2016 02-09 EAC Community Weekly Newsletter

EXECUTIVE PARTNERS

Kevin Yoo, CEO

This is a continuation of the discussion I am having for EAC Investor Partners. In the last newsletter I have given you my argument to try to stay invested at all times in EAC projects. I tried to convince our IPs that your overall return is effectively higher the more you remain invested with us because we know that you will not get rates better than ours or as safe as ours anywhere else. The longer your money stays not invested the lower your ROI. Therefore, it is best that you stay invested as much as you can by investing in every and any project that comes to you instead of waiting for the next shiny deal.

Along this same line, I will also try to convince you to keep your money invested as long as you can. We will be bringing long term deals to you where the rates may not be as good as some of the short term deals. For example, on some properties, we may not be able to fully refinance the all in cost of an income generating property completely. If we buy and rehab a property for $80K but can only refinance out $70K, there is $10K that we can finance with an IP for long term such as 5 to 30 years. We would like to offer interest rates that are competitive such as 9 to 10% for these investments. Such investment is not nearly as attractive as other higher return deals we have, but it will allow our IPs to invest a modest amount of capital for long time without having to constantly look for and wait for deals. Your money will always be working for you.

Please be on the look out for such deals, and consider investing in them. Constantly evaluating and moving your money takes time and effort. It is my desire to create passive income for the members of EAC Community. This is one way we can do this. It is

John Hostetler, COO

I flew out to St. Louis last week and spent a few days with Lou Ellis to see the progress on our current projects as well as source properties for the near future. I also had a very good meeting with Great Southern Bank, a referral from our star St. Louis agent, Mary Krummenacher. It was a very productive trip.

Triplex at 3152 Oregon – The contractor originally hired for this project had to be let go once Lou moved here full time. There was adequate progress during the first 6 weeks, but several missteps occurred upon the latest inspection, and it became apparent that we needed to make a change. The new contractor’s team started work yesterday and expects to have this property completed within 4 weeks.

2835 Winnebago Triplex– Demo began early last week and is complete. After evaluation of the property’s layout, as well as consultation with an appraiser and our property management team, Ray Lemons and Sam Lord, we have decided to convert the two shotgun 1 bedroom units on the first floor to a large 3 bedroom, 2 bath apartment. South City St. Louis is full of 1 bedroom units, but there is a shortage of 2 and (especially) 3 bedroom properties. Although we may lose $200 in “potential” rents, the reality is that tenants in 1 bedroom units tend to move more frequently, and between the turnover costs and maintenance of two units vs. one, it makes more sense to supply more of what the market is demanding. Additionally, the appraiser I consulted believes the additional bedroom will actually increase the value.

8100 S Broadway – Demo on this 4-plex will begin this week, as well as work replacing the roof. We are excited about this one because of the fact that we will end up with four spacious 2-bedroom apartments with ample off-street parking and very close to the River City Casino and Hotel, a highly-rated facility with 200 luxury rooms and suites.

The construction crew that Lou sourced for all of the current projects is headed by a pair of contractors with many years of experience in the St. Louis area. Lou is quite impressed with their knowledge and they have the ability to scale to at least 3 projects simultaneously, which is fantastic. They are predicting to complete Oregonin 4 weeks, Winnebago in 6 weeks, and Broadway soon after that. If they can come close to these deadlines we will be thrilled.

2913 Wyoming flip – Mary Krummenacher sent along what we think is a great opportunity for a flip in the Benton Park West area. Last Friday Mary just sold a smaller home at 2816 Oregon, a few blocks to the north, for $280K. We have the project under contract and are meeting with Mary’s architect to determine the best configuration and finishes. More to come…

Finally, my meeting with two gentlemen from Great Southern Bank proved very promising. After explaining to them our model of investing and the quality of the rehabs we set as a standard, they proposed to partner with us on back-end refinancing for all of our projects in St. Louis at very favorable rates. Our current plan is to group the three rental projects above into a blanket loan as our first test of the process. I expect it to be much, much easier than working with the national lenders.

Olga Levin-Diaz, CFO

No updates.

MANAGING PARTNERS

Vil Nikollaj, Managing Partner

3152/3154 Oregon:
See Lou

2835 Winnebago:
See Lou

8100 S Broadway:
See Lou

Other updates:
– Working on Podio updates (contact management, goals, partner vetting)
– Currently vetting new potential partner involved in Mobile Home Parks.
– Outsourced some excel analysis work. Waiting for right developer to do what we are looking for.

Chad Urbshott, Managing Partner

4384 Ingleside:
Property set to close this Fri, Feb. 12th.

GROUND PARTNERS

Lou Ellis, Ground Partner from Jacksonville, North Carolina

On B2R, the only thing I am waiting on is property management agreement and questionnaire from the folks on Birmingham, for the one home in Cordrey Court. I talked to Eddy, our PM there today and he is going to fill it out and send it out to me today. I’ll wait for that and wraps it up as far as on what I’ve asked to do from B2R. Then we just move to the close and I’m going to continue to push and were definitely on the home stretch.

Steve Shaffer, Ground Partner from Southbend, Indiana

226-228 Cleveland:
Siding installation has begun, HVAC rough in, along with buttoning up for insulation. Projected end of March completion.

201 Cleveland:
On the market awaiting tenants

2016 Berkley:
Complete with tenants.

126 E Broadway:
Cleanup starting with end of March projection for occupancy

Andrew Davis, Ground Partner from Orlando, Florida

602 Emma:
Everything has been filed. After several days have passed, its coming out then we can get court order to possess that property. Its moving forward, slowly but surely.

1215 Avenue L:
The move in went well, appliances are delivered. Remember we have a 5 year warranty parts and labor on both appliances. Attached is the documentation for your records. I also wanted to inform you that there are some other issues inside the unit. The shower is not working properly and we will need to send out a plumber. Only the faucet works, water will not come out of the shower head. The range vent above the stove is not working either. I need permission to replace it with a working one. Lastly the door to the pantry at the kitchen is faulty. The pins that go into the track need to be replaced. If I have your approval I will proceed.

Giovanni Gracias, Ground Partner from San Diego, California

4748 College Ave:
– As of today we are 90% completed and items pending include landscaping, laminate install in living room and carpet install in one room.
– Once this is completed we will have the property staged.
– Projected list price: $575K ($25K above our original projections)

2672 Escala Circle:
– The property has been off the market 2 weeks to allow higher pending comps to close.
– One pending closed at $545K and the 2nd is expected to close on Friday in the $549k range.
– We do have an offer coming in this afternoon from another Realtor my current Broker knows.

12081 Calle de Medio:
– Payoff demand for the property has been requested and will be sent to EAC.
– Lesson learned on this transaction is to cross qualify VA buyers with a lender that fully understands the VA lending regulations. I got this buyer cross qualified with a well known local lender but they don’t do many VA loans and did not catch some of the red flags that have delayed closing. Luckily these red flags will not prevent closing.

George Flint, Ground Partner from San Diego, California

1222 Muirlands:
Only have one more department to sign off with permits. Arch is meeting them today Tuesday, should have permits this week.

Pescas:
Demo is complete, concrete work is about 60% done. Framing to start soon.

John Allen, Ground Partner from San Diego, California

4336 53rd Street:
Vil has brought on a potential buyer who is interested in learning more on this project. We spoke briefly over the weekend, on Saturday, and he said he would look over the package and circle around with me at some point this week. I had not heard from him, so I put in a call today and left him a message. The other potential buyer has not come back to the table. If this potential buyer does not make an offer on the project in the next week or so, we should get together and discuss our next move.

Samuel Lord, Ground Partner from St. Louis, Missouri

3441 Shenandoah:
Spent previous week painting and prepping home. Tuck point of the home completed for the most part. Began trying to replace the soffit on front of the home. Previous work done used substandard materials for outdoor use and did not make necessary repairs prior to covering. Fascia board and Joists holding it have a lot of damage which has created rot of primary joists holding overhang. Purchased materials to make necessary repairs which will commence when weather turns a little warmer.

Floor was to commence over weekend but due some other issues found, will commence flooring in Kitchen/s and work to front of the home. This will allow us to have cabinets and kitchen work done/installed immediately. Work in tiling bathroom floors and walls will commence later this week.

Did full inspection of the roof and found that it is in very good shape with silver coat over.

Minor water damage notice on back of build on which was attributed to improper installation of siding prior to purchase. Minor repairs taking place to ensure leakage stops.

We are still inline to have home ready and marketed by March 1.

Commenced using Simplisafe security system and use to track and control access of Lemonstree and contractors entry and departure.

4759/61 Alaska:
Have shown property the past week and Lemonstree will make a few additional changes to the current kitchen to increase show potential. Feeling right now that $550 will be going rate.

In-lieu of replacing existing gutter system, Lemonstree will replace the existing downspouts and do minor install on front of property due cost.

4552/54 Virginia:
Delay in getting carpet in but showing property. We feel $550 is the rate we should be able to get. Presently we are doing a few upgrades in kitchen as well as the layout to make it more viable use.

Received bids for replacing bad fascia and new gutter/downspouts. Seemed high and looking for another alternative contractor.

3501 Iowa:
Have Section 8 inspection on Thursday 2/11. Lemonstree will re-inspect prior to and install new downspouts by Wednesday which were not originally replaced when they replaced the roof/gutters.

3116 Michigan:
Have inspection from City we just found out about today (Monday). Calling Tuesday morning to find out what it is about and will advise.

3438/40 Ohio:
Ellis Construction commenced work on lateral last week. work progressed to lateral being run but as of this a.m. not connected.

Had issue with tenants at 3438 and Laclede Gas and in process of resolving (tenants never changed over to their name) and Laclede Gas supposedly had no idea this was a converted 4 family although we have had them there three specific times for inspections.

Lemonstree is in process of making minor plumbing fixes that were its initial responsibility (plumbing contractor) and fall out of realm of owner or occupant responsibility.

3438 has caught up back rent (through January) but still owe for February. Discussing details as to when it will be caught. We will most likely end up evicting as a result of not paying on time.

Other updates:
We have and will place simplisafe security systems into vacant units in future. upfront cost is much cheaper than traditional security companies (ADT) and allows potential tenant to rent or buy in at additional cost or we can remove and place elsewhere.

1 Tower, 1 Keypad, 1 key fob, 3 door sensors and 1 motion sensor original cost was $260. We purchase at $199. Monthly cost for use over phone app control is $25.

Simplisafe is all ears to working with property management firms as well as rehab/flips. Pushing toward other investors presently as a cheaper and better alternative to ADT which costs a lot to put in as well as long-term obligation.

Nathan Turner, Ground Partner from Ontario

4233 Comanche:
I just got confirmation this morning that the people have moved out and the realtor says she’ll get me pictures later today. I’ll get them uploaded as soon as I get them in. She recommends getting the property cleaned for $100.

Given that the people are finally out we should be able to be listed this week.