Provident Properties Newsletter October 2019

[Joshua Ferrari]

October Newsletter! _________________________________________________________________________________________________ Hello fellow investors/entrepreneurs! I'm so glad you've taken the time to read my very first Newsletter from Provident Properties LLC. My goal with these will be to add tremendous value, talk about any deals we have, go over the current market trends, and be in communication with every single one of you! _________________________________________________________________________________________________ For this months newsletter, I'm going to be teaching on how to passively invest in real estate through Real Estate Syndication. _________________________________________________________________________________________________ If you’re interested in building wealth, you’ve probably wondered about real estate investing. On the one hand, it seems like a great idea, especially if you live in an area with a booming real estate market. But on the other hand, you may not be ready for the commitment. _________________________________________________________________________________________________ As recent as last year, only 15% of Americans were investing in property outside their primary residence, according to a RealtyShares survey. However, while real estate investing is not exactly widespread, most Americans think it’s a good investment. _________________________________________________________________________________________________ What holds people back? The costs, skills, and time needed to get started. Only 38% of those surveyed thought they’d actually be able to flip a house start to finish, and more than 80% of millennials wished that real estate investing was easier. _________________________________________________________________________________________________ Let’s be honest. Investing in real estate is a big commitment, and it’s important to really understand it before you dive in. I never want you to invest in something you don’t understand—especially real estate. Is it really worth all the effort it takes? Is this type of investing reliable enough to be part of your retirement plan? Is active or passive investing the better route to take? _________________________________________________________________________________________________ Whether or not real estate investing is a smart idea totally depends on you, your financial situation, and your goals for the future. It’s not for everyone, but it can be a great wealth-building tool when it’s done the right way! _________________________________________________________________________________________________ How-To: Real Estate Syndication _________________________________________________________________________________________________ What is Real Estate Syndication? Real Estate Syndication is an effective way for investors to pool their financial and intellectual resources to invest in properties and projects much bigger than they could afford or manage on their own. _________________________________________________________________________________________________ So how does a syndicated deal work? Real Estate Syndication is actually quite simple. It's typically a transaction between a sponsor/general partner and a pool of investors. They are typically formulated under an LLC and then the LLC purchases the property and splits the equity between the investors and the sponsor based upon how much was invested. _________________________________________________________________________________________________ So what's in it for me? How do I make money investing into Real Estate Syndications? What's the difference between investing in a syndicated deal vs. investing in stocks or the open market? These are all great questions and I will gladly answer them in the paragraphs to follow! _________________________________________________________________________________________________ How do I make money investing in Real Estate Syndication? Well typically you make money based on how well the property does and how much you invest upfront. For example, If you invested into an apartment complex that was bought at $2,000,000, had a $200,000 NOI (Net Operating Income), had 100 units, was 100% occupied, and was bought at a 10% Cap Rate with just $25,000, then at the end of 5 years, lets say the property did great and was sold at a 8% cap rate, you would make a 188% ROI (Return on Investment) giving you back the $25,000 that you invested plus an additional $47,000 that you got for simply putting in the investment and watching it come into your bank account! Now not every investment is going to go perfectly, but your chances of success with Syndication vs. in the stock market, is much greater. _________________________________________________________________________________________________ So what is the difference between investing in a syndicated deal vs. investing in stocks or the open market? In a typical stock market investment you can expect to get anywhere from 5-14% annually and as you saw in the previous paragraph, syndication can bring you anywhere from 12-20% annually. Investing in the stock market is pretty risky when you think about the fact that you have very little control over how well the stock does. Real Estate Syndication however; brings you MUCH more control in the investment. _________________________________________________________________________________________________ With Real Estate syndication you can do things like raise rents, decrease expenses, renovate the building, add amenities such as a swimming pool, spa, or gym, hire new property management, add units, add services such as laundry, valet parking, or online rent payments, and much more. When you do any one of these you do what's called "force appreciation". All that means is that you add value to the property in some way, shape, or form, increase your NOI, and cause your property's value to rise. For example, if we use the numbers in the previous deal at $2,000,000 Value, 100 units, 100% occupied, 10% Cap Rate, and $200,000 NOI and we raise the rents by just $25/month, because we'll say the previous owner had rents just barely below market value, then that will bring our new value of the property up to $2,300,000! We'll increase our NOI by $30,000 annually and it will bring a $300,000 increase in value overnight! Talk about a great return! The simple calculation for that is Value = Investment/Return. So with Real Estate Syndication there are many ways to control the assets and be sure that you are getting the best possible return and that is why I personally prefer this method of investing. _________________________________________________________________________________________________ What's in it for me? I hope I've provided enough knowledge to acclimate you with how syndication works and give you the tools to decide if that is something that you would like to do or not. If I could give you one last tip on Syndication it would be this. Make sure that you have the utmost trust in the sponsor that you choose to invest with. They control the deal and make sure that you get the best return possible. If you do nothing else, vet your sponsor carefully and be sure that they have your best interest in mind. All in all Real Estate Syndication is a great way to passively invest and create enough passive cashflow for you to be able to quit your W-2 job, achieve financial freedom, retire early, spend more time with your family, start your business, or any number of other opportunities that passive investing can open for you. _________________________________________________________________________________________________ Current Deals: _________________________________________________________________________________________________ We are currently heavily in the market for Apartments and Mobile Home Parks. We have some deals that we are analyzing, but nothing is concrete just yet. If anyone is interested in investing or partnering with us please don't hesitate to reach out! _________________________________________________________________________________________________ Mobile, AL Market Trends: _________________________________________________________________________________________________ - Mobile has seen a 6% increase in rents per month over the last year which constitutes immense growth in rental demand _________________________________________________________________________________________________ - 72% of the population is under the age of 45 which attracts more of the younger population of which 40% have said they are interested in renting _________________________________________________________________________________________________ - 76 days is the average days on market for a single-family residential property _________________________________________________________________________________________________ - The rental vacancy rate is 11% over the last 6 months for single-family residential properties _________________________________________________________________________________________________ - There has been a 6.7% increase in appreciation in homes over the last year _________________________________________________________________________________________________ - 42% of single-family homes in Mobile are renter occupied _________________________________________________________________________________________________ - The median rent for this year is $900 _________________________________________________________________________________________________ Business Sector: _________________________________________________________________________________________________ There are 10 downtown residential developments currently in play and they include: _________________________________________________________________________________________________ • Meridian at the Port, 300 N. Water St., with 267 units in construction and a $51 million investment; _________________________________________________________________________________________________ • Temple Lodge, 558 St. Francis St., with 12 units currently under construction and a $2.7 million investment; _________________________________________________________________________________________________ • Gayfers, 165 Dauphin St., with 60 units in design and an $11.9 million investment; _________________________________________________________________________________________________ • 360 Dauphin Street, 360 Dauphin St., with eight units currently available for lease and a $1.5 million investment; _________________________________________________________________________________________________ • Russell School, 304 S. Broad St., with 26 units available for lease and a $4.6 million investment; _________________________________________________________________________________________________ • Staples Pake property, 100 N. Royal St., with 20 units currently under construction and a $6 million investment; _________________________________________________________________________________________________ • Marine Street Lofts, 901 Government St., with 48 units now being leased and a $6 million investment; _________________________________________________________________________________________________ • The Fort of Colonial Mobile, address to be determined, with 131 projected units currently under design and a $58 million investment; _________________________________________________________________________________________________ • Seamen’s Bethel, 350 St. Joseph St., with 60 units currently in design phase and a $6 million investment; _________________________________________________________________________________________________ • Merchants Plaza, 106 St. Francis St., with 84 units in design phase and a $35 million investment. Overall, unit availability for downtown residential living spaces now encompasses some 716 units with a collective investment of $182.75 million. This level of investment in the market constitutes that this would be a great time to get into the market if you're interested. _________________________________________________________________________________________________ - Alan Belcher Mixed Martial Arts has leased 4,100 square feet of studio space at 109 Furr St. in Mobile. Belcher, a professional MMA instructor and former UFC competitor, plans to open a kickboxing gym at the location. _________________________________________________________________________________________________ - 6.5 million tourists spent $4.77 billion in Baldwin County last year, sustaining 51,636 jobs and generating $938 million in taxable retail sales plus $527 million in taxable lodging sales. That’s tax money that translates directly into more revenue for the cities, the county, the school system and more. _________________________________________________________________________________________________ - The 2019 Gulf Coast Real Estate & Economic Education Conference was recently held at the University of South Alabama’s (USA) Student Center for the second consecutive year, drawing local area real estate professionals as well as developers from across the country. The conference highlighted Alabama’s third-place national ranking as the best climate for business, second-place ranking for workforce training and fifth-place ranking for economic growth potential. _________________________________________________________________________________________________ - The recent auto manufacturing investment attracted $3.3 billion dollars to the state of Alabama in 2018 with expectations of creating nearly 5,500 new jobs, and the forest industry saw $1.3 billion in new capital and created 2,000 new jobs. Development in rural areas saw gains as well, with $1.1 billion in new investment and creation of more than 1,100 new jobs. _________________________________________________________________________________________________ - Here are some recent newcomers to Alabama that include Facebook, Amazon, Shipt, United Launch Alliance and Mazda Toyota, bringing $8.7 billion into the state in new investment and 17,000 new jobs. _________________________________________________________________________________________________ - Wal-Mart is building one million square feet of warehouse space in West Mobile County and Amazon is building 400,000 square feet of warehouse space nearby just off Interstate 10. Similar projects will continue to be opportunities for commercial growth in Mobile & Baldwin County _________________________________________________________________________________________________ - A residential market assessment commissioned by the Downtown Mobile Alliance shows more residential properties are needed downtown for the foreseeable future. The draft study indicated more than 250 new rental and for-sale housing units can be accommodated per year over the next five years. The majority of those, between 155 and 186, would be lofts and other styles of apartments. The study also showed a need for 18 to 28 large condominiums or for-sale apartments per year over the same period. The study also supported adding 21 to 34 new row houses and 11 to 18 new cottage-style homes or bungalows per year during that period. The study also showed the amount in rent the area could sustain. For microloft and studio apartments from 400 to 1,000 square feet, the rent suggestion is $625 to $1,500 per month. For one- and two-bedroom apartments from 550 to 1,100 square feet, the study suggested rents from $925 to $1,800 per month. _________________________________________________________________________________________________ That concludes our, Provident Properties LLC, very first newsletter! I hope I've helped increase your knowledge and tool belt on what might be the best investment path for you. If you have any questions, comments, or just want to connect please don't hesitate to email or call me! To your success!