May 6, 2013

Dear Investors,

The deals in the San Diego market are hard to come by. We are making all efforts to find them. There are deals, however, outside of California where the returns are far better with lot less capital needed. We are investing currently in St. Louis, MO, South Bend, IN, and Philadelphia, PA.

There are essentially two modes of investing in real estate: 1) Fix and Flip and 2) Buy and Hold. At our company we are doing both actively. Here in San Diego it has been predominantly Fix and Flip. Outside of California we are doing both. Let me tell you about one of our current projects.

St. Louis, MO Multiplex Project

Our overall plan in St. Louis is to acquire as many multiplexes as we can. Over the next one to two years we will place about $100,000 in this market to buy four to five multiplexes leveraged with residential investor loans. The cash flow from these 20 to 25 units will then allow us to buy one more multiplex every year or so.

The acquisition strategy will be to buy these multiplexes at deep discounts (30 to 40% ARV) with JDS Properties who is our partner company on the ground finding them for us. JDS also has their own construction crew who will perform complete rehab on these properties. After the multiplex is fully rehabbed, they will be worth $80,000 to $90,000.

The financing strategy will be to use a credit partner to qualify for an investor loan which would effectively pull out 65 to 70% of the money required to purchase and rehab the property. An acquaintance of mine has just bought and financed the first property for us with the help of Guild Mortgage Company. YOJ Holdings, LLC (our company) has provided all the capital including the down payment for the purchase. We project that we will leave about $20K per property.

The ongoing project management strategy will be to have YOJ manage the project and take 2/3 of the cash flow and equity. The credit partner will be given 1/3 of the cash flow and 1/3 of the equity. We are using Unistream LLC a local property management company to lease out these properties. We plan to acquire quickly 4 to 5 multiplexes and then after setting aside adequate reserves, use the excess cash accumulation of these properties to acquire more multiplexes.

The exit strategy will be to hold the properties with a low interest rate loan and enjoy the high cash on cash return for several years. Once the properties have appreciated and matured, we will then sell to another investor at a lower cap rate for a sizable profit. When we sell, we will then 1031 exchange into a larger apartment or industrial complex.

The cash flow and equity will be split 1/3 each to cash, credit, and managing partners. YOJ will always be the managing partner. Our plan is to have as many multiplexes in our portfolio as possible to have a large presence in this market to leverage our size to our benefit. Moreover, we need to take advantage of the current low interest rates while they are this good.

Profile of current deals

3501 Iowa Avenue, St. Louis, MO 63111 – Triplex

This property has been purchased, rehabbed, rented out, and refinanced.

· Original Purchase Price $30,000

· Total Estimated Rehab Cost $45,000

· Appraised Value $79,000

· Sales Price to Credit Partner: $77,000

· Loan Amount and Cash Pulled Out: $59,250, 30 years at 4.75%, payments of $436.08/month

· Cash left in the deal approximately $19,000

· Total Rent per month $1625

· Annual net cash flow after expenses is approximately $6,700

· Annual net pay out to credit partner approximately $2,200

· Cash on Cash (CoC) return for cash left in deal is 23%

· CAP rate 13% with generous cash reserves

4759-61 Alaska, St. Louis, MO 63111 – Four-plex

This is a property that we bought for $32,000. We have just finished the rehab for approximately $50,000. We are in the process of renting it out and getting our credit partner qualified for a loan on this property. Each unit should rent out for $450/month. With mortgage and expenses, we estimate about $10,000/year total cash flow. This will again give us above 20% cash on cash return and about 13% CAP rate.

Next week, I will bring to you a multiplex project we are currently working on in San Diego.

Kevin Yoo, M.D.