What is the real estate market look like now?
Real estate depends upon the market you are investing in and it is different in each market. We primarily purchase properties in the Memphis Tennessee market which did not have the huge price declines that many other major markets have. It is a much more stable market with high cash flow returns. We have specifically chosen markets that have had extremely stable appreciation over the past 20 years and currently have a very low downside depreciation risk. For those of us with the foresight to see it and the courage to take it, today’s real estate market offers a historic opportunity to develop a great cash flow stream to retire off of.
How does your company make money?
Our company buys distressed properties from banks, homeowners and multiple places, fixes them up and puts a qualified tenant in place that produces a great cash flow stream. We make money by helping our clients purchase positive cash flow investments with cash, seller financing, bank financing or joint ventures with us. In our joint ventures with capital partners we make profit WITH our investors. We also provide promissory note investments, syndicated investments and multifamily investments that we make money off of with our investors where our interests are strategically aligned.
Why shouldn’t I just do it myself?
Most people who have never bought investment real estate before do not fully understand the tremendous amount of knowledge needed to make a real estate investment transaction run smoothly. Ask yourself the following questions:
- Do you have the resources to buy a property from the bank and pay for its rehab with cash?
- Do you know a quality out of state rehabber that you know will complete the work on time and not take advantage of you with inflated and even made up costs?
- Do you know a loan broker or a bank that is able get a loan closed in the current lending market? Do you know the ins and outs of mortgage financing, including which fees are real and which are bogus fees just added on to see if you’ll pay them or not?
- Do you have a title company that can close title in a timely manner and won’t charge outrageous and inflated fees?
- Do you have contacts with a quality property management company who consistently rents your units and doesn’t make up fake charges and repairs?
Unless you are a full time real estate investor with years of experience in the field, our services will save you money, time and heartache.
What makes OCG Properties the best place to buy investment homes?
Our company started out by partnering with everyone who bought a property from us. As a result we have very strict guidelines regarding the quality of the neighborhood, the rehab work, and the tenants. When you work with OCG you know you are working with a company that is dedicated to making the investor happy and increasing the investors return on investment while sticking with strict quality control procedures over renovations and leasing. At OCG we do full inspection reports on all of our properties with all of the preventative maintenance done and full background checks and financial checks on every tenant we place. Our systems, processes and teams have been proven with over 500+ properties under our belt and we have streamlined the process for our investors.
If these properties are so great why are you selling them, why don’t you just keep them?
The simple answer is WE DO KEEP THEM. All of our additional capital goes to purchasing more investment properties to increase our passive cash flow. Our goal is identical to yours; create enough passive cash flow to cover all of your expenses to gain true financial freedom. Many times we need to sell our inventory in order to raise additional capital and purchase more properties. We joint venture with investors as well to create cash flow for ourselves and our investors simultaneously.
What is the initial investment?
When buying a single family home and putting 20% down your investment is approximately $18,000 – $35,000, with seller financing $45,000 – $115k and with an all cash investment $90,000 – $175,000. When you purchase with a loan your return on investment is typically always higher due to the leverage used. Promissory note investments typically start as low as $50,000 while syndicated investments start at $25,000 – $50,000. Our multifamily properties vary from property to property.
Why Memphis?
Before starting our company we did and exhaustive search of many major real estate markets in the United States. Our primary criterion for investment was cash flow. After that we looked at appreciation rates, economic stability, and potential for growth. This led us to Memphis which had significant upside potential due to the economic indicators in those markets, high cash flow and economic stability over the long term.
Why not California?
California is one of the worst markets in the country right for cash flow and stability. California usually has less than a half a percent rent to price ratio, meaning your cash flow return on investment would be much less than the Memphis market or other markets if you have cash flow at all. It also has some of the worst tenant landlord laws in favor of the tenant in the country so it can be extremely hard to get tenants out if you evict incorrectly or do not have experience with the specific rules to follow.
Who manages the property?
Property management can make or break your investment. We have spent a lot of time and effort into finding quality property management companies in our target markets. We have went through more than a few property management companies until we found the right fit for our team member that does all of the right things. They manage the property for efficiency, preventative maintenance, proper collection practices and accounting, as well as the right communication with us and our clients. We have the utmost confidence in our property managers and have a lot of control over them to protect our properties and our client’s properties.
What if my tenant moves out?
All tenants come with a full background check including criminal and financial. They also need to qualify on an income basis to make sure they have enough to love off of when renting one of our units. Eventually you will have someone move out. This is why you should always account for vacancy in your cash flow calculations. Vacancy rates in our target neighborhoods are less than 5%. When a move out does occur the property management company does a move-out inspection with them, applies the security deposit to any repairs or move out clean up and re-leases the property for you right away. Currently our manager has less than a 5% vacancy across over 1000+ single family homes.
How do I know that the property is in a good neighborhood?
We only purchase properties in good areas where our property managers and renovation crews feel safe. We do not buy in neighborhoods where there are multiple vacant and run down properties simply because what is the point of fixing up a property if the rest of the neighborhood is in bad condition. When you buy in bad neighborhoods it comes with more vandalism and theft, more tenant turnover, more bad debts and more headaches that cost money. We learned our lesson the hard way. Cheap does not always mean better.
Does the investor have to apply for mortgages in Tennessee?
The investor has to apply for mortgages on the property unless they buy with all cash or are using seller financing. The loan paperwork is done via email and fedex and we help the investors with the coordination and have lenders that we have used multiple times in the past that are professional, communicate properly and will get the mortgages funded on a 30 year fixed rate mortgage at a really great interest rate.
What type of property insurance covers the properties? Does it include tornado insurance?
Any time our investors purchase a property they obtain a General Liability Insurance Policy on the property and are fully covered on the replacement value of the property and general liability coverage. The policies come with most major perils covered including wind damage, water intrusion, and general liability coverage, and much more. There is also umbrella policy coverage available as well. The policies cover loss of rents if you lose rent from the peril that occurs as well.
What systems are set up for paying mortgages?
After you close escrow and own the property, if you have decided to get a loan on the property and not purchase all cash, you will have a mortgage payment to pay at the end of each month. Included in that payment is the property tax and insurance impounds so you do not have to worry about paying those separately. When the bills come due for the property taxes and insurance annually, the mortgage company will pay that for you (unless you chose not to impound). All you have to do is make the monthly mortgage payment which includes principal and interest. However, the cash flow from the rental income on the property will be more than the mortgage payment which is why they should produce positive cash flow every month. You will get a monthly check from the management company collecting the rents for you and will pay the mortgage payment as well.
What do I need to qualify?
In order to qualify for traditional bank financing you have to have documented and consistent income, a good credit score, and money in the bank for your down payment, reserves and closing costs. The best way to find out if you qualify is to fill out the lenders pre-approval paperwork and submit your documents to get qualified.
Can I qualify with poor credit?
Traditional banks will not qualify you with poor credit. However, we do offer seller financing with approximately 50% – 65% down so you can still use leverage with poor credit, just not at the lower bank rates with lower down payments. An important asset that our real estate investors bring to the table is their credit. In order to qualify for financing from the bank you will need to have a good credit score (usually 700 and above). However, you can always find a credit partner and/or work on repairing your credit as well.
How do I know what investment option is right for me?
At OCG we help you review your financial situation, goals, risk tolerance levels and streamline the process for you to help you get to your goals as fast as possible based on your own comfort level. Our clients typically schedule a one on one consultation with you to go over all of the pros and cons of each investment type and how they work so that you can make an informed decision on which option fits best with your goals and personality. We also recommend reserves to put aside, follow up procedures and how to manage your investment most efficiently.
How do I know your properties are fully renovated?
We do a full inspection report from an independent inspector on every investment property before any investor purchases our properties. Each investment comes with a full inspection report with pictures of every item in the inspection report completed along with a full disclosure checklist as to the age of the AC unit, Furnace, Roof, all major systems and all appliances. We also take full before and after pictures and video to document the entire transformation. By providing this documentation our investors know exactly what they are buying and that they should not have any preventative maintenance any time soon.
What items should I allocate for when trying to project my true return on investment?
We always include a 5% vacancy allowance and $50 per month per unit repair allowance that should be deducted on any investment property. Our manager has less than a 5% vacancy rate across over 1000+ properties so we should be over-estimating on the vacancies but please feel free to include whatever vacancy rate and repairs allowance you feel most comfortable with when calculating your return on investment estimates. Also, we recommend that for every property you own you should have $2,000 set aside as a reserve for that investment.
How does the closing process work?
When ever closing escrow on an investment property you will sign a purchase agreement and send in the earnest money deposit. Then we are officially open with escrow. If you are getting a loan you would get pre-approved with the lender and it takes about a month to close escrow. Once you get emailed the closing paperwork you print it out, get it notarized and send your funds to closing. To see an illustration our entire closing process go to: https://www.dropbox.com/s/4p5r6wlr12zjxpt/The%20OCG%20Process.pdf?dl=0
For any of the other investments that we provide you would be reviewing and signing a loan agreement, joint venture agreement or consulting agreement in order to invest. The closing process is much simpler on those types of investments.
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