Details of Steps

 

 

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further Details of the steps for INVESTMENT

(Each of the numbered sections below correspond to the numbered sections on the steps for investment page)

1.   As topics of discussion on your investment criteria, we want to know what type of investment real estate best suit your needs, what class of property, how you want to balance risk and reward, how do you want to balance income and appreciation, how you wish to handle financing, and your exit strategy.

      a.   The types of property are: Office, Retail, Multi-family (Apartment Complexes), Industrial, and Raw Land.

      b.   The classes of property are:

          i.  Class A – excellent location and construction.  Class A is usually lower risk and lower return.

         ii.  Class B – good location and construction.  Class B is usually the most profitable type of real estate, may need some renovation and repositioning.

         iii.  Class C – average location and construction.  Usually requires renovations and repositioning and is usually a risky investment if it is not well located.

      c.   Risk and Reward:

We need a general sense of how much risk you want to take. And as well, we need a general idea how much return on equity you expect and for what capitalization rate (cap rate) you expect to acquire your properties.

      d.  Income and Appreciation:

For less risk, we can look for properties with higher income and with some probable appreciation.  For more risk and reward, we can buy properties with little or no income but with better chance of appreciation.  Generally, the most significant returns are through appreciation and this could be increased with leverage.  For the most risk and possible reward, some investors may be willing to tolerate negative income in exchange for a greater chance of appreciation.

      e.   Financing:

On a given property, the more the financing the greater the risk and the lower the cash flow.  For the least risk we recommend no financing, which is 100% down payment or equity.  We do not recommend less than 30% down payment unless you have substantial cash reserves.  If you have adequate credit in the United States, we have ongoing relationships with many lenders.

      f.    Exit Strategy:

How long do you expect to hold your property?  What will determine when you dispose of the asset[s]?

 

2.   Once we have a good idea what you are looking for, then through our extensive network of relationships, we locate investment properties closest to your criteria.

 

3.   When we locate a property you must sign and return the property’s Confidentiality Agreement within 24 hours.  Then we send you a property synopsis by fax or email.  Then with your approval, we send the seller a non-binding Letter of Intent to purchase the property.  This serves as a negotiating tool until terms and conditions are agreed upon by you and the seller.

 

4.   Next, we move towards a “Purchase and Sale Agreement”, known as the Contract, which is drawn up by lawyers.  We will recommend real estate lawyers that are expert in the legal issues of the Contract, as well as the legalities and closing of real estate transactions.  Retaining the correct lawyer is an essential element of a successful transaction.

When the Contract is executed, you must wire within 24 hours an agreed upon amount of refundable Earnest Money in an interest bearing account at the Title company handling the closing.  This amount is customarily 10% of the total purchase price.  Earnest Money is refundable until the end of the Due Diligence period, which is customarily 30 days from the execution of the contract.  Upon the expiration of the Due Diligence period there is typically 15 to 30 days until the closing of the transaction.  During that time the Earnest Money is non-refundable, however, it is applied to the purchase price.  If the transaction does not close the Earnest Money is at risk.  Upon advising us, you can ask your lawyer to terminate the contract and receive your Earnest Money back less expenses anytime during the Due Diligence Period.

For the transfer of the Earnest Money and Purchase Money, we prefer that you maintain an account with a bank with branches in the United States.  We will also need banking references from you to give to sellers and potential lenders to demonstrate that you are a qualified investor.

 

5.   Due Diligence is a demanding task that may uncover discrepancies between the preliminary analysis made by the listing brokers and our findings.  This is a critical part of the acquisition process; members of our team have successfully done this for many properties totaling over 10 million square feet of acquisition.

 

6.   The expenses for Due Diligence are added to the purchase price at closing or are deducted from the earnest money before refund should the Transaction not close.  We take an agreed upon token fee for our time spent during Due Diligence if the Contract is terminated.

 

7.   Upon closing, you can own the property recorded with the local authorities in your name or in the name of a legal entity that you own or to be formed during the Due Diligence Period.  Typically, a new partnership is formed to hold each property.  We can recommend an expert lawyer to discuss these possibilities with you.

 

8.   Our property management services will manage all aspects of your properties including leasing the vacancies. For example, our team of property managers will see that your properties maintain high occupancy levels, maximum collection rates, and your properties are properly maintained.

Our main concern is the bottom line of your Profit Statement. In order to maximize profit and meet all budgetary goals all costs will be carefully analyzed. In November of each year, a performance Pro Forma (yearly budgets) will be presented to investors for review. Upon approval, strict adherence to the Pro Forma will be followed. All Capital expenditure cost will be approved by the investors. Quarterly Profit and Loss statements will be reviewed with the investors.

 

9.   Besides managing the property, we manage the investment.  Keeping in mind your investment and exit strategy, we will watch local and national market conditions and make recommendations when appropriate.

 

10. When you decide to sell, we will create an offering memorandum that includes the financials of the properties that we will distribute to buyers and their representatives through our established networks.  We negotiate the terms and conditions of the sale through letters of intent and work with your lawyer on the contract and successful closing of the Transaction.

 

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Send mail to robert@oasisinvestments.com with questions or comments about this web site.
Last modified: 01/21/05