The mission of Lionel Blake Holdings, LLC is to build a property development and management company first by creating a portfolio of income-producing real estate assets. A modest approach will be taken at the company outset, allowing the principal owners to maintain their full-time jobs and positions as students. The company will begin by investing in 2 properties.
Lionel Blake Holdings, LLC will seek to purchase residential properties that have potential for generating prompt return on investment upon completion of rehabilitation and then will be resold. Lionel Blake Holdings, LLC will then take capital from sale to support equity investment of second residential property that will be held and rented as an income producing asset.
1.2 Objectives
The main objectives for Lionel Blake Holdings, LLC are as follows:
• To invest in undervalued and/or distressed properties with the intention of rehabilitation and prompt resale, or to maintain and rent, generating repeated income over an extended period.
• To manage real estate investments from first identification through acquisition and development to final resale or rental.
• To manage and oversee the rehabilitation procedures of recently acquired residential properties.
• To maintain the rental properties that are held for an extended term.
1.3 Keys To Success
The keys to success for Lionel Blake Holdings, LLC are as follows:
• Acquiring distressed and/or undervalued residential real estate properties. The lower the amount of capital required to purchase the properties, the greater potential for short or long-term gains.
• Identifying opportunities to purchase specific properties that would furnish the option of immediate resale or rental upon rehabilitation.
• Completing rehabilitation projects within scheduled budget and timeframe.
• Locating rental occupants for specific properties for renting, before scheduled completion of rehabilitation, or at soonest opportunity thereafter.
• Generating enough repeated income from specific rental properties to cover debt and expenses and provide capital for future property acquisitions.
1.4 Executive Summary
Lionel Blake Holdings, LLC is a property development and management company, initially based in the Metro Atlanta area, created with the purpose of building a portfolio of real estate investment properties that will eventually serve as the foundation for a larger, more diverse collection of income-producing properties and investments. The object of the company is to start with 2 properties in its first year, and use the proceeds to steadily increase the amount of acquisitions as the company ages.
The company will initially be managed by a small group of members as their secondary means of employment, with each member increasing their role as the business becomes larger and more profitable. Lionel Blake Holdings, LLC will not have any employees aside from the identified members, and will initially not pay its members any salary. The proceeds resulting from the management of real estate acquisitions will be used to repay debts and for reinvesting in the company.
Due to the recent increase in availability of discounted real estate properties listed as short sales or foreclosures, and due to the rising property values in the Metro Atlanta because of growing popularity, Lionel Blake Holdings, LLC will employ an acquisition strategy that consists of adding significant value to the identified properties through rehabilitation, and further exploiting them to meet the needs of the portfolio, which involves reselling the properties or renting them out.
The principal investment criterion is that the properties have are capable of being rented out, and of producing a positive cash flow over an extended period of time. Although Lionel Blake Holdings, LLC will be purchasing discounted and/or distressed properties, they will only be chosen because they display potential to generate cash flow after rehabilitation.
The initial equity required to purchase the first property will be raised from the identified company members, along with a select group of investors. The goal will be to invest in an attached or detached residential single-family home, with a purchase price of less than $125,000. The initial equity investment is projected to be $50,000, which will include a 20% down payment, initial renovation costs.
The key of the strategy is to minimize outside borrowing, which will be achieved by flipping the first property that the company acquires and rehabilitates to raise capital to put into a rental property that will generate long-term cash flow. This process can be repeated as long as the market supports it with the available inventory of discounted residential properties, or until the company is generating enough income to pursue larger projects.
Lionel Blake Holdings, LLC will initially provide its own property management services, helmed by one of the identified company members, but as the real estate portfolio grows, it may become necessary to either outsource property management responsibilities, or hire an additional property manager.
2. COMPANY SUMMARY
2.1 Principal Members
The principal membership of Lionel Blake Holdings, LLC is as follows:
• Lionel Blake, Founder and Chief Executive Officer
• Anthony Blake, Chief Operating Officer
• Robin Blake, Chief Financial Officer and Real Estate Agent
• Telia Fisher, Senior Vice President of Operations and Management
• Brittani Smith, Junior Vice President of Operations and Real Estate Agent
• Lashawn Fisher, Independent Contractor
2.2 Start-up Summary
Lionel Blake Holdings, LLC will be a property development and management business. At the outset, it will aim to manage all of the daily operations and activities of the company, but will seek outside legal and accounting help. The main focus of the company will initially be reinvesting proceeds, acquiring additional properties, and rapidly expanding the overall investment portfolio, as opposed to paying its members a salary or hiring employees. The members are currently expected to maintain their full-time work or student positions, so they will not be reliant on the proceeds from the company.
Costs associated with the formation of a new company will be kept to a minimum, as the members plan to run it from home offices, and while maintaining their current full-time positions. Together, they will cover the costs of the professional fees associated with establishing the LLC, domain hosting, website building, initial promotions, and branding.
The members have limited capital to put into each property for rehabilitation, so additional fundraising may be needed as the rehabilitation process takes place with the first properties that the company acquires. The strategy is always to minimize outside borrowing, and retain as much of the original investments and capital as possible. An example of the acquisition and rehabilitation strategy is as follows:
Step
Property
Task
1
#1
Raise $25,000 in capital for equity investment (20% down payment) in distressed properties with values of $125,000 or less. Receive debt financing for remaining balance.
2
#1
Perform necessary rehabilitation for prompt resale.
3
#2
Take proceeds from sale of Property #1, and us
e as down payment when acquiring next distressed property.
4
#2
Perform
necessary rehabilitations on Property #2, and rent it out to produce repeated cash flow.
5
#3
Repeat Steps 1-2
6
#4
Repeat Steps 3-4
2.3 Start-up Funding
Start-up Expenses (formation of LLC)
Legal
$100
Domain Hosting/Website Building
$100
Total Expenses
$200
Start-up Expenses (at time of 1st Property acquisition)
Start-up Expenses at Formation of LLC
$200
Start-up Assets for LLC Formation
$200
Total Funding Required
$0
Assets
Total Assets
$0
Liabilities and Capital
Liabilities:
Current Borrowing
$0
Outside Investment
$50,000
Debt Financing
$100,000
Total Liabilities
$150,000
Capital:
Total Capital
$0
Total Capital and Liabilities
$150,000
Total Funding
$150,000
3. BUSINESS MODEL
Lionel Blake Holdings will be a privately held Limited Liability Company (LLC). It shall be registered in the state of Georgia. It will be wholly owned by the CEO, Lionel Blake, and responsibilities shall be delegated among a selected group of five executive members.
Lionel Blake Holdings, LLC will be configured as the holding company to manage and develop real estate properties acquired. Any asset acquired with the purpose of rehabilitation, reselling, and/or renting shall be held in Lionel Blake Holdings, LLC.
4. INVESTMENT CRITERIA
Lionel Blake Holdings, LLC will invest in existing residential properties to rehabilitate and resell or rent. The goal will be to invest in attached or detached single-family residential properties in the Metro Atlanta market area with a purchase price of $125,000 or less. Criteria for selecting properties for investment will include those that exemplify problems that can be resolved using the members’ in-house expertise.
The strategy will be to acquire properties that are discounted, due to distress, foreclosure, or short sale. Properties like these typically have values that are depressed compared to similar properties in the area. Lionel Blake Holdings, LLC will seek to exploit these properties and restore their value through rehabilitation. Many of these properties may only require surface-level refurbishing, such as new flooring or paint, while others may require a more extensive renovation, especially if they are received in a severely depressed condition. These opportunities will be located using the members’ previously available resources, and by establishing new relationships with agencies and individuals that have access to properties before they are widely marketed. This will allow Lionel Blake Holdings, LLC to pre-emptively acquire the desired properties with early, strong offers, which will help reduce competition and increase capital.
Each proposed property will meet the criteria that they will be purchased, improved and rented out to produce a positive, repeated cash flow, with the minimum criteria: equity investment of 20%, debt financing over 30 years for the remaining balance, and all other fees associated with purchasing and maintaining a property, such as HOA fees, brokerage fees, taxes, transaction fees, and insurance. Regardless of whether the properties were acquired for the purpose of renting or reselling, all of the properties will meet the criteria to become a rental property, and produce a repeated cash flow for the company.
The business model for Lionel Blake Holdings, LLC is designed to modest in the beginning, and as such, the company aims to execute the first two steps of the investment method, and therefore acquire its first two properties, within its first twelve months over operations, after securing the appropriate funding.
5. SOURCE OF EQUITY AND DEBT
Lionel Blake Holdings, LLC aims to employ a two-step strategy that will require raising investment capital, and securing debt financing from a lending institution. The strategy to acquire one repeating source of cash flow, and therefore create a portfolio with one real estate asset, follows as such:
• Step 1:
o The goal for the first acquisition is to purchase a depressed attached or detached single-family residential property that is undervalued in the current market, priced below $125,000. Ideally, this purchase would occur through a foreclosure or short sale. The property will undergo necessary improvements for prompt resale, with goals of a net profit of about 15%. The initial investments that made up the down payment will be returned, and the profit will be reinvested in the company to acquire the second property.
• Step 2:
o The proceeds from the sale of the first property will furnish the 20% down payment on the purchase of the second property. The second property will be in the same price range as the first one, and be acquired in a similar manner. The amount of debt owed to outside investors will be significantly reduced or possibly eliminated with the profit from the first property. The second property will be rented out and held as a long-term investment, generating steady cash flow for the company. It will become the first asset in Lionel Blake, LLC’s portfolio.
o The two-step process will be repeated in order to retain capital and eliminate unnecessary debt. Each two properties acquired will result in one asset being kept in the portfolio, until the company has enough capital to pursue larger projects.
6. PRODUCTS AND SERVICES
Lionel Blake Holdings, LLC is a real estate development and management company, and will offer property acquisition, financing, property and asset management services. All company acquisitions will be managed within the company. The identified members will seek out and collaborate with community officials, such as real estate agents, homeowners, brokers, and other participants in the community to identify suitable properties for future investments.
Lionel Blake Holdings, LLC will seek to diversity its portfolio first by acquiring properties that may attract different types of tenants, and in the future, acquiring properties that house multiple families, or provide office or retail space.
The company will cooperate with lenders to negotiate the best rates for new acquisitions, or obtain refinancing on older assets. The members will be responsible for drafting loan applications, and cash flow projections. The company will also perform asset management on all properties in the portfolio, and the company will perform market reviews to ensure that the rent being charged is equal to comparable properties, and is returning maximum profits. Lionel Blake Holdings, LLC will enlist professional accounting, legal, and tax help when necessary.
At the outset, all property management will be performed by the identified members of Lionel Blake Holdings, LLC. This will continue until the position requires the member to perform these job duties full-time, or necessitates the hiring of a new professional. In any case, the members will ensure that the position is performed prope
rly, and the needs of the tenants are always being met. Lionel Blake Holdings, LLC will bring in independent contractors as necessary to conduct maintenance and do improvements.
Lionel Blake Holdings, LLC will ensure that the transaction will produce the projected return by performing analysis to evaluate the market.
7. MARKET ANALYSIS SUMMARY
According to a market report by AlphaFlow, the Metro Atlanta area is currently the third hottest real estate market in the country, displaying a 4.9% dip in available housing since June 2016. As the city continuously attracts young families and millennials coming in for the mild weather, multiple Fortune 500 companies, and high quality of life, more and more people migrate outside of the city center to the surrounding areas, which will be the target areas of Lionel Blake Holdings, LLC at the beginning.
For Gwinnett County, Georgia specifically, home prices have been rising steadily ever since April 2012. As of right now, the average home value in Gwinnett County, according to the Zillow Home Value Index, is $206,600, which is projected to increase by 4.2% by November 30th, 2018. The company has identified a property listed for $125,000 listed in Lawrenceville, Georgia, where the average list price is $174,200.
The popularity of the rental market in Gwinnett County has been steadily increasing since 2013. As of December 2017, the average rental in Gwinnett County is $1,467, which is higher than the $1,384 average rental price for the entire Metro Atlanta area, and significantly higher than Gwinnett County’s 2013 average rent of $1,206.
This data is significant because it demonstrates the sizable returns that the company can receive once it finds and redevelops a depressed property.
7.2 Market Segmentation
At the company outset, Lionel Blake Holdings, LLC will be primarily targeting middle income households to rent or purchase the properties in its portfolio. According to the US Census, household income in Gwinnett County, Georgia averages at $63,219, and as increased numbers of similar tenants seek housing in this area, demand will most likely increase.
Demographics (According to US Census Data)
2000 – 588,448
2010 – 805,321
2017 – 907,135
Although the population is predominantly white, it has been steadily diversifying for years, and it continues to attract diverse people of similar socioeconomic backgrounds. According to the US Census, 56% White, 28% African-American, 12% Asian, and 21% Hispanic or Latino, with 35% of citizens aged 25 years or older holding a Bachelor’s degree. This trend is expected to continue in coming years as more housing units are constructed, and more young families come to Gwinnett County because of the nationally recognized public-school system.
8. RISK ASSESSMENT
There are several risks associated with this business structure. They can more readily be identified when placed into three groups.
Possible issues associated with starting and running Lionel Blake Holdings, LLC might include:
• The members fail to find $25,000 to place a down payment on the first property and secure a debt financed loan.
• The members fail to secure a debt financed loan after the down payment capital is raised.
• Projected start-up costs are higher than what was estimated.
• The necessary responsibilities of running Lionel Blake Holdings, LLC exceeds the amount that the members can accomplish while maintaining full-time commitments.
• The necessary responsibilities of property management exceed the amount that a person can accomplish while maintaining a full-time commitment, before the company is able to hire outside help.
• Lionel Blake Holdings, LLC improperly manages the real estate investment portfolio, and does not produce the estimated returns, or acquire additional property.
Possible issues associated with acquiring, rehabilitating, and exploiting real estate might include:
• Property acquisitions are difficult to identify, and are not made as projected.
• Rental rates are less than estimated.
• Rehabilitation and/or costs are more than estimated.
• Properties are vacant for a longer period of time than expected.
• Tenant vacates property early, or does not pay rent on time.
• Unexpected spending on improvements.
Possible issues associated with the housing market in general, or the housing market in the Metro Atlanta/Gwinnett County region might include:
• Reduction in cash flow due to increase in interest rates
• Drastic decrease in supply of distressed properties to rehabilitate
• Outside circumstance that encourages citizens to buy homes instead of rent, decreasing opportunities for positive monthly cash flow
• The Atlanta Metro area is negatively impacted by an event that results in a reduction in available jobs
These risks could negatively affect Lionel Blake Holdings, LLC, and hinder its ability to meet its projections, but the strength and flexibility of the investment plan, paired with the expertise of the members and the benefits of holding significant investment in real estate will allow the company to produce the projected returns, and meet financial obligations.
8.1 Management Plans and Competitive Edge
Lionel Blake Holdings, LLC is to be managed in equal part by the identified company members, with each member holding a specific set of responsibilities that matches their expertise. Robin and Anthony Blake, the Chief Financial Officer and President of Lionel Blake Holdings, LLC, bring a competitive edge to the company. Robin Blake has been practicing real estate since 2005, while her husband, Anthony Blake, has been practicing real estate since 1999. Together, they have brokered hundreds of thousands of dollars in real estate transactions, and have made thousands in commission fees. They also have previous experience purchasing, developing, and managing occupied rental properties in New York State, and they bring their knowledge of the business and the solutions to their past errors to this new company. Anthony Blake received his B.A. in Business Administration from Nyack College in 2005, while Robin Blake is currently studying for her B.B.A. in Accounting with a Minor in Cyber Security at the University of North Georgia. Robin Blake is also currently a licensed real estate agent in the state of Georgia, and will begin her thirteenth year of real estate licensure in 2018, which provides the company with yet another invaluable resource, and saves the company from having to hire someone from the outside to handle its official real estate dealings.
Lionel Blake, the Founder and CEO of Lionel Blake Holdings, LLC, brings to the table a lifetime of valuable experience-based teachings about types of real estate, real estate transactions, and property acquisition, development and management, through his parents who were involved with the business during his entire life. Now, he consolidates his family’s talents in the company, and pairs their experience with his technical real estate knowledge and his knowledge of the Metro Atlanta area and market. He is currently studying for his B.A. in Politics with a Double Minor in Public Policy and Psychology at New York University.
The management necessary to establish Lionel Blake Holdings, LLC and successfully maintain it will be largely be conducted outside of normal business hours, but due to the flexibility of the schedules of all six of the company members, there is likely to be a member available at virtually any time of the day to address a problem or attend a meeting.
The experience and expertise of the members, paired with the passion for real estate that each member demonstrates and the practicality of the business and inv
estment plan, will lead to the success of Lionel Blake Holdings, LLC.
8.2
Marketing Strategy
The marketing for Lionel Blake Holdings, LLC will be dynamic and multifaceted, since the company will have expanded control over the presentation of the properties in the portfolio due to the presence of licensed real estate agents in the identified members of the company. Marketing will begin with Multiple Listing Services (MLS) through our realtor, but will also include Instagram, Facebook and Snapchat campaigns spearheaded and supervised by the CEO, and will be supported by the upkeep of a professional company website that includes an interactive news section and map for customers to enjoy.
8.3 Sales Strategy
Lionel Blake Holdings, LLC will carefully select the tenants who rent the properties in the investment portfolio. Good credit history, a criminal background check, proof of employment, and references will all be required in order to be issued a lease with the company. One month’s rent will also be requested at lease signing as a deposit.
In terms of selling properties in the portfolio, the sales will be contingent upon the buyer’s ability to secure adequate financing. In order for a contract to be accepted, potential buyers will have to prequalify for a mortgage.
9. FINANCIAL PROJECTIONS
9.1 Pro Forma Financial Statements
The company has identified a sample investment property to illustrate the growth in cash flow and distribution of expenses that is to be expected from each rental property.
Property
2194 Hawks Bluff Trail, Lawrenceville, GA 30044
Size
1,712 sq. ft.
Year Built
2004
Garage
Yes
Purchase Price
125,000
Closing Cost
4744
Accounting
–
Legal
–
Realtor Commission
–
Insurance
–
Due at Closing
4744
Projected Renovation Cost
15000
Total Start-up Cost
44744
Kitchen Renovation
Appliances (Stove, Dishwasher)
4700
Upgrading counters
4500
Upgrading Sink
700
Flooring and Carpet
1300
Re-facing Cabinets
3500
Walls and Paint
300
Expenses
Maintenance Allowance
750
HOA Fees
200
Insurance
600
Property Taxes
1860
Utilities
600
Realtor Commission
1275
Financing
Interest Rate
4%
P/I
477
Points
2000
Duration
30 Years
Third-Party Closing Cost
Appraisal
425
Recording Fees
125
Closing Escrow
450
Start-up Projections
Start-up Period
0
0
0
0
Year 1
Year 2
Year 3
Year 4
Month
0
1
2
3
Summary
Summary
Summary
Summary
Revenue:
Rent
15300
15300
15300
15300
Escalation
–
324
648
972
Rental Income
15300
15624
15948
16272
Vacancy
(1275)
(1302)
(1329)
(1356)
Total Revenue
14025
14322
14619
14916
Expense:
Equity Contribution
50000
Insurance
50
50
50
600
618
637
656
Maintenance Allowance
–
–
–
750
773
796
820
HOA Fees
200
200
200
2400
2400
2472
2546
Utilities
50
50
50
600
600
618
637
Realtor-Lease Commission
1275
300
300
300
300
Property Taxes
155
155
155
1860
1860
1916
1973
Operating Expenses
50000
455
455
1730
6510
6551
6739
6932
Financing (P&I)
477
477
477
5724
5724
5724
5724
Total Expenses
50000
932
932
2207
12234
12275
12463
12656
Free Cash Flow
(50000)
(932)
(932)
(2207)
1791
2047
2156
2260
9.2 Cash Flow Analysis
Year
2018
Cash Inflows
Inflow from Rent
15300 (1275×12)
Equity Investment
5000
Borrowings
50000
Total Cash Inflow
70300
Cash Outflows
Rental Expenses
455
Repayment of P&I
477
Asset Purchases
–
Income Taxes
188
Total Cash Outflow
1120
Net Cash Flow
155
Cash Balance
10256
9.3 Balance Sheet
Year
2018
Assets
125000
Cash
5000
Property Assets
–
Total Assets
130000
Liabilities
Long-Term Liabilities
100000
Other Liabilities
–
Total Liabilities
100000
Equity
30000
10. CONCLUSION
The preceding business plan completely outlines Lionel Blake Holdings, LLC as it incorporates as a property development and management company, and will provide a diversified, strong portfolio of real estate assets in order to allow the company to further expand and pursue more complicated projects.
The initial approach that Lionel Blake Holdings, LLC plans to utilize will help to minimize starting expenses, and is viable due to the number of experienced members that are involved in the structure and operations of the company.
All of the combined experiences of the members will lead to the success of Lionel Blake Holdings, LLC. This is especially pertinent because the members have lived in the area in question for several years, and therefore have invaluable expertise of the real estate market, demographics and living conditions that characterize the area. In addition, all of the members have more than twenty years of combined experience buying and selling real estate, as well as years of experience in property management.
The members will be able to locate and identify depressed properties in areas with high property values, and restore the value to these properties with the appropriate rehabilitation by the prescribed timeframe and on budget. Their efficiency, practicality, and frugality will allow the company to meet the modest goals set out as it begins. The construction of the diversified real estate portfolio with positive monthly cash flow will then allow the members to reevaluate the company’s goals and actions, and expand into other areas of real estate investment.