Gem Rentals, LLC
San Antonio, Texas 78233
To Whom It May Concern:
Enclosed is a Business Plan for Gem Rentals, LLC a real estate investment company. The company Invest in income producing properties in Texas. We invest in Multi Family and single family properties in San Antonio and surrounding counties. We have been in business for ten years. I have been a real estate investor for 32 years. We are looking to expand our business over the next five years. To achieve those goals we borrow from private lenders and raise equity funds via Regulation 506-C offerings.
We are raising $2,000,000 this year as detailed in the attached plan the funds.
Should you need additional information, you can reach me at (210) 413-7230. Thank you in advance for your consideration.
James E.Glasgow Sr Gem Rentals. LLC
Gem Rentals, LLC
Gem Rentals, LLC was formed in January 2010 to invest in Rental properties that require rehabbing for resale or rental. We invest in distressed properties in San Antonio area and surrounding counties. Gem Rentals, LLC is solely owned and managed by James E. Glasgow Sr. Gem Rentals, LLC is located in San Antonio, Texas 78218 (old Address)
Gem Rentals, LLC is in the income property business. We invest in single family homes, small apartment properties, real estate notes and Mobile Home Parks.
We purchase residential real estate in San Antonio, Texas and neighboring Counties. We look for properties that can be acquired at 70% or less of the current fair market value after repairs. These properties need moderate renovations to go into the retail, owner finance, or rental market. The resale value of the properties after repair ranges from $55,000 to $150,000. While our objective is to make a minimum of 15% to 30% profit based on the After Repair Fair Market Value on each deal, we are also aware of our responsibility to the communities we do business in, and our role in the betterment of these communities. Therefore, we always make every effort to provide products that are of good quality and will improve the neighborhood.
Gem Rentals, LLC invest in residential real estate and Mobile Home parks.
The company Invests in residential real estate by purchasing distressed properties at or below 70% of fair market value. Our strategy is based solely on making sure the profit is made going in and not on speculative appreciation months or years down the road. We then sell, rent, or sell the houses on owner carry notes.
Our most profitable business strategy is to sell the homes on owner carry mortgages at 10% or higher interest. To this end we are raising money to fund these owner carry notes.
As we developed our business we have put in place a solid group of people with defined roles that will ensure our success such as Realtors, settlement attorneys, mortgage servicing company, contractors, and bankers. As with any business we will continually evaluate each member’s role and contribution and make necessary changes.
Gem rentals currently owns three (3) rental houses, one (1) rental office building, three (3) mortgage notes. One (1) House in inventory going into our owner finance program. Current monthly rental income is $11,700. We have three (3) projects that we are working on. Properties and cash on hand in excess of $1.5 Million.
Gem Rentals, LLC needs to raise money to finance the homes it buys and sells on owner carry notes or on properties it holds as rentals.
We borrow from private investors at an interest rate of 8% with a loan to value of no higher than 70%. The loan term is for five years, interest only at which time the lender (you) is repaid. Interest payments are paid quarterly or as negotiated. Loan to value is typically 70/30. At the end of the five years, we will sell the notes and pay the investors back. Or investors may be offered an opportunity to reinvest under the same or similar terms.
These are managed notes as Gem rentals are the borrower and responsible to you for the loan payment. If our home buyer does not pay, the collection and default problem are ours. Your payments continue.
Certain statements contained herein are forward looking statements, which reflect numerous assumptions and estimates and involve some risks and uncertainties. There are possible developments that could cause our actual results to differ materially from those forecast-ed or implied in the forward looking statements. This information shall not constitute an offer to sell or a solicitation of an offer to buy securities, nor shall there be any sale of securities in any state in which such offer, solicitation or sale would be unlawful before registration, qualification or the applicable exemption under applicable federal and state securities law.
Gem Rentals LLC sells mortgage notes to private lenders who want a higher return. The notes have an interest rate of 10%. Ownership of the mortgage note transfers to the private lender and Gem Rentals is out of the deal.
Typical Owner Carry Deal
Gem Rentals, LLC Buys a House in need of some TLC, We make repairs sufficient to resale the house to a do-it-yourself-er as a handyman special. The buyer makes further repairs to improve their home. The buyer makes monthly payments to Gem Rentals LLC which then makes interest payments to the Investor.
Actual example: House on Taft Street Sequin, Texas, three bedrooms, one bath house in need of remodeling and updating.
Purchase price: $30,000
Acquisition cost and 2,000
Closing cost 3,000
Total Cost 35,000
Sales price $59,000
Down Payment 2,500
Mortgage note 56,500
(10% interest 20 year amortization)
Monthly payment 545
Tax & Insurance 150
Total Payment 695
Gem Rental LLC then borrows from the lending pool $35,000 at 8% interest only for 5 years. Interest is paid monthly into the investor.
Loan Amount $35,000 (Loan to note value 62%)
Payment interest only $ 234 a month.
Total interest five years $14,000
Re-payment at end of five years $35,000
At the end of five years, the balance owed on the note to the investors is due and payable. If the home buyer has not refinanced during the five years, then the original mortgage note to Gem Rentals LLC is sold to pay off the investor.
The loan to Gem Rentals LLC from the investor is secured by a first lien on the property. Gem rental’s note from the home’s buyer is second in line. If the home owner refinances, the investor is paid back. If five years pass and the home is not refinanced, the note held by Gem Rentals is sold to pay back the pool. The investor’s loan to note value is never greater then 70% to allow enough equity to assure the note can be sold at a discount if need be to repay the investor.
Gem Rentals profit on this typical Owner Carry Deal
$2,000 purchase fee
$2,500 down payment
$20,000 paper equity
$311 a month difference between the two notes.
Typical Rental Property
Gem Rentals, LLC Buys a House in need of some TLC, We make repairs, do remodeling and updating. We rent the house at the fair market rent rate. The property is held for cash flow and long term appreciation.
Actual example: House on Contour drive Spring Branch, Texas, Three bedrooms, two bath house, 1865 square feet, in need of remodeling and updating.
Purchase price: $39,000
Acquisition cost and closing cost 2,500
Remodel cost 25,000
Total Cost $66,500
Rent $ 900 a month
Value based on comps, and rent $98,000
Loan from investor $58,000 (Loan to Value 59%)
Payments interest only $ 373 a month
Tax & Insurance 232
Total monthly cost $ 605 a month
Cash flow 295 a month
The loan to Gem Rentals LLC is secured by a first lien note on real estate. The loan is at 8% interest for five years. At the end of five years, the loan is re-financed, or the property is sold.
The properties targeted by our company are affordable single-family homes and duplexes in predominantly first time home buyer neighborhoods located in San Antonio area. The resale value of the homes ranges from $60,000 to $150,000.
We find the properties through a variety of sources, but our primary source is the Multiple Listing Service (MLS). The properties are typically owned by banks and government through foreclosures. The condition of these properties at the time of acquisition will range from badly in need of repair to ones only needing minor cosmetic repairs. The repair cost will range from $5,000 to $45,000 depending on the type of work required. The properties usually are all in need of paint, carpet, new kitchen and bath. Since most of these properties have been neglected for some time, they almost always need landscaping as well as major system checks. We pass up on properties with major foundation problems, extensive roof damage, odd floor plans and those that require lead paint, asbestos, or radon abatement that could result in the significant cost overrun.
The most critical factor to our company’s success is buying the property at the right price. We determine the Fair Market value after renovation by reviewing recent comparable sales for the area. This data comes from the MLS as well as other online sites such as Realtor.com. The first formula takes into account (in the 30%) all acquisition costs, holding costs, selling costs and profit (See complete descriptions below). This formula works better on properties that would retail for more than $100,000. For lower end properties we use the second formula. That sets a minimum profit margin and allows for holding costs.
Example: Fair Market Value is $100,000, Repair Costs $30,000
1. $100,000 X .70 = $70,000 – $30,000 = $40,000
2. $100,000 – $25,000 = $75,000 – $30,000 = $45,000
The lower of the two figures is the maximum purchase price we would be willing to pay. We make our offer $2,000 or lower than our target price to give us some negotiating room.
For rental property accusations we take the properties projected annual income, then subtract annual expenses, then deduct one month’s rent (for the vacancy) then divide by twelve. The resulting number (minimum monthly cash flow) needs to be $200 or $2,400 annually. Expenses would include such costs as taxes, insurance, utilities, maintenance, management, advertising, and debt service.
Our purchase contracts get accepted even when they are lower than the competition because they have none of the contingencies that are typically associated with real estate contracts. Also, we offer quick settlement usually less than 30 days.
Since our offers tend to be on the low end, we have to make several offers to get one accepted. That is especially true in this hot real estate market. Our current acceptance rate is 10 to 20%. We pride ourselves on performing as agreed. This goes a long way when dealing with team members who frequently see others who don’t perform.
The managements 32 years of real estate investment experience has proven to be a great advantage in, selecting properties, avoiding problems and cost, and negotiating deals when buying and sell.
The management team consists of James E. Glasgow Sr. with 32 years of real estate investing experience and fifty years of management experience. Mr . Glasgow will handle all day-to-day operations while outsourcing services such as accounting, legal, marketing, mortgage servicing and all renovation related work.
Lisa Lewis: is the companies Property Manager who oversees, rent collection and all landlord related issues.
Project Manager: will over see re-hab and property acquisitions.
We use outside business partners for a variety of business
services such as our banker, securities attorney, real estate attorney, title company, mortgage loan originator, loan servicing, accounting and other services.
We assume the real estate market will continue to grow and interest rates will stay low. We assume that the demand for handyman special starter homes, with owner financing, will remain strong as it has for the past 30 years. Another assumption is that the market for homes with deferred maintenance will continue to grow to allow us plenty of homes to buy.
It is our goal to continue to market our good name so that deals will come to us through other investors, individuals, and Realtors. We will continue to pay our cash investors 8% returns on their savings as we have for more than thirty years. We plan to develop our owner finance business model into our primary source of revenue. Our expansion plans are realistic and achievable. We are confident that we have the experience and the right people on our team and right process in place to achieve our goals.