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Frequently Asked Questions
How Can You Pay 12% Annualized Interest Up Front?
Double digit interest on short term "hard money" loans is fairly common for the industry. We can afford to pay 12% annualized interest up front at closing because we have bought foreclosed and abandoned houses at well below their "as is" value for their market. This provides us with a sufficient cushion to be able to pay this rate of interest to the investor for providing Ri Group and Luis and Associates with working capital on short notice. This enables us to negotiate the best price for the property by being able to pay cash. This also permits us to close quickly within days of the acceptance of the purchase offer, allowing us to immediately begin the restoration and pre-sale process. For providing us with this level of flexibility and financial "clout," we reward the investor with what we believe is both a fair and enticing rate of return.
How Secure Is My Investment?
The investor holds the first deed of trust on valuable, but distressed property that Luis and Associates has smartly purchased at well below local market value. Regardless of subsequent improvements, the property is worth more than the investor's stake. No investment is without risk, of course, but of the 60+ homes Luis and Associates has acquired and restored in the last 13 months, all have resold at a substantial profit and, on average, within 92 days of the original closing date.
What Types of Properties Do You Buy?
As stated in "How to Profit from Restoring America's Neighborhoods One House at a Time", we only purchase single-family houses in the greater Denver, Colorado metro area. The properties we acquire were built in the 1950-to-1980 time frame.
Why Only Denver?
Two reasons: With 13 years of experience in Denver real estate, this is the market that we know the best in terms of neighborhoods and sales potential. Secondly, the number of distressed properties that meet our selection criteria is quite large and portends at least 5 years of restoration investment opportunities as of 2009.
What Improvements Do You Make to the Property?
We allocate a budget of between $25,000 to $30,000 per property. All properties are professionally inspected and brought up to FHA standards. Where needed, roofs and windows are replaced, as is the HVAC system and hot water heater. Besides fresh coats of paint and wood flooring, interiors are often remodeled, opening walls to improve the flow of the rooms. Kitchens are given major renovations including new cherry cabinets and fixtures, granite counter tops, ceramic tile floors and new stainless steel appliances. Bathrooms are given similar makeovers. When our restorations are complete, the house is clean, fresh and has a modern, up-to-date look and feel. This is one key reason why our homes sell so quickly.
When and to Whom Do I Loan My Money?
Ri Group and Luis and Associates do not accept or handle any investor's money. When a suitable property is found, we invite the investor to participate in the transaction and ask them to wire their funds directly to the title and escrow company that is handling the closing. The same company pays the agreed upon interest to the investor at this time. Once the property has been restored and resold, the designated title company then cuts a check or wire transfers the investor's principle back to them.
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