Inspired Ventures Plan

8/6/2019 Inspired Ventures Plan

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VENTURES

Inspired

Green

Multi-FamilyInvestment

Prospectus


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Inspired Inspired Ventures, 491 Second Street, Suite 104Encinitas, CA 92024 Copyright 2011 Simcoe Ventures

For further information call 760 -271-7128

[email protected]

1. EXECUTIVE SUMMARY...........................................................................................2

2. TEAM .................................................................................................................41. Jim Simcoe-principal ........................................................................................32. Kevin Gaynor-principal ....................................................................................3

3. GREEN MULTIFAMILY OPPORTUNITY .......................................................................41. Green Opportunity .........................................................................................42. Multifamily Benefits .........................................................................................6

1. Cash Flow ...............................................................................................7

2. Demand ..................................................................................................73. Leverage .................................................................................................7

4. MARKET SELECTION .............................................................................................81. Rental Market Strength.....................................................................................82. Competition ..................................................................................................9

5. INVESTOR OPPORTUNITY ....................................................................................101. Debt Investors ..............................................................................................102. Equity Investor ..............................................................................................103. Investment Strategy .......................................................................................10

6. INSPIRED PHILANTHROPY ....................................................................................11

1. Benefit to the Non-profit .................................................................................112. Benefit to our Investors ...................................................................................11

7. INVESTMENT SNAPSHOT ...................................................................................121. Property Specifics .........................................................................................122. Property Overview ........................................................................................123. Housing Market ...........................................................................................124. Economic and Market Overview .....................................................................12

8. FINANCIAL SUMMARY - Multi Family Unit ...............................................................13

9. PROPERTY PROJECTIONS .....................................................................................14

10. INVESTMENT GRAPHS ......................................................................................151. NOI (Net Operating Investment ......................................................................152. Cash Flow (Pre-Tax).......................................................................................153. ROI (Return on Investment) .............................................................................164. COC (Cash on Cash Return) ..........................................................................16

TABLE OF CONTENTS


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We offer an investment in green multifamily properties. Our team has been activein the green multifamily industry for the past several years and is now positioned tocapitalize on it with a select group of investors.

Green multifamily represents the single highest performing real estate investment in the nextten years. Green multifamily investments offer the following:

1. Opportunity to substantially increase profitability through green retrofits.2. Risk mitigation- Green multifamily excels in any economic climate.

3. Demand far exceeds supply for green multifamily.4. Rebate and Incentive funds offered to offset any green retrofit expenses.5. Accelerated appraisal value.

Currently there is a perfect storm of opportunity for green multifamily created by threedisparate, yet related factors:

1. As consumers grow increasingly more educated about green living they aredemanding more from their prospective landlords. As this consumer educationcontinues to increase, the demand for green apartments will only continue to rise.

2. Demand for green multifamily continues to outpace supply. There are very

few green multifamily properties in the US. Our properties will have little,if any, competition.

3. Current market prices for multifamily projects is at an all-time low. We are ableto purchase properties through a variety of sources (banks, REO companies,bulk sales, etc.) and gain very favorable lending terms. These favorable marketconditions are forecasted to last another 12-18 months.

We work with investors in two ways: as debt investors (guaranteed return) or equityinvestment partners (projected return, equity position in the project). We arelooking for a small, select group of investors who are interested in taking advantage

of this opportunity.

EXECUTIVE SUMMARY


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JIM SIMCOE

Jim Simcoe is green real estate investment consultant,sustainability speaker and author. He develops greenmultifamily strategies for real estate investment companiesthroughout North America. Jim has been featured on NBC,Fox, SmartMoney.com, San Diego Insider TV, etc.

Jim writes for Personal Real Estate Investor Magazine,BiggerPockets.com (the #1 real estate investing website

in the US), EcoHome, San Diego Business Journal,GreenRealEstateInvestingsNews.com, RIS Media, etc. Heis the co-author of the Go Green, Bank Green study published by Personal Real EstateInvestor Magazine in March 2010.

Jim is the President of the Board of Directors of the New World Leadership School,the first sustainable pre-school in San Diego County. Jim is a Certified Green BuildingProfessional, EcoBroker and Real Estate Broker.

He lives with his wife, two daughters and two very spoiled dogs in Cardiff-By-The-Sea, California.

KEVIN GAYNOR

Kevin Gaynor is a Civil/Environmental Engineerspecializing in the areas of Land Development and SiteDesign. He has managed projects including single familyhomes, commercial properties, 200+ multi-unitdevelopments, hundred acre residential subdivisions andnumerous condo conversions.

Kevins environmental consulting work consisted primarilyof preparing environmental studies, waste managementdesign, and overseeing construction projects. He has

developed multi-million dollar cost and quantity estimates for client projects. He hasdesigned strategies for effective Storm Water Management, Storm Water Prevention &Pollution and Low-Impact Development.

Kevin graduated from University of Massachusetts-Amherst with a degree in Civil andEnvironmental Engineering in 1999. He lives in San Diego, California with his wife, Karin.

TEAM


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GREEN OPPORTUNITY

High-performance green multifamily properties represent the single greatestopportunity for real estate investors nationwide. They offer higher profits, greaterappreciation, more favorable lending parameters, rebates and incentive money, etc.

For our business a multifamily property must conform to thefollowing criteria to be considered green:

1. Create a healthier (re: non-toxic) living environment for residents.

2. Offer significant utility expense savings to all residents.

3. Cost less (than comparable properties) for us to operate.

4. Create a smaller environmental footprint.

Our business model is geared to capitalize on the perfect storm of opportunity forgreen multifamily properties. Currently three trends work in our favor:

Renters are increasingly demanding green features in prospective apartments.

Green retrofits result in lower short and long term expenses for multifamily owners.

Rebate and incentive money offered to multifamily owners is at an all-time high.

GREEN MULTIFAMILY OPPORTUNITY

86% of renterswould prefer agreen home

55% of rentersare willing tospend moreto live in one

Data from Rent.Coms Feb 2010 survey

86% 55%


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Another key benefit of our green multifamily properties is that were able to acceleratethe appreciation in appraisal values much faster than comparable properties.Multifamily appraisals are largely based on the net operating income (NOI) generatedby the property. Our NOI will be higher due to increased rents and decreasedexpenses. That is the first step in increasing our properties appraisal values.

The second step involves using the Energy Star Guidelines which state thatthe increased annual savings in utility expense in a commercial property will

increase the appraised value of that property. The formula is as follows:

Net Annual Energy Savings / Capitalization Rate = Increased appraisal value (in dollars)

For example, on a $1,500,000 property assume you save $30,000/year in

a market where cap rates are 6%. Using the formula:

$30,000 / .06 = $500,000. Your $1.5M property is now worth $2M.

MULTIFAMILY BENEFITSWeve chosen multifamily as the asset class to pursue for several reasons. Multifamilyoffers the greatest return coupled with the lowest risk. Additionally, the power toincrease cash flows (profit) and property values rests largely with us. In short, wedrive the results, not the market.

The three key benefits of green multifamily investments are: Cash Flow, Demand,and Leverage.

CASH FLOW

Cash flow is defined as the Net Operating Income - Mortgage. Net Operating Incomeis the total income from the property minus the expenses. In essence, when you increaseincome and/or lower expenses, cash flow increases. We consistently increase cash flowby executing a sound property management plan that maximizes rents and decreases

GREEN MULTIFAMILY OPPORTUNITY cont


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expenses. Additionally, our expertise in multifamily rebates and incentives will furtherreduce our expenses and thus increase our cash flows.

Net Operating Income (income - expenses) Mortgage = Cash Flow

DEMAND

The demand for rental housing in the US continues to increase due to populationgrowth, housing affordability, etc. For example, the Echo Boomer generation (children

of the Baby Boomers) are 80 million strong, represent 1/3 of total US population andcomprise a huge percentage of the next decades rental population. According to astudy done by Harvard University Joint Center for Housing Studies, 80% of householdswhere people are under 25 years old are renters. 65% of households where peopleare 25-29 are renters. That offers tremendous potential for our investors.

LEVERAGE

Multifamily investments offer the ability to utilize leverage to dramatically enhance the value ofour investments. Typically we put down no more than 20-40% for any property we purchase.Upon closing we own/control an asset that is worth considerably more than our investmentin it. At the same time, cash flows, appraised value and appreciation rates are based on thepropertys total value, NOT just the money we have in the deal. Real estate represents one of theonly investments where what you purchase is immediately worth more than you invested. If youinvest $400,000 in mutual funds, youd have $400,000 worth of mutual funds. If you invest$400,000 in a multifamily deal, youll own an asset worth approximately $1,000,000.

65%

65% of householdsof 25 29 yearolds are renters

80%

80% of householdsof under 25 yearolds are renters

GREEN MULTIFAMILY OPPORTUNITY cont


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Although we are market agnostic there are two key components a market must meetfor us to pursue investing in that market. We define market as the metro area of acity. For example, the San Diego market would encompass any city within the SanDiego County area. The two key components we consider are:

1. Rental Market Strength2. Competition

RENTAL MARKET STRENGTH

We determine rental market strength using three core benchmarks: job growth,affordable housing, and supply. These three indicators have shown to mostaccurately forecast the success rate of multifamily investments throughout the US.

Job growth in a market is calculated by the percentage increase in jobs per capita over agiven period of time. We look for markets that have a strong employer base and a pro-business political environment. Markets that have a significantly higher percentage of bluecollar workers are very attractive to us as those workers are our target renters.

Our approach to affordable housing is contrarian, meaning that we look for markets

where there is a lack of affordable single family homes. In markets where home salesprices are above the national average more people rent. In essence, the higher theaverage home sales price, the higher percentage of renters.

Supply is based on both the current multifamily inventory in a market and the amountof new multifamily construction. We look for markets where inventory is low and newconstruction is slight. With fewer available properties, rental demand increases forthose properties in place. Thus, vacancy rates decrease while cash flow and profitincrease.

There is a plethora of data we could consider in determining the viability of a market.Weve chosen to stick with the three factors that have the strongest track record of success.An increasing job market, higher home sale prices and a lack of supply all indicate astrong market for our investments.

MARKET SELECTION


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COMPETITION

Our profit is driven by offering our target renters a compelling advantage that theycannot get anywhere else. Offering high performance apartments that create healthier(re: non-toxic) living while substantially reducing monthly utility bills, results in:

1. Higher occupancies2. Higher rents3. Longer tenant rental periods

4. Fewer rental concessions5. Less maintenance

All of these factors contribute to higher profits, higher appraised values, lowerexpenses, etc. all of which contribute to our bottom line. Put simply, we offer anopportunity to renters that is uncommon and highly desired.

From a competitive standpoint we chose markets where we will be the only playerin town. We seek markets where green living is not en vogue and where there arefew (if any) green multifamily projects.

This gives us first-to-market advantage. This advantage gives us: 1. Greater share of available rebates and incentive funds

2. Free, favorable PR3. Better integration in the local community

Contrary to presumed logic, we actively seek markets that are not green focused.These markets give us the greatest opportunity to be a major player and set thestandard for that market. All of which works to increase our profits dramatically.

MARKET SELECTION cont


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Prospective investors are invited to participate in this opportunity in either of two ways:as debt investors or equity investors. For our purposes they are defined as follows:

INVESTOR OPPORTUNITY

INVESTMENT STRATEGY

Our strategy for each project is as follows:

1. Once purchased, transform property into a high-performance green property.

2. Capture all available rebate/incentive money, stimulus and grant funds to offset the costof the green retrofit.

3. Optimize all internal/external systems to reduce capital and operational expenses.

4. Launch marketing strategy positioning property as a green property. Leverage lowerutility bills and healthier living in all marketing materials, sales presentations.

5. Increase occupancy and rents resulting in NOI increases and higher appraisalvalue(utilizing Energy Star Guidelines to maximize appraisal value).

6. Refinance property within 2-4 years.

7. Upon re-finance, investors will have the option to be cashed out.

DEBT INVESTORS EQUITY INVESTORS

Debt investors provide capital in exchange forguaranteed return on their money.

Payments are made quarterly or annually.

A balloon payment (initial investment + preferred

return) will be returned within 2-4 years.

The loan is secured by the property.

Debt investors do not hold any equity in the property.

Equity investors provide capital in exchangefor a projected return on their money.

Payments are made from the net profits fromthe project.

Payments are made quarterly or annually.

A balloon payment (initial investment + profit)will be returned within 2-4 years.

Equity investors hold equity in the property.


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PROPERTY SPECIFICS Location: Phoenix, AZ

Property Type: 20 unit Multi-FamilyMarket Value: $650,000Purchase Price: $425,000Estimated Equity: 63%Cash Flow: $62,000Current Cap Rate: 9.4%Return On Investment: 26.4%Cash On Cash: 25.6%

PROPERTY OVERVIEW Stabilized property with strong occupancy history. 1986 construction with 100% two-bedroom floor plans. Close proximity to major highways, retail centers and jobs. Individually metered for electricity, swimming pool and on-site laundry facilities.

HOUSING MARKET Phoenix is now rated the 5th largest city in the United Sates.

One bedroom apartments in Phoenix rent for $624 a month on average and twobedroom apartment rents average $816.

Multi-family properties have come down in price, even as occupancies have gone up.

ECONOMIC AND MARKET OVERVIEW Phoenix is currently home to seven Fortune 1000 Companies. Employment/Job Growth is up 28.8% over the last year. With an average age of 34, greater Phoenix is the fifth youngest metro region in the

country with a diverse, well-educated labor force of over 2 million people. Greater Phoenix has consistently outpaced the U.S. population growth over the last 18

years. Projections show the region is expected to grow by nearly 60 percent by 2030,bringing the population to more than 6 million people.

INVESTMENT SNAPSHOT


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FINANCIAL SUMMARY Multi Family UnitCurrent Property Profile Assumptions & Savings For Calculations

Multi-Family Electric Bill 35%

650,000$ Gas Bill 35%

425,000$ Water Bill 50%

170,000$ Appraisal Increase 0%

-$ Rental Increase 10%

75,000$ Vacancy Rate 5%

245,000$ OperaonCosts 15%

Rehab Material Costs 5%

Income Summary Current (Annual) Green (1st Year) 5th Year Rebates 10%

Gross Rental Income 114,000$ 131,957$ 160,395$Other Income 5,702$ 6,557$ 7,970$ Assumptions

Vacancy & Credit Allowance 17,100$ 6,270$ 7,621$ GrossPotenalIncome 114,000$

GrossOperangIncome 102,602$ 132,245$ 160,744$ AddionalMonthlyIncome (if any) 5,702$

1st MortgageLongTerm (Fixed) 30 yr

Expense Summary 1st Mortgage Interest Rate 5.5%

Utility Information Current (Annual) Green (1st Year) 5th Year 1st MortgagePrincipal Amount 255,000$

Electricity Bill 2,551$ 1,658$ 1,546$ Private Mortgage Insurance -$

Gas Bill 4,251$ 2,763$ 2,577$ Percent Down 40%

Water Bill 10,202$ 5,101$ 6,184$

TotalUlityCosts 17,004$ 9,522$ 10,307$ Property taxes 10,669$

Insurance 3,500$

Operation Information Current (Annual) Green (1st Year) 5th Year Electric 2,551$

PropertyManagement Fee 4,845$ 6,284$ 8,037$ Gas 4,251$

Accounng/Legal -$ -$ -$ Water 10,202$

Repairs/Mantainance/Supplies 10,000$ 8,500$ 9,201$ Maintenance 10,000$Property Taxes 10,669$ 10,669$ 11,102$

Insurance 3,500$ 2,975$ 3,096$ Appreciaon Rate 6%

On-site Payroll 6,000$ 5,100$ 5,360$ PropertyMgmt Fee 5%

ContractServices 3,000$ 2,550$ 2,680$ Rental Income Increase 5%

Markeng 1,000$ 850$ 893$ Property Tax Incease 1%

General & Admin 2,777$ 2,360$ 2,555$ Insurance Increase 1%

Reserves & replacement 4,000$ 3,400$ 3,680$ Ulies Increase 2%

TotalOperaonsCosts 62,795$ 52,211$ 56,911$ General Ops Increase 2%

Property Tax Rate 1%

Cash Flow Assumptions Current (Annual) Green (1st Year) 5th Year Percent Land Value 20%

Net OperangIncome 39,807$ 80,034$ 103,833$ ClosingCosts (Purchase) 3%

MortgagePayment (17,374)$ (17,374)$ (17,374)$ ClosingCosts(Sell) 5%

Cash FlowBefore-Tax (CFBT) 22,433$ 62,659$ 86,459$

Financial Performance Green (1st Year ) 5th Year

* - Based on a 30-yr Fixed Mortgage

Cap Rate 9.4% 10.4% 10.7%

Gross Rent Mulplier (GRM) 5.70 5.83 6.05

Cash on Cash Return (COC) 25.6% 35.3%

Internal Rate ofReturn (IRR) 250.1% 51.9%

Return onInvestment (ROI) 26.4% 156.0%

Equity (Wealth) % 63.5% 75.7%

Equity (Wealth) $ 517,314$ 734,918$

NOTE: The values and data are to be used forestimation purposes and should be verified.

DownPayment

Buyer Credits / Rebates

Proposed Rehab Budget

TotalCost

Purchase Price

Projected Green SavingsPurchase Information

Property Type

Appraisal Value


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PROPERTY PROJECTIONS


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Inspired d d F f h f ll 760 271 7128

0.0%

10%

20%

30%

40%

50%

Year 1 Year 2 Year 3 Year 4 Year 5

50.9%

35.3%

27.7%

30.1%32.6%

25.6%

Year 10

COC(Cash on Cash Return)

0.0%

200%

400%

600%

800%

1000%

Year 1 Year 2 Year 3 Year 4 Year 5

931.7%

156.0%

54.9%86.0%

119.6%

26.4%

Year 10

ROI(Return on Investment)ROI and COC

Inspired Ventures Plan

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