Table of contents
- Summary of the Report
- Overview of the Business
- Market Research
- Implementation of Marketing Strategies
- An examination of the strengths, weaknesses, opportunities, and threats
- Selling Proposition That Is Different (USP)
- Advantage over your competitors
- Positioning and marketing strategy
- Strategy for Selling
- Plan of Exit
- Management and Organization
- Investing Strategy
Summary of the Report
Real Estate Ventures (“REV”) is a newly established S-Corporation owned exclusively by Steve and Linda Rogers with the goal of purchasing and owning income-producing real estate. REV addresses a need in the local Franklin, Tennessee rental housing market by providing clean, well-maintained condominium apartments to well-qualified renters. Neither the homes nor the renters are picked on a haphazard basis, but rather on a systematic, thoughtful, and deliberate basis. The property selection process is rigorous and focused on long-term investment needs, and renters are reviewed by the owners, in my opinion. REV thinks that the secret to successful property management is to be committed for the long haul in both the property and tenant selection processes.
REV’s proprietors have lived in the prosperous Franklin, Tennessee region, a suburb of Nashville, for most of their lives. Steve Rogers, an entrepreneur, has operated ProStar Paints for more than 15 years. Linda Rogers teaches math at Franklin Elementary School. Both owners have access to other sources of income to supplement the costs of the investment property. In addition to their backyard earnings, the Rogers just received a $100,000 inheritance from Linda’s mother.
REV is acquiring its first property investment, well-maintained standard home in the highly sought-after Red Mill Estates development. The residence is under contract with REV, and the income price is $107,500. The property needs some maintenance and protection (primarily cosmetic). REV will subcontract the job to a suitably recognized contractor who has been respected by REV for 15 years, in my opinion. The property will be painted by Steve Rogers. It is projected that the repairs would take one month to complete and will cost about $10,000.
The owners have found a renter with excellent credit and references who is ready to move in the following month. She has put down a security deposit.
REV’s owners are seeking a $53,750 commercial real estate loan to help them acquire the financing property. The deposit facility will have a 15-year amortization period and a loan-to-value ratio of 50%. The following business format will provide information on REV’s past, present, and future goals, as well as its ability to fulfill this financial commitment.
Goals for the Company
- Invest in well-kept, well-maintained homes that are priced within the local market range.
- Find only well-qualified renters that are looking for a long-term lease.
- Profits that are passive
Statement of Purpose
REV’s goal is to invest in the best – in both its houses and its residents. One of the most common mistakes made by beginning real estate investors is poor property selection. Their tenant selection method is much worse, with tenants having little or no background and no savings checks. The proprietors of REV are very committed to their company, and their commitment to the long term can be seen in their excessive commitment to both their properties and their thorough selection procedure for finding long-term renters.
Principles to Follow
The following are REV’s guiding principles.
- First and foremost, treat the investment like a business.
Many real estate investors would overlook their funds and keep poor or incomplete financial documents. This lack of discipline may spread to other elements of the firm over time, resulting in a commercial enterprise’s decline.
- In the tenant selection process, be selective.
Rather than accepting the first person who walks through the door, REV will meet with each candidate for a personalized interview. REV is looking for a long-term lease with good tenants. All applicants must pass a savings and credit background check, as well as furnish the requisite deposits. References are required and will be verified on a regular basis.
- Provide renters with exceptional service.
The goal of REV is to achieve long-term occupancy levels. If the tenant’s air conditioner is broken, they’ll fix it the same day! Period! The property will be kept clean, well-maintained, and well-managed.
REV is entirely committed to making its commercial rental property business a long-term success, with ambitions to expand in the future. This commitment and determination will set them apart from their colleagues in the area. REV feels the following are the secrets of its success:
- Property management – Instead of relying on an outside management company, REV’s owners will manage the rental property themselves. All repairs will be handled right away, rentals will be collected on schedule, and the accounting ledger will be maintained current and up to date.
- REV isn’t interested in ‘flipping’ houses and instead prefers to engage in long-term, high-quality ventures. Prior to making any acquisitions, the residences are thoroughly analyzed in order to determine excellent money flow and long-term viability.
Overview of the Business
Real Estate Ventures, Inc. (“REV”) is a recently formed S-Corporation that will be responsible for managing the underlying real estate in Franklin, Tennessee, which is a major city in the Nashville Metropolitan Statistical Area (“MSA”). Steve and Linda Rogers, husband and wife, are co-owners of REV.
Steve and Linda Rogers have lived in Franklin, Tennessee since they were children. Steve is the owner of ProStar Paint, a commercial painting company that he has operated for more than 15 years. Linda Rogers is a math teacher at Franklin Elementary School and a graduate of Middle Tennessee State University.
Form of the Law
S-Corporation: Real Estate Ventures Inc.
Overview of the Business
The owners of REV, Steve and Linda Rogers, have been looking for ways to boost their income. When Linda’s mother died earlier this year, the couple received an inheritance of around $100,000, which they opted to invest in and manage investment properties. They decided on the challenging property for their first purchase after attending numerous continuing education classes at their local community institution. The Red Mill Estates neighborhood houses the 1,356-square-foot home. The home is in need of some cosmetic renovations to bring it up to modern condo market standards, with new carpet, paint, and laminate floor being the most important.
The pair intends to outsource the renovation and finish it in 30 days, with the renter moving in after that.
The Construction Budget is summarized below:
In my perspective, Steve Rogers knows the contractor, Ben Nelson of Ben Nelson Construction, and has painted several houses for him over the last 15 years. Mr. Nelson has accepted the funds and feels that, barring unforeseen circumstances, the project will be finished on time and under budget. The contractor is dependable, and he is well-known in the community for his honesty, punctuality, and high-quality craftsmanship. Steve intends to paint the whole room himself. The reconstruction and rehabilitation are expected to take one month to complete.
The land has also been leased by REV. Linda’s institution has asked that the apartment be occupied by a professor and friend. The divorced single mother of two is now living with a family member. A home is an excellent place for the teacher to start over, and it is just 5 minutes away from the school where she works with Linda. The renter has saved more than she expected and has passed all of her background checks, as well as her references. REV’s protection credit has not been revoked.
The Facilities and Location
REV conducted an extensive study on the local market and determined that it suited all of their requirements. The Red Mill Estates neighborhood, which is mostly owner-occupied, boasts beautiful landscaping and larger-than-average lots. The neighboring communities are middle-class suburbia with five grocery shops within a five-mile radius, several restaurants, and a three-mile distance from the easily accessible I-65. Franklin City Elementary School District administers the site.
The original owner has kept the property in excellent condition. The property will be updated mostly for aesthetic reasons in order to bring it up to date with current market standards.
Descriptions of Goods/Services
REV provides appropriately qualified renters with clean, wonderful residences in emerging areas.
Rental income is the primary source of revenue. The following will be added to the profits:
Deposits that have been surrendered
Costs of a Returned Check (NSF)
Fees for being late
Costs of Repair and Cleaning
Fees for applying
Fees for leaving a lease early
In comparison to others
Within a one-mile radius of the scenario, there are seven apartment profit properties, as well as many multi-family condominium units. The multifamily apartments were left out of this comparison for the sake of evaluation. The price per square foot (PSF) ranges from $1.11 to $0.83. In Franklin, the average market hiring PSF is $1.01. The current rent per square foot (PSF) is $0.98, which is competitive.
Sourcing of Goods and Services
Management of Stocks
Fulfillment and warehousing
Products and Services in the Future
REV intends to buy more high-quality income-producing properties in the near future, with the goal of creating passive revenue streams.
Franklin, Tennessee, is a Principal City in the Nashville Metropolitan Statistical Area (“MSA”) and is rated 31 in the United States. It is located in Williamson County. Williamson County, according to the University of Tennessee’s 2012 Economic Outlook, is one of the state’s fastest-growing counties, increasing by 44.7 percent over the previous year.
The Provident Music Group, Renal Advantage Inc, World Christian Broadcasting, Health Spring, Community Health Systems, Healthways, Home Instead Senior Care, MedSolutions Inc, Magazines.com, the Provident Music Group, Renal Advantage Inc, World Christian Broadcasting, and Nissan’s North American head offices are all based in Franklin.
Within a three-mile radius of the topic, there are approximately 1,600 businesses. The bulk of neighboring businesses is in the carrier-class, employing 40.1 percent of the local workforce, followed by the retail sector, which employs 20.8 percent.
Franklin’s vacancy levels were reported to be 6%, which is lower than the industry average of 7.9%.
Analysis of the Industry
The classic real estate mantra of “location, location, location” has stayed true throughout the home market recovery. The state of your local market today – and whether it makes more sense to buy or rent, sell now or wait if feasible – is primarily determined by distinct, local characteristics and fundamentals. Customers continue to seek deals, and sellers seem to optimize returns, thus timely and thorough local market information will be even more important in 2013.
Size of the Market
According to a recent study conducted in Franklin, Tennessee, there are now 67 single-family homes available for rent. The average month-to-month apartment price varies from $2,202 to $1,058 each month. The monthly cost for the center tier is $1,283, or $1,031,532 year.
REV’s portion of the $1 million market accounts for 1.51% of the total.
Participants in the Industry
Different single-family dwellings and apartments are the most prominent participants in the apartment real estate market. Condos, cellular houses, trailers, garage apartments, and duplexes are some of the indirect competitors. Another sort of criticism comes from house sellers who offer rent-to-own options.
Ten condominium complexes and seven single-family homes are available for rent within a one-mile radius of the challenge. For the sake of comparison, this analysis will focus entirely on single-family homes available for rent.
Gown Boulevard is located at 1101 Gown Blvd.
2 BDR / 2 BA
$1,200 per month / 1,107 square feet
This property is in direct competition with the topic. The issue, on the other hand, is top of the line, with its extra square photographs and extra bedroom.
Gown Blvd., #1102
2 BDR / 3 BDR
$1,350 per month / 1,445 square feet
This attribute is the most similar to the topic. Comparable Number Two has 119 more rectangular feet and costs $0.05 less per month.
Located at 700 Fountain Blvd.
2 BDR / 3 BDR
$2,595 per month / 2,328 square feet
This home boasts the most square footage of the comparables and is situated on a large piece of land. It’s also the most expensive condo in terms of monthly fees. Comparable Number 3 is an oblique rival based on these parameters.
Segments of the Market
The population in the 1-mile radius around the problem was 7,199 at the 2010 Census, and it is predicted to grow to 7,363 by 2017. According to the 2010 Census, the bulk of the dwellings is owner-occupied, with 1,950 housing units and 793 renter-occupied units. By 2017, the number of rental units is planned to increase to 854. In 2010, the median age was 34.
Residents within a one-mile radius of the problem are divided into two market phase groups: In Style has a market share of 52.7 percent, while Crossroads has a market share of 35.4 percent, for a total market share of 88.1 percent. The In Style market is mostly made up of people who live in the suburbs yet like a city lifestyle. Townhomes are preferred over single-family houses by these people, who have a median family income of $182,665. As its most significant target consumer, REV is focusing on the latter group, Crossroads. Here’s a basic rundown of their target occupant:
In tiny towns, crossroads neighborhoods are becoming communities. The most common family types in these locations are married couples with and without teens, as well as single mothers and fathers. They are 32.2 years old on average. This population is growing at a rate of 1.6 percent per year faster than the US population. The average household income is $43,799. Their lives revolve around their children. They drive domestic automobiles and vans and handle their own security.
REV placed an ad for rent in the online ads at Linda’s workplace, Franklin Elementary, before deciding on the apartment unit. Once upon a time, the reaction was an avalanche! REV was able to choose among 14 applicants! The vast majority of these applicants were colleagues or friends of colleagues. All of the applicants were single-income and dual-income households. REV had to advise the potential tenants that the property had already been rented.
REV decided to put the “pedal to the metal” and make a bid on the property based on the results of this market “test.”
Market Segmentation Objectives
REV focuses on single-parent or dual-income families with children. The target renter is under 35 years old and is likely to have some other financial responsibilities, such as student loan debt and vehicle note debt, that they would wish to pay off before contemplating house ownership. Many of Linda’s new teachers fit the desired profile, and REV will continue to seek them as renters. The target salary range is $1,100 to $1,400.
Needs of the Market
REV’s target renter favors growing a family in a traditional single-family home over a condominium complex. The Red Mill Estates neighborhood and its neighboring areas are rapidly increasing residential areas, making the region suitable for REV’s renters. Due to the scarcity of direct comparables in this market, demand for single-family homes that are convenient for condos is high.
The Current Market Situation
- When the occupier plans to remain for 5 years or more and has enough cash flow to pay routine repair and maintenance expenditures, homeownership makes financial sense. Tenants may also leave to seek homeownership once the recession fades away.
- For REV’s ideal renter, who no longer wants the added expense and time burden of property care, renting still makes financial sense.
Growth of the Market
Over the previous year, the local single-family rental housing market grew by 1.4 percent.
REV will establish itself as the go-to rental property for great houses in desirable communities by keeping on top of local market conditions.
Implementation of Marketing Strategies
REV will own, run, and rent to adequately qualified tenants single-family homes that are clean and well-maintained. Others often miss the target by investing in low-quality properties that do not provide a significant return on investment (ROI) (return on investment). Other landlords are also notorious for being slow to reply to tenants’ requests for repairs. When a tenant requests repairs, like a leaking faucet, REV will have a repairman on site the same day, and more than likely one of the owners will do the repair, in my opinion. REV’s unique ability to connect high-quality properties and renters together will set it apart from other property managers. The parts that follow go through a variety of approaches that will help with this project.
An examination of the strengths, weaknesses, opportunities, and threats
Strengths, Weaknesses, Opportunities, and Threats (SWOT) are acronyms meaning Strengths, Weaknesses, A SWOT analysis is a strategic planning technique that assesses these four components in relation to REV’s business goals. REV’s advertising and marketing strategy is seen in the next section:
- The apartment is in a great location in a rising area, close to schools, shops, and restaurants. The commute to Nashville takes less than 20 minutes and is just 5 minutes from I-65.
- REV currently has a security deposit-paying renter in the area. The renter has a good history of deposits and charges. REV knows the tenant, and he works at the same college as Linda Rogers as a teacher.
- Upgrades to the property will be carried out by a reputable contractor who has worked with REV’s owners for 15 months. REV’s owners will paint the building themselves, saving money
- REV will pay more than $67,000 out of pocket for the house and improvements, producing a low loan-to-cost (LTV) ratio of 50%.
- REV’s owners have ‘day jobs,’ which means they have additional income and savings to use to help run the company.
REV has little experience owning and maintaining investment earnings properties as newcomers to real estate property management.
- In comparison to the national average of 7.9%, Franklin has a low vacancy rate of just 6%.
- The property is in a rapidly expanding area in the state’s fastest-growing county.
- REV has the chance to invest in a $1 million apartment market in the area.
- Changes in unemployment, hiring increases, and economic changes may all have a negative influence on condo unit demand.
- The brilliance of rents should be affected by a decline in the local local.
- REV’s cash glide should be impacted by cost overruns in the construction budget and inability to finish renovations on schedule.
Pyramid of Marketing Strategy
REV will only lease investment properties that are sturdy, clean, and well-maintained and provide excellent cash flow.
REV will not make the mistakes that many new landlords do and will do comprehensive due research before purchasing any property in order to achieve these goals. The following criteria must be met by all potential residences:
A thriving area with low vacancy rates is required for the property.
Rents will be set within the market range of $1,100 to $1,400.
Profitable passive revenue should be generated by the property.
All renters will be required to pass background and credit checks, as well as provide references that may be verified.
To pay the costs associated with these checks, provide a non-refundable application rate.
A security deposit will be demanded of all renters.
Tenants will be obliged to make payments through EFT, which will ensure that payments are paid on time and in accordance with the lease agreement.
REV will strive to be an excellent landlord as well, by responding to any tenant concerns about repairs and renovations within one hour during normal business hours. Weekend and evening calls will be returned the next business day unless it is a life-threatening situation (such as a gas leak or a water main break), in which case the owners will be paged promptly and an emergency response service will be sent.
REV will change air filters and check smoke and radon detectors on a month-to-month basis.
Selling Proposition That Is Different (USP)
REV’s owners are enthusiastic about their work. And it shows in everything they do, from the quality of the residences they buy to the tenants they recruit. They completely assess the property and do a market analysis. REV will keep track of local market trends and keep them in mind. They want to stay in this for a long time.
Advantage over your competitors
Prior to purchasing and investing in any property, REV employs a detailed due diligence procedure. REV can consistently rate their rentals at or below market value by completing their study. REV has a competitive edge over their competition because they know their market through and out. Furthermore, REV has an aggressive advantage when it comes to understanding the quality and level of the neighborhood contractors because of Steve’s expertise in portraiture and his large relationships in the construction industry in the Franklin region. Many opponents will fall short and will typically subcontract to the lowest bidder with a questionable track record. If a critical tenant repair is necessary, REV will be prepared and able to choose a reputable contractor at a reasonable price. As a result, expenses will be kept low, but profit margins and return on investment will remain on track.
Positioning and marketing strategy
REV’s marketing strategy uses a Focus Strategy, which means it focuses on a certain target market. REV focuses its marketing efforts on obtaining stable, credit-worthy renters who are motivated to remain in expanding, flourishing communities.
Statement of Position
REV is a top-notch real-estate investment firm. REV picks its condo buildings with care and precision, focusing on rising areas with low vacancy rates. The residences are spotless, well-kept, and provide a steady stream of income. REV’s tenants, in keeping with their high-quality standards, have great savings scores, on-time condominium payment histories, and a strong desire to reside in a secure neighborhood for a long time with their families. REV is committed to its properties for the long haul; they don’t believe in the “here now, gone tomorrow” mindset. Above all, REV’s owners are passionate about what they do and are committed to the company’s long-term success.
Strategy of Pricing
REV uses market-based pricing. The company’s extensive due diligence procedure ensures that they never acquire the cheapest or the most expensive property.
Strategy for Promotion and Advertisement
REV will mostly depend on word-of-mouth marketing and advertising in the Franklin Elementary School Online Classified Ads.
REV will place signs in front of properties as they become available. REV will place classified advertisements in the local newspaper and on Craigslist as a last option.
REV’s website lists available homes for rent, as well as the company phone number to call for information about renting or who to contact for maintenance. In addition, the website will provide access to an online utility as well as critical topics for tenants, such as the significance of having enough renters insurance.
If a property is available, the website will provide photos of the property, a thorough description of the property, amenities, notable points in the surrounding area, and any current concessions.
Programs for Marketing
REV is unusually sized to both personalize and manage its funding properties, in my opinion. REV intends to rely on Word of Mouth promotion and no longer have to spend a big portion of their budget on marketing efforts because of their extensive relationships in the Franklin region. REV has a policy in place in the region to buy classified advertising space in both the local newspaper and on Craigslist if a property sits empty for 30 days or more.
Strategy for Selling
REV will meet with possible partners on the spot. In a safe and polite setting, the possibilities will be welcomed and handled with the highest expertise. The initial meeting is an opportunity for REV’s owners to determine whether or not to lease to the prospective tenant. REV will no longer lease the property if the prospect is unfriendly, nasty, or makes unreasonable requirements. If the prospect, on the other hand, is professional and has realistic requirements, this meeting will be considered, along with the credit score and background check, when making a choice to rent.
The following table shows the expected condo unit sales for the first three years of operation. The research assumes that the property is fully leased and that there are no lease escalations for the first two years.
Programs for Sales
REV’s property owners lease their homes privately and do not want to pay commissions to salespeople. However, much like income agents, REV’s owners are motivated to swiftly hire houses—after all, unoccupied properties don’t earn cash! Although REV’s owners are eager to get tenants in as soon as possible, they will no longer ‘rush’ at the expense of quality. If REV is unable to find a suitable renter in a reasonable length of time (about 30 days), the cost of doing business will include the marketing expenditures associated with running classified advertisements in the local newspaper and on Craigslist.
In order to buy investment real estate, you’ll need a clear title and zoning. Prior to REV purchasing any property, a title check and a tax report search should confirm this. There must be no liens found in the title search.
All maintenance and repairs will be carried out by bonded and licensed contractors who are in good standing with the government.
REV feels the milestones listed below will help them achieve their goals.
Plan of Exit
The owners will be the secondary remedy if the condominium unit is empty for an extended length of time or if extensive repairs are required, depleting all available funds. The property will be auctioned after the proprietors’ non-public reserves have been exhausted. The proceeds will be used to pay off debts to lenders, with any excess going to the owners.
Management and Organization
REV’s ownership and future personnel projections are highlighted in the following section:
Structure of the Organization
The tough real estate will be owned and manipulated by both Linda and Steve Rogers. Steve Rogers will take care of the event’s maintenance and repairs. Linda Rogers will be in charge of the day-to-day accounting needs. She will send the needed data to REV’s registered public accountant for counseling of the yearly income taxes, and she will post repayments to providers such as garbage and recycling services.
Steve Rogers will be in charge of the condo unit’s day-to-day maintenance. On a monthly basis, he will replace air filters, examine the grounds, and make notes on the property’s typical physical condition. If the yard needs to be mowed or weeds look to be a problem, the renter will be placed on notice. The renter will be given enough opportunity to address the issue and will be penalized on a daily basis until the problem is rectified.
Steve has successfully owned and maintained his painting business for over 15 years and is in the area on a daily basis. He would often drive by the site to do visual inspections. In the event that the renter requires any repairs, he is easily accessible.
Linda Rogers will be in charge of the condominium’s day-to-day accounting needs.
Gaps in Management Teams
REV no longer employs an accountant or an attorney. The owner’s long-term non-public public accountant will provide tax practice and consultation services. REV will rely on their title company to confirm that they have a clear title.
Plan for Personnel
Steve and Linda Rogers will own and run REV but will not be paid; each of the owners has outside income and will no longer be paid from the houses.
Personnel Plan, Table 6.4
Owners and operators, Steve and Linda Rogers
Directors of the Board of Directors
The following financial plan addresses:
- Start-Up Expenses
- Earnings and Losses
- Flow of funds
- Statement of Financial Position
- Ratios of financial performance
REV expects the project will take one month to complete. The work will be carried out by a contractor who is well-liked by the proprietors. The contractor is licensed, bonded, and in good standing with the government.
REV’s proprietors received a $100,000 bequest and now have access to capital to cover start-up fees and operational shortages. However, they plan to put a portion of the money into other condo profit buildings. Each proprietor’s ‘day employment’ provides additional funds – Linda Rogers is a math teacher at Franklin Elementary School, and Steve Rogers operates his own home painting business.
Earnings and Losses
Franklin has a low vacancy rate of 6%, which is much lower than the national average of 7.9%. The assessment is based on a 100% occupancy rate for the three years under consideration.
Sources and Applications of Funds
REV’s owners received a $100,000 bequest and have access to funds to pay startup expenditures and satisfy operational deficits. However, they have set aside a portion of the money to invest in further rental income properties. Both proprietors have day jobs: Steve Rogers operates a house painting business, while Linda Rogers is a basic college math teacher at Franklin Elementary. The table below shows the intended funds’ source and use.
Analysis of Break-Even Points
The rental income property is expected to bring approximately $1,300 per month in rent or $15,600 yearly. Breakeven rentals are $14,020, or 10.78 months of income.
Profit and Loss Predictions
The pro forma profit and loss are based on the subject property’s first three years.
Cash Flow Estimates
The cash flow statement indicates how much money is coming in and going out of the company.
Balance Sheet Projection
Ratios in business
The business ratios are calculated using the NAICS code 531110. REV is well funded, has a low leverage function, and has strong liquidity, according to the ratios. REV compares well to its enterprise counterparts, owing to the owner’s fairness injection.