Why Your Uncle Might Want To Invest In Your Green Project
G r e e n E a r t h E q u i t i e s . C o m
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Saving The Planet One House At A Time 1
Private Financing: The Idea Who’s Time Has Come
? w o N y h W
1. Depressed Lending Market For Quality & Green Projects 2. “4 Mortgages” Rule 3. Bank Conservatism 4. Housing Needs will Increase as we continue to not build. G r e e n E a r t h E q u i t i e s . C o m
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House
They Started Off The Same
$70,000 $10,000 Renter Zero No Change Zero Lowered Dragged Down
A
House
B
Purchase Price Improvements $ Occupant Energy Retrofit Carbon Footprint Green Jobs Tax Base Neighborhood
The Flood of Cheap Flips (A) has created APPRAISAL Challenges for Quality & Green projects (B) G r e e n E a r t h E q u i t i e s . C o m
$70,000 $50,000 New Owner Everything Reduced Yes Raised Lifted Up
Then Everything Changed
m e l b o r P G No ELLIN Saving S The Planet Š 2010
One House At A Time 3
House
A
House
B
The Success of A ... Is impacting B The Success of Conventional Investors with their philosophy of minimal cosmetic improvements (Lipstick on a Pig) has established an easy valuation technique that can be used by uneducated or lazy appraisers, (who dont know how or wont take the time to evaluate energy efficiency of a home) G r e e n E a r t h E q u i t i e s . C o m
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Banks, Real Estate Lending & d The Appraisal Industry . o . o s.
G ew N
1. The Appraisal Industry is BEGINNING* to train appraisers how to value Energy Improvements. 2. You MAY get one of these Appraisers * Watch for blogpost updates here on Appraising Energy & Green by Debra Little G r e e n E a r t h E q u i t i e s . C o m
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Banks: There For You .....
When You Dont Need Them G r e e n E a r t h E q u i t i e s . C o m
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Saving The Planet One House At A Time 6
Little Value Quibbling Over Rules, When The Players Aren’t Even Playing The Same Game Energy Wise Investor
Banker, Appraiser, Regulator
Meet 2030 Energy Goals Brief Nod to List at Left Reduce Carbon (except the last one) Playing Playing To Win Buy Less Foreign Oil Job preservation To Not Become Energy Independent Dont rock the boat Lose Create Green Jobs Be Safe Improve Neighborhoods Have evidence you are right Increase Tax Base Make the math work Saving The Planet Change The Status Quo Keep the Status Quo One House G r e e n E a r t h E q u i t i e s . C o m
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At A Time 7
Nothing Wrong With Job Preservation and the Status Quo ... Except that it makes change difficult or impossible. ... If we just stay the same, We’ll never achieve our goals ... We’ll just stay the same Change is slow. Soldier On! G r e e n E a r t h E q u i t i e s . C o m
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Benefits Of Private Financing 1. Significant Savings in fees 2. Increased Flexibility (You can consider more deals & structure them differently. Customized vs 1 size fits all.) 3. Savings @ Escrow etc
G r e e n E a r t h E q u i t i e s . C o m
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Additional Benefits Of Private Financing With BRRR Strategy* (Buy - Renovate - Rent - Refinance) All savings and flexibility PLUS 1. No Appraisal at completion of renovation. 2. Future appraisals will fare better due to improvements in economy and appraiser education
3. If an appraisal returns low for a cash out refi, it is an inconvenience, not Saving a deal killer The Planet
G r e e n E a r t h E q u i t i e s . C o m
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More Benefits Of BRRR Minimize The Biggest Tax Of All Inflation is a definite possibility following our recent and continuing spending spree. Inflation can consume more wealth than any taxes our politicians can devise. Owning rental property may be one of the best hedges against such inflation. G r e e n E a r t h E q u i t i e s . C o m
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Saving The Planet One House At A Time 11
Warren Buffett On Housing The industry is in shambles for two reasons, the first of which must be lived with if the U.S. Economy is to recover. This reason concerns U.S. housing starts (including apartment units). In 2009, starts were 554,000, by far the lowest number in the 50 years for which we have data. Paradoxically, this is good news. People thought it was good news a few years back when housing starts – the supply side of the picture – were running about two million annually. But household formations – the demand side – only amounted to about 1.2 million. After a few years of such imbalances, the country unsurprisingly ended up with far too many houses. There were three ways to cure this overhang: (1) blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the “cash-for-clunkers” program; (2) speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers or; (3) reduce new housing starts to a number far below the rate of household formations. Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious. Prices will remain far below “bubble” levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.
(From Berkshire Hathaway 2009 annual report) G r e e n E a r t h E q u i t i e s . C o m
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GRIP A Way To Invest In Green Real Estate With GreenEarthEquities Following is a description of the G.R.I.P program now being developed and offered by GreenEarthEquities to investors looking for Green Investments and the benefits that this program offers. Continuing development of this program will be available in the GEAR subscription program G r e e n E a r t h E q u i t i e s . C o m
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Get A GRIP!
(Green Renovation Investment Plan) GreenEarthEquities GRIP is for investors who: 1. Resonate with our Mission, Saving The Planet, One House At A Time. 2. Can benefit Tax-wise from ownership and renovation of Green Real Estate 3. Expect to invest for periods of a year or more. 4. Are looking for better returns than conventional investments currently offer. 5. Do not want “Landlord Challenges.” GreenEa rthEquities.Com
© 2010
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GRIP Investor and GreenEarthEquities form a specific partnership for each investment property. Investor holds title to the property from the beginning, accruing tax benefits & total security. GRIP is a long term, multipart plan with flexible exit strategies after renovation. After confirmation of Investor Goals, including desired level of Green Commitment and available capital, GreenEarthEquities (GEE) shops for the best appropriate property GreenEa rthEquities.Com
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GRIP
(Organization & Entity)
It is commonly acknowledged that the LLC (limited liability company) is the best way to hold real estate. This vehicle has both liability and tax benefits for the investor. The first Action Step is to set up an LLC with an appropriate Operating Agreement for the Investor. If the investor already has an LLC, the features of the GRIP Operating Agreement can be amended into the existing agreement. (Sample on next page) GreenEa rthEquities.Com
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Saving The Planet One House At A Time 16
GRIP
Operating Agreement Points
1. Title vests in the LLC 2. All ownership and profits are the investors 3. Tax Benefits of Energy Features such as Solar go to the investor 4. Rebates and Incentives reduce project costs, therefore increasing Investor’s position 5. GreenEarthEquities is retained by the LLC as a construction manager during renovation. 6. GEE is then retained as a property manager 7. These management arrangements may be terminated at will with 30 days notice. 8. Both parties hold each other harmless. GreenEa rthEquities.Com
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Sample Renovation New Bath & Master Closet Addition At 503 Scott making luxurious Master Suite & turning a 3-1 to a 3-2
GRIP (process continued) Investor wires funds to Title Company and goes on title at Close Of Escrow GEE proceeds with Renovation according to the agreed upon GreenRenovation Plan Investor funds the Renovation in $20,000 increments as needed. GEE’s Renovation fee of 10% of Total costs is paid incrementally along with the stage payments. GreenEa rthEquities.Com
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GRIP Upon Completion of the Green Renovation, the project is either: Sold. GEE will market and attempt to sell “By Owner” saving Commission costs. Or Decide for a longer term investment: Rental: GEE will screen and place a tenant, or Lease-Purchase: GEE will screen and place a lease option purchaser GreenEa rthEquities.Com
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GRIP In either case, Rental or Lease-Option, Investor may choose to refinance the finished and seasoned property, usually at 75% LTV. This is usually 80-90% of the original capital. Investor may choose to use this capital for another project with GEE or another investment. GEE provides property management services for Green projects and clients including screening and placing & replacing tenants Collecting Rent, managing any repairs Accounting Reports to Owner Assistance with Refinance & Sale Normal fee is 10% of rent. GreenEa rthEquities.Com
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GRIP Time Line, Typical Project Activity Investment Goal Alignment & Form LLC for Real Estate Investing Locate Property, Close Escrow Investor’s LLC takes title. Green Renovation of Project Sell the Project or GEE manages the Investment
Time
Cash
1 Month1
$0
1-3 Months
$0- $3,000
2 Months
Apx $100k
3- 6 Months
Apx $100K
Investors Choice
Cash Flow
GreenEa rthEquities.Com
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GRIP GreenEarthEquities and Dave Robinson are not attorneys or accountants and dont offer legal or accounting or tax advice. Each GRIP is an LLC that renovates “by owner” Dave Robinson is a manager of the LLC and is not a Real Estate Broker or acting as a General Contractor Real Estate Investing has risks. Each Investor should evaluate his position. No returns on investment are promised with GRIP
GreenEa rthEquities.Com
© 2010
Saving The Planet One House At A Time 22
One Recent Example 3405 N Miami Item Cost w PV Original Purchase 50,000 Renovation, Mat, Lab, Sub 70,000 3 KW Solar PV 18,000 Job Supervision .10 8,800 SubTotal 146,800 Construction Mgmt .10 14,680 Total Cost @ Completion 161,480 Would Sell For 175,000 Actual Appraisal Profit If Sold 13,520 Monthly Rental 1,150 GreenEa rthEquities.Com
Cost 50,000 70,000 7,000 127,000 12,700 139,700 160,000 153,000 20,300 1,100 Š 2010
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GreenEa rthEquities.Com
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