Executive Summary:The Waller Group is a full service residential brokerage and property management company with Preferred InvestorServices focusing on the acquisition, repair/renovation, pre- leasing, lease up, and property management for TX residential investment properties.
We’ll Cover the Following:1. Why single family homes as an investment vehicle?2. Why our focus is on the Texas market?3. Suggested portfolio mix and property criteria?4. How Waller Group Preferred Investor Services work
• Shadow overhang of single family REO properties in the market• Rents projected to continue to increase due to lack of owner occupant financing for first time home buyers.• Increased emphasis on short sales for distressed homeowners• REITS pay an average of 3.5% yield, through increased reporting, management fees, accounting fees, SEC regulation REITS are less and less attractive. Less opportunity in commercial sector due to sellers modifying their commercial loans. Through lack of employment single family loan modifications have a higher failure rate.
Consumer Confidence ImprovesIndex, 3MMA160140 West South Central120100 88.980 U.S.60 67.84020 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 NOTE: Shaded bars represent U.S. recessions
Dallas Fed Surveys Suggest Positive Outlook for U.S. Business Conditions (Texas Business Outlook Surveys)Index, SA 60 TMOS TSSOS TROS4020 Mar-12 0-20-40-60 2007 2008 2009 2010 2011 2012
Texas Leading Index Edges Up Suggesting Faster GrowthIndex,Oct 1971= 100 130 Texas Leading Index 125 122.8 120 115 110 105 100 1996 1998 2000 2002 2004 2006 2008 2010 2012NOTE: Shaded areas represent Texas recessions.
Construction at Low Levels (Contract Values) Real $, 5MMA, SA800070006000500040003000 Total Contract Total2000 Residential1000 Private Nonresidential 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Drivers of Texas Commercial Demand RisingIndex, January 2000 = 100230210 Real Exports190170150 Real Retail Sales130110 Office Using Employment907050 2000 2002 2004 2006 2008 2010 2012
Real Estate Conditions Improving Nonresidential leasing and occupancy up Drivers of demand for space are rising Investment sales are improving Apartment demand is very strong Construction expected to increase in 2012 Housing sector on the mend Modest gains in home sales Decline in inventories No improvement in house prices, yet
Dallas Facts:1. Dallas/ Ft. Worth metropolitan population is more than 6.3 million.2. 3rd fastest growing metropolitan 2000 to 2010 in the United States.3. 9th largest city and 4th largest metropolitan area in the United States.4. Seventh busiest airport in the World.5. Third highest concentration of Fortune 500 companies headquarters in the US, including Exxon Mobil, AT&T, Kimberley Clark, Texas Instruments.6. Low vacancy rate of 6.47% against the national average of 10.5%.7. Per capita income of $26,440 against the national average of $27,041.8. Ranked number 6 in the USA for job growth 2010 to 2014.9. 4 th highest ranking job growth metropolitan area for Q1 2012 (Sources: U.S. Census Bureau, Airports Council International, Fortune 500, Moody’s Economy.com, Sperlings)
Why Single Family Homes? The typical price range of homes purchased by our investors is $40,000-$90,000.The repairs needed range from $7,500-$35,000. Upon completion the after repaired value of the property is between $75,000-$140,000.
1. Our analytics recommend 3 bedroom, 1-2 bath homes, in Dallas, Austin, and Houston to fill the gap between demand for single family housing and the existing financing for first time home buyers in the marketplace. 52% of all first time home buyers are Hispanic. The influx of Hispanic household formation for Texas is one of the fastest growing segments of the country. It is also forecasted to be the largest echo boom generation also purchasing over the next 10 years. a) As multifamily construction increases throughout the US, apartment rents could become more competitive. b) Focusing on a single family home targeting to the Hispanic Latino community reduces downside risk. Single family homes in desirable locations near transportation will be far more attractive and marketable than apartments.
d) Single family home construction will not be able to compete with the distressed market until the inventory is disposed by the banks. Fannie Mae and Freddie Mac are suggesting 2-4 years to clear the existing and shadow inventory of REO properties.e) As owner occupant financing becomes more available and the distressed/REO inventory declines over the next 5 years these homes will be very attractive to sell to existing tenants. It also allows adequate time for the Waller Group to assist the tenant in building their credit and establishing payment history which makes the tenant a good prospective borrower.
“Financing will tighten even farther in the short term for first time home buyers, immigrants, and those that need financing most” - David Stevens, President, and CEO of Mortgage Bankers Association“Single family rental homes is a fantastic investment, depending on how they are locally managed” - Eric Belsky, Joint Center for Housing Studies, Harvard University
Key Qualifying facts for Waller Group Investment Home Criteria: Purchase price, typically the homes we contract are 50% REO, 30% short sale and 20% equity sellers. Repair costs, the cost to bring the property to average or good condition for the neighborhood, which is required to maximize the value and marketability of the home. Utilizing dedicated contractors generally saves 10-20% for repairs, also reduces the repair timeline. Rental amount, generally easy to calculate based on average rents for the size of the home, condition, and the neighborhood.After Repaired Value, the value that the property appraises for after repairs are complete. Generally this value is up to 80-90% higher than the acquisition cost of the property. If the above 4 factors fit within our pre-determined criteria, we then submit to our preferred investor for final approval and funding.
Waller Group Preferred Investor Investment Package: Typical Cap rates of 8-12%, Each investment will have $10,000+ in equity within 30 days of property repairs and make ready. Waller Group Preferred Investor Services
Waller Group Preferred Investor Services “Attachment A”Waller Group, LLC (“Waller Group”) will endeavor to complete the following enhancedservices for investor clients:1. Source properties that are projected to yield a cash on cash return of 7% or more based on the following assumptions: I. Properties are unlevered. Levered properties will yield 14%-21% II. The following expenses are factored: 5% vacancy factor, 10% monthly property management fee, one month’s rent, lease listing fee, (10% of total cost of make ready) management and make-ready fee, annual taxes, insurance and maintenance2. Properties will meet the following criteria: I. Located within the DFW metroplex, brick, 3+ bedroom, no garage conversions II. Minimum spread of $10,000 between basis (purchase price, carrying costs, repairs) and estimated ARV (after repaired value) III. Purchase price of no more than (optional): ______________ IV. Estimated repairs of no more than (optional): ____________ V. Additional property criteria (optional):
Waller Group will Provide the following services: Buyer brokerage Representation/ Property Sourcing Services Make ready coordination and facilitation Pre-lease services Property lease listing and marketing services Property lease up and property management
Upon execution of this agreement Client agrees to:1. Authorize Waller Group to submit offers on behalf of client with the above property criteria.2. Utilize Waller Group for make ready services (fee: 10% of total construction/make ready expenses).3. Execute property management agreement retaining Waller Group as manager (fee: 5-10% of rent collected).4. Execute property listing lease agreement retaining Waller Group as brokerage (Fee: one month’s rent).5. Execute Buyer Representation Agreement (Fee: 3% of sales price, paid by seller, promulgated Texas Real Estate Commission document).
1. Provide Proof of funds available to purchase properties with above criteria (bank statement of proof of cash available to close, dated within 30 days and titled with entity that is purchasing property).2. Complete phone consultation with Logan Waller upon submission of the above.3. Notify brokerage in writing at any time if client wishes to terminate or change investment criteria or relationship. (fee: none charged, client has the right to terminate agreement at any time and no fees will be incurred).Client: _______________ Waller Group, LLC: _____________Date: _______________ Date: _______________________
Performance Incentive:“We are so confident and committed to meeting ourpre-determined expectations…we’ll defer our fees if necessary to ensure that YOU PROFIT FIRST” Waller Group will NOT charge a lease listing sidemarketing fee OR a make-ready fee if the appraised value of the property after repairs are completed (based upon an appraisal prepared by a mutuallyacceptable appraiser) is less than $10,000 greater than the purchase price + repair costs + make ready expenses.
Waller Group does not charge a property management fee while theproperty is vacant. Property management fee payable will be reduced to5% (with the balance of management fees deferred) during the time thatrental revenues are not sufficient to provide a cash flow return of 7% ormore annualized return. Deferred management fees will be due andpayable once 7% annual return threshold is met either through rentalactivities or upon sale of property.The above performance incentives apply only if investor opts to utilize allof the above Waller Group services.Client: ________________ Waller Group, LLC: _____________Date: ________________ Date: _______________________