With local real estate prices at record levels, it has become increasingly difficult to find profitable properties, which is driving many real estate investors to look elsewhere for better returns. The trouble with going out of town is that most investors don’t have the bandwidth to pursue and manage the properties themselves. This was a core reason for the formation of a small pool investment fund that I help run, where we handle multiple investments in other markets where the returns are better. Recent acquisitions include several homes that the fund is flipping in the Phoenix area, with targeted yields of between 30-40%, as well as an off-market apartment complex that we currently have in escrow, which shows a similar profit potential of between 30-40%, while simultaneously presenting a back-up option as an 8% Cap rate investment as a long-term hold. We also have a large development project in Fresno that we acquired earlier this year with excellent carrier cash flow with in-place rents at a 9% Cap rate. That property is now in escrow for twice what we paid for it with a developer who has proposed a mixed-use project there. All of these investments are in line with our general strategy of choosing properties with both upside potential and positive cash flow to help minimize risk in the event that any given market turns. And they have the added benefit of being diversified across multiple markets. In other news, we recently partnered with a group who specializes in researching tax lien auctions across the country, and we have begun picking up the rights on multiple holdings in Houston and Philadelphia. The selection process involves driving literally hundreds of properties in preparation for each auction, putting bids in on only the ones that meet our targeted criteria of the face value of the tax lien being at 20-40 percent of the property value. The majority of these tax liens pay out with 10 to 25% of face value guaranteed return, with rights to collect in-place rents, and redemption periods varying from 3 months to 6 months in the states we are tracking. The upside lies in the properties that do not get redeemed, at which time we can sell the property at its current Fair Market Value. We are also exploring opportunities in Florida where ownership is immediate with no redemption period and are likely going to enter that market as well. It has been exciting to be a part of the growth and success that the fund has enjoyed as we continue to raise additional capital to pursue these and other opportunities that we have been able to find and facilitate. If you are interested in learning more, you are welcome to contact me to explore whether joining a pool such as ours could be a match for your investment needs as well.
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