Kevin Strasser
WestOne Properties Real Estate Service Provider
Executive Summary Advantages of Investing in Real Estate Pittsburgh’s Posed for Growth Key Investment Considerations Experienced Management Team Investment Process Synergy Capital Investment Portfolio Investment Risks
Why Invest in Real Estate?
Diversification Stocks help grow your portfolio
Bonds bring in income
Real estate provides a hedge against inflation and has a low "correlation" with stocks
International investments provide growth and help maintain buying power in an increasing globalized world
Cash gives you and your portfolio security and stability
Stocks vs. Real Estate Stock Market • • • • • •
Intangible Asset Uninsured Invest at market price Returns are unknown Return subject to market conditions Liquid Asset What about REITs?
Private Lending for Real Estate • • • •
Tangible asset you can visit Secured by mortgage deed Collateral is insured Collateralized below market value (equity position) • Returns are known, fixed and agreed upon • Illiquid asset
Investment Comparison Barclays Aggregate US Treasury Bond T-Bill Index 10 Yr
Inflation
S&P 500
Russell 2000
Synergy Capital
5 Year
1.80%
4.83%
6.83%
5.89%
5.55%
-
3 Year
2.06%
11.66%
9.66%
5.73%
8.28%
7.00%
1 Year
1.75%
15.60%
15.97%
3.86%
5.02%
7.00%
Why Pittsburgh?
Pittsburgh Accolades America’s Most Livable City, The Economist and Forbes.com Best Commercial Real Estate Market, WestOne Service North American City of the Future, fDi Economically Strongest U.S. Metros, The Brookings Institution Top 10 City for Job Growth, Forbes.com America’s Best Housing Market, Forbes.com Best Cities for Recent Graduates, Huffington Post Safe Havens in Real Estate, Kiplinger Magazine
Pittsburgh Population by Age 65+ yrs.; 17% Under 10 yrs.; 11%
55-64 yrs.; 14%
10-17 yrs.; 10%
18-24 yrs.; 9%
25-34 yrs.; 12% 45-54 yrs.; 16% 35-44 yrs.; 12%
Source: 2010 U.S. Census Bureau
Crime Index 2010 (rate per 100,000 inhabitants)
Metro Area Pittsburgh, PA Boston, MA San Diego, CA Raleigh, NC Richmond, VA Washington, DC Philadelphia, PA Denver, CO Cleveland, OH Minneapolis, MN Portland, OR Detroit, MI Baltimore, MD St. Louis, MO Cincinnati, OH Milwaukee, WI Atlanta, GA Kansas City, MO Phoenix, AZ Indianapolis, IN Charlotte, NC Seattle, WA
Violent Crime 319.5 406.0 378.5 242.6 269.3 380.0 551.8 337.1 415.7 268.5 635.4 685.3 497.4 314.1 464.1 413.8 461.3 370.8 627.9 528.2 353.0
Property Crime 1,975.6 2,189.5 2,206.4 2,442.6 2,542.9 2,550.6 2,662.7 2,771.4 2,835.6 2,894.2 2,929.0 2,950.3 3,090.7 3,159.5 3,340.7 3,360.3 3,462.6 3,476.1 3,534.6 3,827.1 3,902.2 3,905.8
Source: FBI Uniform Crime Report 2010
Pittsburgh Key Economic Sectors Advanced Manufacturing
Energy
Financial & Business Services
Health Care & Life Sciences
Information & Communications Technology
Median Sales Price of Existing Single-Family Homes (4Q 2011) $350,000
Average Asking Monthly Apartment Rent (1Q, 2012) $2,500
$300,000 $2,000 $250,000 $200,000 $150,000
$1,500
$1,000
$100,000 $500 $50,000 $-
$-
Source: The NAHB/Wells Fargo Housing Opportunity Index: Complete History by Metropolitan Area (1991-Current)
Investment Opportunity Investment Conditions: Synergy Capital
Management Team
Residential
ďƒ˜ Three-Year Commitment ďƒ˜ Fixed 7% Annual Return
Investors
Commercial
Private Lending
Three-Year Return Investment Amount
Compounded 3-Year Return
Annual Interest Rate
 Annual Return
Aggregate Annual Return
$ 25,000
7%
$
5,626
$ 1,750
$ 5,250
$ 50,000
7%
$
11,252
$ 3,500
$ 10,500
$ 100,000
7%
$
22,504
$ 7,000
$ 21,000
$ 250,000
7%
$
56,261
$ 17,500
$ 52,500
$ 500,000
7%
$
112,522
$ 35,000
$ 105,000
$ 750,000
7%
$
168,782
$ 52,500
$ 157,500
$ 1,000,000
7%
$
225,043
$ 70,000
$ 210,000
Key Investment Considerations Experienced Management Team Value Added Strategy Unique Deal Flow Capital Preservation Risk Mitigation Alignment of Interests
Experienced Management Team Josh Adamek – Managing Partner • • • • •
Ten year track record 2003-2010 built personal portfolio of rental properties Full-time since 2010 Has been the principal in over 100 transactions Vice President of ACRE of Pittsburgh
Scott Hastings – Managing Partner • • • • • • •
Eleven years of experience, completing over 500 transactions Accumulated 50 rental units in first year of investing 2002-2007 was the 2nd largest wholesaler in Pittsburgh with over 200 transactions 2008-2010 opened Pittsburgh regional office for a national private lending company 2010-2011 started own investment company and bought, renovated, sold 30 properties Reputable real estate agent Mentor to Pittsburgh area real estate investors
Key Investment Considerations Experienced Management Team Value Added Strategy Unique Deal Flow Capital Preservation Risk Mitigation Alignment of Interests
Commercial Investment Process Sourcing Properties
Evaluating Deals
Due Diligence
Renovating
Selling
Closing
Average Investment Period from Due Diligence to Closing: 18 Months
Private Lending Process
Sourcing Borrowers
Evaluating Deals
Due Diligence
Average Rollover Rate: 8 Months
Lending
Loan Payoff
Invest with Synergy Capital Real estate is a tremendous opportunity to add value and diversification to
investment portfolios and outperform industry averages Information-intensive aspect of real estate investing favor experienced and well connected investors like our local firm Specialized managers with excellent market knowledge add enormous value Invested management team encourages thoughtful acquisitions, careful oversight, and timely dispositions Management team garners a margin of safety by paying a low purchase price in which properties are acquired at a discount
Exhibit 1: Self-Directed IRA or 401(k)
All investments must be arms length, meaning the buyer and seller are acting in their own self-interest and there is no influence from other parties.
You cannot sell or buy property from a disqualified individual. Disqualified individuals include you, your spouse, your parents, your kids and/or their spouses, grandchildren, grandparents, investment advisors, fiduciaries and entities where the disqualified individual owns 50% or more interest.
You cannot receive immediate benefit from a property owned by your IRA. No vacation homes, personal residences or office spaces because these would benefit you in some way.
You cannot lend yourself money to perform rehab work or cosmetic work on the home purchased by your IRA. You can't perform any maintenance on the home or even furnish the home. It's all done via a property management company, which is nice because then you don't have to deal with tenants. All income or rental profits generated from your investment must go back to your self-directed IRA and all expenses like improvements, property taxes and bills directly related to the investment property must be paid from your IRA account.
Your IRA may invest in: Single-family residences and vacation homes, Certain condominiums and duplexes, Multi-family (5+ units) properties, Commercial properties (retail/office/warehouse), International properties
A self-directed 401(k) offers the same benefits of pre-tax savings and automated payroll deductions that you'll find with a traditional 401(k) plan. The difference is in your investment choices.
A self-directed plan is similar to a brokerage account. It's essentially a do-it-yourself 401(k), and you're the fund manager. Rather than choosing 401(k) investments from a short menu of pre-approved mutual funds, participating employees have an entire universe of investments to consider.