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Buy and Hold Partnership

Downloadable Files:

Buy & Hold Partnership Document Property Closing/Purchase ChecklistRental Spreadsheet

 

 

EAC, LP is a California based Limited Partnerships and a Real Estate Investment community. The EAC Executive Team and principals of the company are Kevin Yoo, M.D. , CEO, John Hostetler, COO and Olga Levin-Diza, CFO.

We are actively building rental property portfolios throughout the country. We currently invest in San Diego, CA, Los Angeles, CA, St. Louis, MO, South Bend, IN, Jacksonville, NC, Phoenix, AZ, Birmingham, AL and are constantly looking for other markets and partnerships. We are opportunistic buyers of mostly single family homes but also purchase multi-family properties as well. The following table is a rough guideline of what we are looking for in single family homes.

Class of PropertyARVAll in price points% rent to all in costActual rents per monthExpense to income ratio
A75-80%$100K+1%$1000-1500+30%
B70-75%$50K-100K1.5%$800-100040%
C60-70%$30-$50K2%$600-80050%

Our strategy for financing is to acquire a portfolio of these properties using funds from our network of Investors. We will then pay them a monthly interest for the use of their money that is at a minimum of 12% per annum.

Acquisition Phase Financing Phase Hold Phase
6-9 Months
Cash Flow Split GP 10% EAC 90%
Equity Split: GP 20% EAC 80%
3 months
after reaching certain value like $760K
Indefinite
Cash Flow Split: GP 20% EAC 80%
Equity Split: GP 20% EAC 80%

Our strategy for acquisition is to partner up with individuals “on the ground” who can acquire, rehab, and rent out these properties. We are looking for honest, hard-working individuals who would be accountable for their work. We are looking for people motivated by the idea of building a rental portfolio rapidly using other people’s money. EAC as your cash partner will provide funds for all your marketing costs, acquisition costs, rehab costs, and any other costs. Marketing costs will be paid by EAC on a regular basis as agreed upon by the partnership. Other costs will include but not limited to appraisals, inspections, closing costs, and legal fees.

Our expectations of the Ground Partners are the following.

  1. Acquire all classes of properties at the lowest % ARV possible with the greatest potential as rentals. The % ARV estimated by our Ground Partner will be verified by appraisals. We expect our Ground Partners to be within 10% of their ARV estimates.
  2. Rehab the properties with licensed individuals at the lowest cost but with the greatest quality. We expect our Ground Partners to be within 10% of their rehab estimates.
  3. Rent out the properties with the best quality tenants and highest rents in the shortest time possible. We may use property management if needed. We expect our Ground Partners to be within 5% of their estimates for rents.
  4. Manage the assets with the lowest expenses and highest net cash flows. We expect our Ground Partners to be within 10% of their estimates for expenses.
  5. Corporations in good standing. You must provide copies of Operating Agreement and Corporation in Good Standing documents.
  6. The Ground Partners will be paid a wholesale fee for each property based upon and indirectly proportional to % of ARV determined by all in cost including purchase price + rehab. The lower the % of ARV, the higher the wholesale fee will be with the maximum ceiling of $10,000 per property. This will be determined by multiplying the % of discount from ARV with $10,000. For instance, if the property is purchased for 65%, then the discount is 35%. The wholesale fee is 35% of $10,000 or $3,500.
All in costARV%ARV Wholesale Fee
$70,000$70,000100%0% x $10,000$0
$45,000$70,00065%35% x $10,000$3,500
$0$70,0000%100% x $10,000$10,000

The partnerships will be structured so cash flow and equity will be split up between the ground partner and EAC that will vary based upon the where we are on the cycle of portfolio building. The net cash flow after all expenses will be split 10% to ground partner and 90% to EAC during the acquisition phase. This disproportionate amount of cash flow will go to EAC during the acquisition phase in order to pay our Investors. The equity split will be 20% to ground partner and 80% to EAC during this phase and at all times.

Once we have reached around $750K to $1M value in our portfolio of rental properties, we will then obtain institutional financing for 50 – 80% of LTV and pay off most if not all of our Investors. At the time of financing, any cash out will be split 20% to Ground Partner and 80% to EAC. The loan amount or % LTV will be determined by the terms offered by the financial institutions and the need for cash of the partners. We may elect to have lower LTV fixed loan and then set up a line of credit (LOC) for the balance. We may also elect to keep a small balance of Investors’ funds as a second loan.

Because we invest in multiple different markets, we will be working with multiple different Ground Partners at the same time. Therefore, when EAC has a Portfolio that becomes ready to refinance, there is a good chance that you will be one of multiple Ground Partners in that same Portfolio. In that case the 20% equity and 20% cash flow due to the Ground Partner will be based proportionately to the appraised value of the properties owned by the Ground Partner in relation to the value of the rest of the Portfolio. This sort of setup will be extremely valuable to our Ground Partners because it will allow you to be invested in multiple different markets thereby safely diversifying your real estate holdings in the EAC Community.

If the Ground Partner has not performed up to expectations as measured by the criteria outlined above, then the cash out at the time of the financing will the buyout of the Ground Partner from the partnership. If the Ground Partner has performed up to expectations, then the new split of cash flow will be 20% to Ground Partner and 80% to EAC and will remain such thereafter after the cash out if there is any.

We expect the whole process of building a portfolio should take around 6 to 9 months. We expect financing to take approximately 3 months. Once financing is in place, we will simply repeat the process for those Ground Partners that have passed the test of the first Portfolio.

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