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Coop Investing

What is Coop Investing?
What is our goal?
What communities do we work in?
What size projects do we work with?
What do you need to Coop with us?
How does Coop investing work?
Illustration of an average normal project we do.
SPECIAL NOTE
What is The Process?

What is Coop Investing?
It's a unique way to invest without the hassles of investing. We do all the work and leave you with a finished product for your cooperation or give you a VERY attractive return on your investment (100% annualized). All you need to know is that you want a reasonable return on your investment (is 100% too much?) within a reasonable time period (is 6 months too long?) and have the ability to join a particular project available.

What is our goal?
We start by selecting a property in a large metropolitan area that is purchasable and manageable on a cash flow positive basis. We then follow our original intent to either flip for a profit or hold for cash flow. The key is that in the worst case situation, the safety factor is a positive cash flow. The minimum goal is to get a return of 100% of our input dollars within 6 months and end up with a positive cash flow to cover all expenses of ownership. In those cases where our plan is to flip for profit, we expect a return of 100% of our original cash (non-financed) plus another 100% profit on that cash input.

What communities do we work in?
Our first concern is that the community is part of a larger metropolitan area with lots of properties available to us and lots of buyers and renters available for our projects. Next we compare the cost of renting versus the cost of ownership to get the two as close as possible. This makes it much easier to sell a property for a profit to more people that are already renting. Consider Los Angeles where the average 3 bedroom home rents for $2,500 per month but the same house on an ownership basis costs $4,000 per month. It's difficult to find renters that can afford the extra income to cover a mortgage. Indianapolis, IN, rents the same house for $1,200 but the cost of ownership of that same house is only $1,300. That's what we want! Next we consider the economic basis for ongoing growth in the area to make sure it's got a future to it.

What size projects do we work with?
We work with the smaller projects most investors can afford. If you can afford to put $100,000 into a property and qualify for the financing it requires, you have a different view of investing, expect a lower return and generally have other professional do your whole process for you. We do invest in such larger projects, but you will need to ask us for particulars. We are hands-on and work with properties the beginning or average investor looks for, but can't manage on their own. Most of our projects are 1 to 4 units, condo, single family homes, etc.

What do you need to Coop with us?
1. $5,000 to $10,000 available cash or the ability to get it within 5 days.
2. Willingness to deal out of state.
3. Decent credit with a FICO score in the 700's.
4. The ability to prove a good income ($60,000+ / year) for the last two years.

How does Coop investing work?
Essentially, There are two ways to coop invest with us. If you wish to be a student and do much of the work and learn how to do more on your own, that is a different process and you gain greater profit for doing the work while you learn. If you wish to be a student, please contact us directly. Otherwise, the normal process of coop investing is as follows:

A written commitment by you to invest with us is required. This is not a contract, only a written notice that you understand the terms by which we coop invest with partners. Letter of Intent (click here).

Since we have done all the work and you have provided the upfront cash and credit, when the project is finally sold, we first pay you an annualized return of 100% (50% for 6 months) profit on your cash investment then take the next $10,000 of the net profit. The balance of the net profit is split 80% to IHL and 20% as additional profit to the investor.

Illustration of an average normal project we do.
The following example is typical of a flip resale for quick profit.
The property is in a medium income neighborhood, with a lower than average crime rate and better than average schools. The example is a 3 bedroom / 1 bath house built in the last 50 years of approximately 1200 sq. ft. It is average for it's community in style and construction . Established comps by a reliable, currently productive localized real estate agent familiar with the local market has been established and a licensed general contractor has given a written bid on the cost of rehab. In addition, a wholesale price to sell the property below current market for a quick sale has been estimated by the agent that will be responsible for that sale. A sale is expected within 90 to 180 days of acquisition. The property will be in a fully rehabbed condition with all repairs required by the city completed, new paint, carpets, fixtures, cabinets and appliances where and when appropriate for the property and resale.

Comparable prices average based on 9 similar condition and size houses = $115,000

Purchase price asked for by the bank (we start at 1/2 price)
$24,900
Written bid for rehab required
$30,000
Estimated closing costs on purchase and later resale and included financing charges
$12,000
Total acquisition costs (includes $10,000 cash in by investor + $56,900 financed)
$66,900
Wholesale price for quick sale
$98,000
Cash originally required of investor which is returned prior to net profit computation (approximately 15 - 18% of financed amount)
$10,000
Net profit at close (6 months later)
$31,100
100% annualized net profit on cash input to investor
$5,000
Net profit to IHL
$10,000
Final Net Net Profit to be split 80/20
$16,100
Additional profit to investor (20% x $16,100)
$3,220
Return to investor = original $10,000 was returned above + profit of $5,000 + $3,220
$8,220
Return on Investment (ROI) to investor within 6 months
82%
Potential ROI if original $10,000 is used on a second project annualized profit per year
164%

In the above example, if the investor wanted to hold the property for income their cost would be based on the profit expected by the other beneficiaries of the title holding trust (investment group).

Rental of the property is estimated at $850. A general rule of thumb for expenses including full professional management fees, property taxes, insurance, repairs and upkeep, is generally about 45% of income. The repair estimates would be greatly reduced due to the recent rehab and full repairs already done. A professional management company can be found by IHL, Inc. for the investor or the investor can deal with the property as they wish. If professionally managed the estimated cash after 45% expenses would be approximately $465 per month.

$465 per month will provide coverage for principle and interest on a 30-year fixed rate mortgage based on the following interest rates, remaining positive cash flow and show the out of pocket or additional financing necessary by the investor. The purchase price from the other investors in the above example would be $20,080. The original financing already holds $8,000 of the investors money. The financed minimum to get the original cash back and pay off the other beneficiaries would be $66,900 + $20,080 = $86,980.

%
P&I covered by $465
Net +/- cash to investor
Result
4.75
$88 000.00
+$1,020
$1,020/$10,000 = +10.2% + property
5.00
$86,000.00
-$980
+ Property
5.25
$84,000.00
-$2,980
+ Property

SPECIAL NOTE
The whole project is handled by us. There is no requirement for you to know or participate in the ongoing management of any project. Essentially you are a silent partner until the end. If your final receipt is the project it will be turned over to you with a qualified renter in place, management in place and a turn key operation.

All projects are held in a land trust for maximum security to all partners. Please review other sections of this web site to learn more about land trusts.

What is The Process?
We want you to feel as safe as possible. First, why do we offer so much return? Is this some scam? How do we know we can give that much profit back to you? - We know four things from our experience:

  1. The cash required to do a deal is small, from about $5,000 to $10,000 max,
  2. Investors want to feel they got their money's worth when they invest,
  3. There is lots of profit in the deals we do, and
  4. We want you to want to do this again and again.

If we gave a 25% return, that sounds like a lot, but on a $5,000 investment is $1,250 enough to get your interest, especially when its in the real estate market you hear a lot of negatives about? On the other hand, does getting 100% or $5,000 in profit on your $5,000 investment in 12 months overcome some of your hesitation? We think so. Can we afford it? Yes, because we only do deals with a LOT of wiggle room. When the current market is selling (and it still is in most areas) for a local average price of $150,000, with a low of $130,000 on high quality newly rehabbed houses and we start at $120,000 we generate a lot of interest quickly. Within that deal we have a minimum of $30,000 wiggle room we can discount further to sell really cheap if the market dives in a very short time. That's why we feel safe in our investments. We have the ability to drop the price another $20,000 and still pay you back, pay expenses and make a little profit in the worst sales situation. However, we expect to gain a $20,000 to $30,000 profit minimum on a quick turn around below market prices. With that, there is a plenty of profit to give you the incentive to be an investor with us. We're not greedy.

Next, who do you trust? Us? We hope to earn that trust, but recognize it's not practical to expect it initially. We want you to be able to do your own simple and quick research to assure yourself that our expectations are accurate. Here's how. We already know what the seller is asking as top price and we will offer less, but consider full price as our initial estimate. Second, we have a written contractor's bid for the rehab work so we are not guessing and making numbers up that will be overrun. We will make copies of these to you. Third, the resale expectation is not from us, it's from a local real estate agent who knows the local market. Here's where you can check for yourself. Go to http://maps.google.com/ and type in the zip code of the specific property you will be working with followed by a colon and then "real estate agent" (55555: real estate agent) and do your own search. A map with offices and a list to the left will come up. Open each link to an office. At that link if there is a web site link, click on it. If not, close the link. Go to the office web sites and check thoroughly for some indication of their listings or number of agents. What you want to find is a lot of listing and/or a lot of agents. Now call that agency, ask to talk to the broker or their top selling agent and follow this dialogue.
1. You are an investor from (your location) and are considering buying a property at (actual address), having it fully rehabbed and selling it as a pretty property at a discount on the open market within 30 days of completion of rehab, which usually takes about 60 days.
2. Ask if there are properties still selling in that local community and neighborhood.
3. Tell them the address, how many bedrooms and bathrooms, year built, square footage, and what ever other information you have but explain that you don't need a drive by inspection or a BPO (Broker's Price Opinion) simply an educated estimate taking about 5 minutes of their time to arrive at a ballpark number.
4. Ask what discount price would have to be used to get a sale within that 60 to 90 days period during the rehab and shortly thereafter.
You have now done exactly what we do to estimate a safe starting price for resell. We then look at the difference between that price and our total cost to determine how much wiggle room we have to drop even further to guarantee a sale. In the worst case situation, where it can't be sold at all, we never enter into a property that will not provide enough cash flow to pay all bills plus a mortgage to cover all costs and still give a little positive cash flow left over.

What do you need to do? You will need to make application to our private lender to pre-qualify for lending on a personal basis. To do this you need a minimum FICO of 640 plus provable income as tax returns for the last two years showing at least $60,000 annual gross income plus the last 2 or 3 months bank statements and pay stubs if you have them. None of this costs you a dime, but you are now ready to invest with us.

Once a property is identified, you will be given all the details we have and copies of listing page, contractors bid and our analysis of the property including who the real estate agent is we will be working with. From that point you do the research above to verify the discount wholesale price to expect from a different broker. Now you should be comfortable with the numbers. Understand that the quality of our team of agents, contractors and sales people all work at high quality and want to continue to earn our future business so their incentive is strongly in favor of their doing a top quality job for us.

When you agree to that investment property, we will make application the the private lender for a Letter of Intent or guarantee of funds based on the property and your participation. If you're pre-qualified, that usually takes only a few days. Our next step is to create the Land Trust and Beneficiary Agreement for the protection and understanding of all parties on how the deal will be handled. With that, we contact the buying agent and make a offer. Your cash input is paid directly to the broker of record as earnest money deposit and held in escrow until closing. We don't have any access to those funds at all. Again you are protected in your position of cash payer.

The entire process is overseen by our trained trustee who has no beneficial interest in the Land Trust, must abide by the instructions from the Beneficial Agreement or changes that are only agreed to by 100% of all beneficiaries. At the final sale and termination of the trust, proceeds are distributed by the closing company according to the beneficial agreement, not just turned over to the trustee for his or her discretion. Again, you are protected.

We want you to feel safe and secure knowing that there are separate non-connected professionals involved in the whole process with a maximum reduction in risk to you. We want you to want to do this again and again with us. We are more than willing to give a superior return for building a long term investor relationship.

If you are interested please read, print and send the Letter of Intent (click here).

 

 


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