advertise our project in order to get publicity onto the deals that we
are doing.
§ As for equity, we will fill up to the down-payment of the property with the most
demanding capital requirements.
3 Loan/Financing
Loan/Financing

§ The loan/financing portion already starts during the operating prospectus phase, where
we gather documents in order to meet loan requirements that the lenders have set forth.
We will then use funding from the LLC to order an appraisal on the buildings that we
would like to purchase. These will not be all the 10 deals, and will only be the deals
where we have sent a letter of intent to the seller and have the price agreed upon by
both sides. Only then will we be committing to do further due-diligence on the property
as well. The loan/financing phase will end with us choosing potential loan structures
that will suit our needs for the duration of the loan term(i.e. amortization periods,
interest rates, loan terms, and etc.).
§ The third partner of the LLC will be in charge of the legal aspects required by the
lenders and the first and second partner’s job is to make sure that the property’s
information is getting provided.
§ We will end the loan phase by signing the necessary loan documents to guarantee that
we have the loan setup in place.
4 Contract
Contract

§ At the same time of the loan/financing phase, we will start to pursue our contract
phase after the necessary letter of intent(LOI) has been submitted and accepted.
From that point on, we will start a 30-60 day due-diligence period(period agreed
upon the signage of the contract), where we will receive necessary documents and
conduct necessary inspections to get the property inspected. This is generally time
where some investors will also put some good “escrow” money, but for us, that will
depend on our situation with the seller. During the time of the due-diligence period,
we will also make sure that the loan/financing phase is secure.
§ The third partner’s role in this phase is to make sure that any legal counsel needed is
given and that any fees will be divided between the partners of the company, while
the first and second partner will make sure that regular operations and deadlines are
being met. Once again, the third partner holds the other two in accountability.
§ The contract phase will end as the due-diligence period nears expiration and when
the loan/financing phase all works out.
5 Closing
Closing

§ This remains one of the most important periods that will be encountered in this
strategy as the closing represents the period when the property is successfully
transacted between the seller to the buyer. This means that all fees are paid off, and
that the money is successfully transacted to the full agreed upon amount. The closing
period represents a period where all three partners will have to remain in touch with
any investor in the company to ensure the safety of their capital once the transaction
is complete. Once again, the partners will divide the roles with the third partner
being the legal counsel, and the other two ensuring that the closing will be
successful.
§ Once this step is achieved, then congratulations for acquiring the desired property!
6 Exit Strategy
Exit Strategy

§ The exit strategy remains one that will be considered during the operating
prospectus/investor match phase for all of the deals that we plan to look at. It
represents the phase where we will exit the deal given that we are seeing a moment
of appreciation on sale or that we are unhappy with the property’s performance. The
exit strategy for each property will start out differently than how it will end up being,
as the exit strategy will innovate and adapt each year given different market and
property conditions.
§ The exit strategy is well-considered throughout the investors and will be discussed to
its full extent when the operating prospectus is being presented. It remains one of the
steps that can ensure capital protection at a time when risks appear in our way.
5 types of exit strategies
Terms
1. Ground-Up Development
2. Acquisition and short-term
hold
3. Acquisition and long-term
hold
4. Cash-out Refinance
Definition
This strategy involves buying the property, demolishing it, then redeveloping a real
estate property on top(could be commercial or even residential). Co-investing
passively alongside a developer involves substantial risk, as the property must go
through all stages of development before being sold or rented.
This strategy, referred to by some as “fix-and-flip”, involves acquiring and selling a
property for a higher amount over a relatively short time horizon. In this case, returns
are predicated on the property’s value increasing quickly – through increased demand
in the market and/or improvements made to the property – rather than on sustained
cash-flow.
This strategy entails acquiring a property, improving it to some extent, and
improving cash flow through some combination of decreased vacancy rates and
increased rents (via some combination of improvements to the property, better
management, and more/improved marketing efforts).
Cash-out refinances operate in commercial real estate much as they do in
single-family finance: a borrower (the Sponsor or developer on a project)
secures a new mortgage of a greater amount than the existing mortgage. In
most cases, substantial value has already been added via renovation or
expansion, increasing the appraised value of the property and improving
terms for the borrower as they seek to refinance.
6 types of exit strategies

Terms Definition
5. Sales Leaseback Agreement This exit strategy is pretty much what it sounds like: the seller immediately
leases the property from the purchasing party. The sale of the property is
often legally contingent on the subsequent lease agreement. The seller of
the asset is therefore able to recoup capital tied up in the property – and
deploy that capital elsewhere – while still operating the asset.
6. Sale through with This exit involves the investors of the property to agree to a value and sell it on the
Appreciation market for its given value. In a way, it is a combination of a “short” and “long”
position that stock owners will consider.