PCC Capital Investments, LLC (The Company) is in the business of raising private investor capital for the purpose of buying distressed, foreclosed, or bank-owned residential real estate in large and medium sized- Market Service Areas (MSA's).
The Company uses secured loans from a private investor to acquire, repair or improve the home to market values comparable to other nearby properties. The subject properties are then either re-sold at market, or are held in a portfolio if they are cash flowing well.
The investor is secured with a Note and a Mortgage or Deed of Trust (whichever is specific to the state) against the target property, with a 12% per annum simple interest yield, OR 15% of the profit generated by the re-sale of the improved property, whichever is greater. The investor’s funds are borrowed on a 12-month maturity, with zero payments with all interest and principal due on the 365th day from the Note, or when the property sells, whichever comes first.
The Company’s Managing Director is Michael J. Weiner, (BS, BA, MBA) who also owns PreConstruction Catalysts, Inc, a funding advisor for international infrastructure projects. PCC Capital Investments LLC. puts together residential real estate deals with calculated profit potential meeting its criteria.
Private investors are defined here as individuals who own cash assets, either in the bank or in a retirement account. By assisting the investor in establishing a self-directed retirement account, the investor legally can use his funds to loan for notes and mortgages. Profits from the transactions, once the subject property is resold and settled, are tax-free as they go back into their retirement account.
The Company is focused creating real returns on our Investor’s money, by reviving downtrodden residential properties or their owners which have been foreclosed upon, acquiring them at a steep discount by making all-cash offers with proof of funds, and renovating them to their marketing potential for resale. We will focus on single family homes that have been foreclosed, are being auctioned, are eligible for short sales, are vacant, and in low crime areas. It is conservatively estimated that more than 3,000 such properties in the Washington, DC metro area.
For a successful acquisition at its lowest possible price, cash offers command greater attention than those made by private investors who then need to find a lender in order to close. The Company has established a specific step-by-step system which first requires funds in-hand, putting us in a position to strike at an opportunity with cash in hand. The moment the property has been secured, a promissory Note and a Deed of Trust or Mortgage is issued to the investor to provide security.
Once a cash offer has been made and accepted by the seller, an inspection is made by a highly experienced home rehabilitation specialty contractor with whom the Company has a relationship. This will provide the budget for necessary repairs and improvements which will be added to the acquisition cost, and then a market comparison will be made by one of the local Realtors with whom we have developed a relationship. That will give us the expected range of profit to be made at the time of resale. In all cases, we will strive for a minimum of $40,000 in net profits. Upon resale and closing, the investor’s money and interest due, or 15% of the profit—whichever is greater—will be returned to the investor. The investor will then have the option of repeating the investment in the next opportunity.
Michael Weiner is 59 years old, lives in Olney, Maryland with his wife of 32 years and 3 grown children. He has previously held Maryland Real Estate Agent licenses, Mortgage Originators License, and Insurance agent licenses. He holds a Masters in Business Administration specializing in marketing, and has a long history of business ownership, including 40 years in the marketing, advertising and business development arena, with the last 8 years facilitating very large infrastructure and humanitarian projects worldwide under PreConstruction Catalysts, Inc. He is also appointed as an Investment Advisor to the Governor Inspector General of the International Organization for Economic Development (IOED), a United Nations activity. In addition to his project funding work, he is now focusing on the residential buy, fix, and flip market in Maryland, DC and Northern Virginia.
Funds invested are wired to an approved Settlement Company to be held in escrow until the property has been identified. Once the property is identified, the formal Promissory Note and Deed of Trust or Mortgage will be issued to the investor, secured by the target property. The Company will not touch funds until the target property has been identified, negotiated, and placed under contract with a cash offer. The investor funds will be used for the acquisition and rehabilitation costs, along with expected seller closing costs to the resale buyer.
FUNDING VIA RETIREMENT ACCOUNTS
An investor who holds cash assets in an IRA, 401(k), or other authorized retirement account, can establish a Self-Directed IRA, using an approved Custodian. Once they have opened their account under the approved custodian, they can request the funds to be wired for the purpose of a Promissory Note and Deed of Trust or Mortgage. These are completely legal investments for an IRA. The Company has those resources to recommend to the investor using retirement funds.
RETURN ON INVESTMENT
The Company, as reflected in the Promissory Note, will pay to the investor a return of 12% simple interest per annum, OR 15% of the profit from the resale of the subject property, whichever is greater. The funds will be disbursed at closing by the Settlement Company.
It will be able to return the above by purchasing distressed real estate (which, for purposes of this business plan, will include foreclosures, bank real-estate owned (REO) properties, vacant properties and other below-market discounted property), which has a spread that will at least earn $40,000 in profit once repairs are made and the property is marketable.
A typical property acquisition might look like the following example- this is for the purposes of illustrating the format for an acquisition:
TARGET PROPERTY Single Family, 3 Bedroom, 1 Bath, Residential.
ACQUISITION PRICE $170,000
REHAB COST OF REPAIR $ 50,000
AFTER REPAIR VALUE $320,000
COST OF RESELL (10%) $(29,000) (taxes,commissions, etc.)
FINAL PRICE SOLD $290,000
GROSS PROFIT $ 50,000
TIME FROM ACQUISITION TO MARKET 120 DAYS
INVESTOR FUNDS PRINCIPAL $220,000 (for Acquisition AND Repair Costs)
INVESTOR FUNDS INTEREST 12% Simple Interest for 120 days
Per Diem Interest $ 72.33 x 120 days
Interest Returned to Investor $8, 751.93 OR 15% Profit (whichever is greater) $7,500
The Company expects to make all-cash bids for distressed property, and believes that 1 out of 20 offers made will be accepted by the sellers.
Unlike many real estate entrepreneurs, the Company will be armed with investor cash at the waiting, so that all-cash offers can be made with genuine proof of funds and a fast settlement, subject to inspection by the Company’s General Contractor and his expected rehabilitation costs.
Resources for finding these types of properties are abundant, from HUD. FNMA, Freddie Mac, Auction.com, and dozens of other resources including driving target neighborhood to surfing the Internet. Bank-owned real estate and other sources for deals are still plentiful.
There are many real estate investors looking for similar deals all the time. This is why we are expecting to successfully bid on 10% or less than the houses we target. In order to accomplish our 2 to 4 property per month acquisition and rehab goals, we will need to make 20 to 40 offers each month.
Cultivating relationships with active Realtors, other investors who are open to joint venturing on their deals, wholesalers and bank REO departments with property they need to unload from their balance sheets, and others will allow for that kind of “offering volume”.
Where we believe we will be different is because prior to making offers, we will have Investor cash in-hand, allowing us to make an offer. Most real estate investors find the property first, then have to go looking for a lender/investor to back them. This makes an all-cash offer that is accompanied by proof of funds and promises a ready settlement, subject to the General Contractor’s evaluation and cost estimates for repair, more desirable than another offer which is subject to financing. Moving fast when a deal is found can only be accomplished when the money is ready to make the purchase.
Constant marketing is essential. The Company has a proprietary formula that it uses to create excitement when the subject property is ready to go on the market. This formula has a proven history of generating open house sales with a lot of foot traffic and seller offers that attract buyer attention. In general, it is a combination of elements that has created sales of a number of properties in 90 minutes. While these results are not always the case, there is a history based on this formula for this kind of fast sale.
In the United States, the real estate sector has been ravaged by the sub-prime mortgage crisis, fraudulent packaging of loans into Mortgage Backed Securities by the banks, and the resulting deepening depression in the real estate and financial sectors. The last 8 years have led to record foreclosures on properties around the country, and the subsequent havoc wreaked on people’s lives.
While this has started to turn around, the damage has been done, and will probably take another 5 to 9 years to fully recover. The opportunities to take an abandoned, foreclosed property and turn it into an attractive home for new families is a win-win-win for everyone undertaking this, from the investor who is protected by a security interest in the acquired property, to the general contractors who create jobs, to the family that buys the rehabilitated home, to the neighborhood whose property values have been diminished as a result of the empty house.
Our mission is to create profits for our investors, create jobs for our contractors, create livable homes out of the detritus of the foreclosure crisis, and restore neighborhoods’ value, all while making a profit for the company.
There is much to be done, and little time to waste without the funds needed to start the process.