Mid-Month Update July 15, 2013
Welcome, current and potential investors to the inaugural edition of our mid-month update. This email was born out of a desire to provide more direct communication to you, to highlight projects you might be interested in investing in, and to give us the opportunity to feature many of the opportunities discovered by Altus during the past month. Our goal is to keep this email to a relatively short summary, so let’s get started!
Single Family Fix and Flips: We closed on a flip property in Sonoma last week and currently have 5 additional flip properties scheduled to close within the next two weeks. One of the flips is being funded through our Altus Hybrid Fund, two others are being funded in whole by investment partners, and the remaining properties are being funded in house with assistance of a hard money loan from one of our investors. Additionally we have several possibilities that may or may not come to fruition within the next few weeks. The total project profit for these flip properties is forecast to be between $500,000 and $600,000.
Redevelopment: There are two separate projects we are involved with that have substantial upside. Both of them are currently mobile home parks in areas with great value add potential if we change the use of the properties. There are laws in California concerning the displacement of mobile home owners and occupants and solving this problem is where our expertise and the upside comes in. One of the projects is in West Sacramento in an area of massive redevelopment along the river and the other is in San Luis Obispo in an area with severe constraints to development. The reason we like opportunities like these so much is that best case, substantial upside is obtained but worst case, strong cash flow can still be received from the existing use. The site in San Luis will likely be redeveloped into apartments and the site in West Sacramento will be some sort mixed use between retail, offices, and multi-family residential. These are great opportunities for investors looking to juice their returns but still having a concern for capital preservation. We will begin the money raising process for these investments shortly.
Infill Development: Last week we closed on a property in Santa Rosa with development potential. It is an existing house with rents enough to provide positive cash flow to the project during the development stage. The plan is to obtain approval for two more lots in addition to the existing house. Additionally, we have recently submitted development plans for a 4 lot subdivision in Citrus Heights, CA (also with an existing tenant in place), will be submitting for a 4 lot subdivision on a piece in Fair Oaks, CA (also with an existing tenant in place), and we are close to submitting building plans for two new construction homes in Windsor, CA. Opportunities such as these generally require a lower investment amount than some of our other real estate projects, have breakeven cash flow (or better), and have the potential for decent upside upon successful development approval.
Apartments: We currently have only one apartment complex in contract and have not yet started to raise investment. If the published information is correct we feel we can supply a strong, growing, and consistent cash return to our investment partners. However, we have not yet started to raise the investment needed because we are still verifying the information to make sure the investment is as understood.
Shallow Well Oil: While a new product we may be pursuing, all indications are that we will be able to offer a fantastic opportunity to our investor partners in a vehicle they may not be familiar with. Unlike wells in Texas, North Dakota, or the Gulf of Mexico, shallow oil is drilled from known oil fields at a fraction of the cost of the deep wells. In fact, the contract that will be in place will require the driller to re-drill at their cost if a well doesn’t hit the minimum contracted amount of oil. A person isn’t going to gain great fortune with this investment but the overall returns, especially taken in context of the risk, are fabulous. Assuming the remainder of our research doesn’t turn up any large surprises we will be looking to put together the investment needed sometime in August or September. Each investment group will be $250,000 and will buy 1/5 of 5 different wells (to further spread risk). Altus Equity Group or its principals will be the lead investor on each of the groups which will be structured in such a way as to provide a preferred return to the investor with Altus Group only being compensated after the preferred returns have been paid. Additionally, there are some fantastic tax benefits associated with this type of investment. The minimum investment amount will be $25,000, which will buy two of the 20 available units per investment group. Stay tuned for more information.
If you have any interest in any of these investment categories, I encourage you to contact our office so that we can set up a time to have a conversation and learn more about your investment profile. I look forward to sharing more news in future newsletters about the value and benefits of investing with Altus.
Altus Equity Group, LP