INVESTING MADE EASY
If you've stumbled onto this page, it most likely means that you're looking for an alternative way to invest your hard earn dollars. Something a little more tangible than the stock market... Maybe an old run down house or something...The idea of buying a neglected property, picking up a hammer, spending your nights and weekends turning it into a dream home and selling it for a huge profit is something we've all dreamt about. There's no doubt the concept is alluring. The siren song of home flipping calls to us all. Most of us start by scouring Zillow for cheap properties. We may drive around and look at a few homes or even call a contractor or two, but the majority of us will hit a road block and quit before pulling the trigger. Those of us that wade deep into the proverbial waters learn very quickly that investing in real estate is not as warm and welcoming as HGTV makes it seem. If you're not careful, any one of the many pitfalls could turn a profitable venture into a money sucking disaster. Only those who have been through the fire know how just how difficult it can be.
The truth is, most of us have some money piled up in an old bank vault gathering dust, but very few of us have the time it takes to successfully flip a home or the knowledge of where to begin. The good news is, you don't have to do it all yourself! You don't have to spend months watching youtube videos on how to install a bathtub or frame a wall. You don't need to cry into your 17th cup of coffee while you paint window casing at 2am. You can put your money to work for you while you play catch with your kids in the backyard.
Here at Renaissance Builders, we have a team dedicated to sourcing, designing, estimating, producing, and selling fabulous Minnesota properties. With over 30 years of experience in the MN market, we know what it takes to succeed in the real estate game and it starts with knowing your limitations and building a team of professionals who can help. By collaborating with Renaissance Builders, you can be part of a fun, and profitable journey toward financial freedom. The best part is that you don't need to know anything about construction.
We at Renaissance believe in walking a path before asking anyone else to walk it. This believe ripples through every part of our culture from showing up on time in the mornings to sweeping up before we go home at night. If we require our cabinet makers to scribe their cabinetry tight to the floor and walls, you can be sure that we are fully capable of doing it ourselves. As it relates to real estate investments, we put our money where our mouth is. We are actively funding real estate ventures in house. However, there are more opportunities out there than we can fund ourselves. After a few years of flipping properties and building spec homes, we were approached by a couple of our past customers wondering how they could get involved. We spent a couple years creating and modifying a system that really seems to work. "So...how does all of this work?", you might be wondering. Good question! Let me tell you.
From an over arching perspective, there are usually two players in any real estate investment. The passive investor (the person who brings the money to the table, and the active investor (the person that brings the expertise and the labor). Both of these people are vitally important to a successful project and without both of them, there is no deal. When we act as both the passive investor, and the active investor, we keep all of the proceeds from the sale ourselves. When we are acting solely as the active investor and collaborating with one or more passive investors, we split the profits down the middle.
The way we structure the deals is quite simple. We start by forming an LLC between the active investor and the passive investor(s). The LLC will act as a holding company for the property. All of the funds spend or collected during the life of the project are passed through the LLC and tracked. Once the LLC has been formed and funded, the real fun begins. Locating, analyzing, and purchasing project properties. Locating potential projects is easier said than done. If a good deal hits the MLS, there is a really good chance that the property will go into a multiple offer situation. Unfortunately, these situations usually drive up the initial purchase price to a point that is not worth pursuing. For obvious reasons, we try to avoid this situation as much as possible. Instead, we work to locate good deals before they hit the market. That way we can negotiate and secure properties for a fair and equitable price.
Developing good relationships in the real estate industry gives us an upper hand when it comes to finding these unicorns. Once we identify a good deal, we need to spend some time digging to make sure we haven't overlooked anything. Time is of the essence in the real estate world and once you identify a deal, the clock starts ticking. Without proper planning though, you can get into a lot of trouble fast. With our past experience, we can surmise rather quickly whether or not a potential project is a good fit for us. If it seems like a good fit, we will make an offer contingent upon inspection. This gives us time to establish a budget along with a full scope of work and design to confirm that it is truly is a good deal.
The days leading up to closing will be filled with final drafting and design selections as well as accurate pricing. As soon as we close, the project is treated just like all of our other projects. Materials are ordered, contractors are scheduled, and the work commences. The time it takes to complete a project depends upon the scope and complexity but as a general rule of thumb, a major renovation is 3-5 months and a complete teardown and rebuild is 5-7 months. Upon completion of the construction phase, we list the property with our broker and begin the marketing campaign. Once we've accepted an offer and scheduled closing, our accountant and title company handle the rest. The post closing funds are wired into the LLC's account and dispersed from there to its members. At this point, the members can opt to dissolve the LLC., returning the initial capital injection to its respective owner along with the profit realized from the project. Or, If the members want to let it ride and do another one, we would repeat the same process over using the same LLC.
Thats a lot of information to take in so if you are interested in learning more about an investment opportunity with Renaissance Builders send us an email or give us a call. We would be happy to sit down and review the process in more detail or answer any questions you might have. You can also check out our FAQ's section below for some more information.
FREQUENTLY ASKED INVESTOR QUESTIONS
-how long does a typical project last?
The answer depends on what type of project we are working on. A simple cosmetic renovation could take as little as 2 months while a complete tear down and rebuild could take up to 6-7 months. We also need to figure in about 45-60 days between identifying a subject property and closing as well as 30 days at the end of the project for the buyers bank to finance the sale.
-have you ever lost money on a project?
No, we have not lost money on a project. However, we did come close. We held onto a property for about a year after completion. At the end of the deal, all of the investors were made whole plus a very small return. We learned quite a few lessons on that project and will never make those mistakes again.
-who gets to decide what properties to buy and when to sell?
The decision making agreement is case by case and gets ironed out in the operating agreement. Some investors want nothing to do with decisions while others want more involvement. At the end of the day, we have been very successful in our real estate ventures because we trust in and rely on our team to make the right decisions. Our brokers along with our estimating and design team will dictate which homes to buy. Price reductions and acceptance of offers involves the owners of the LLC (Renaissance Builders Officer and the Passive Investors)
-are the funds liquid?
The short answer is no. Once the funds are dedicated to a project, they cannot be pulled out until the project is sold and closed. At that point, we will complete the necessary account and tax documentation and dissolve the LLC returning the initial cash injection plus profit to the investors.
-what happens if there are surprises along the way?
Surprises in the construction industry are pretty much a guarantee. We have been doing this long enough to know which surprises are common and we can plan accordingly. Our project estimates will always include contingency funds the are allocated to unforeseen expenses like a rodent infestation or rotten framing members. The don't usually include major surprises but the simple answer is that we fix it and move forward. If there is an issue that is not covered by our contingency fund such as bad soil that needs to be replaced, we will figure out the cost of the remedy and present it to the investment team. Our numbers are always transparent and do not include a mark up. Some of the most common surprises we've seen are rotting lumber near windows and doors and showers, multiple layers of flooring or shingles that need to be removed, and mechanicals such as plumbing pipes, wires or duct work hidden in walls that we are planning on modifying.
-what are the potential profits?
The profit margin is something we would be happy to discuss with you if you are interested in this opportunity. For the sake of our customers and investors privacy, we cannot disclose that here. The example investment below will provide some insight into this topic.
IN-DEPTH LOOK AT AN EXAMPLE INVESTMENT
3472 Acorn Street South
Minneapolis, MN 55XXX
1,476 finished sq. ft.
Year Built: 1943
Current Property Taxes: $3,798
Asking Price: $289,000
Median Sales Price in Past Year: $576,000
Total Active Properties: 49
Total Pending Properties: 6
Total Sold Properties: 32
Walking Distance to Retail
Walking Distance to Lakes
Close Proximity to Entertainment and Restaurants
Tear down the existing structure and build a new home with 3,500 finished sq. ft., 4 bedrooms and 4 bathrooms. The home will be 2 stories with an open floor plan and level 4 finishes. The design will fit a narrow lot and include a detached garage with access from the alley.
Sold Comparables in the Last 6 Months
Subject Property A
3,700 finished sq. ft.
Year Built: 2020
Current Property Taxes: $16,425
Sold Price: $1,250,000
$/Sq Ft: 337
CDOM: 45 Days
Subject Property B
3,800 finished sq. ft.
Year Built: 2019
Current Property Taxes: $15,564
Sold Price: $1,132,000
$/Sq Ft: 297
CDOM: 67 Days
Subject Property C
3,400 finished sq. ft.
Year Built: 2019
Current Property Taxes: $15,564
Sold Price: $1,225,000
$/Sq Ft: 360
CDOM: 23 Days
Construction & Sales Projection
Lot Purchase Price $289,000
Front End Closing Expenses: 7,500
Sworn Construction Statement: $656,083
Total Aquisition & Build Cost: $952,583
Proposed Sale Price: $1,189,000
-Brokerage Fees: $59,450
-Interest Payments to Bank: $28,324 (Assuming Leveraged Project)
-Back End Closing Fees $6,679
-Acquisition & Build Cost $952,583
Total Projected Profit: $141,964.00