The crowdfunding company VERAFUND (Florida, USA) has been successfully operating in the real estate investment market for ten years.
The idea of organizing a special structure as an investment vehicle, a joint investment tool for people with different income levels immediately found support among a growing stream of interested clients.
The FUND initially works only with accreditedinvestors. If the investor is a resident of the United States and the United Kingdom, then he undergoes a mandatory accreditation procedure. The FUND sends the investor a questionnaire (income, availability of real estate, assets, etc.), the purpose of which is to determine the financial viability of a person and to understand the level of his experience in investing in real estate.
If the investor is not a US citizen, the sanctions lists are checked first, and then, based on the answers to the standard questionnaire sent by the FUND, the investor's experience of investing his own capital in various real estate objects is evaluated.
There are many opportunities for investment in today's financial markets. The main areas of investment are both stock markets, commodity markets, startup platforms, precious metals markets, cryptocurrency markets, and the real estate market. Real estate markets differ significantly from other financial markets due to the stability of demand and reliability. By checking the accreditation of depositors, the FUND wants not only to analyze their financial well-being, but also to understand the expectations of investors from the placement of their capital in real estate.
Real estate is not always a liquid investment. An investor needs to understand that investing in real estate is not a quick process and it is important to meet certain deadlines. For example, the processes in the real estate market are significantly different from the processes in the securities markets or buying and selling in cryptocurrency, where a transaction can be made in just half an hour. But real estate investments are much more controllable, since real estate cannot change instantly. Entering the real estate market, you can gradually adapt and observe the events taking place in other more volatile markets, calmly predicting your future actions.
At first the company's financial resources were invested in various real estate objects, then, starting from 2016 to 2019, the FUND was actively engaged in the purchase and sale of land plots in South Florida (Hollywood, Fort Lauderdale, Aventura, Palm Beach). Land development became the main focus of the company's work at that time.
One of the first plots in the structure of the FUND was a plot planned for the construction of a retail center plus a residential component. In this case, the buyer was one investor, with whom VERA FUND began cooperation on the development of the acquired land area in Hollywood (Florida, USA). There were many meetings with representatives of various structures on the proposed changes to the project. By the way, this plot was purchased by a well-known developer in Florida - the Housing Trust Group (HTG).
Often, in the process of direct interaction between sellers and buyers-investors, there is a discussion of the existing concept - vision of the prospects for the development of the land plot. Unfortunately, this practice of discussions is not ubiquitous.
For an investor in land development, it is extremely important to determine the new possibilities of the object, the value of the land. Each site carries a certain attractiveness, and each site may have its own problems. If we take into account the uniqueness of any land plot, then when designing its further use, it is possible to strengthen the initial capabilities, increase the return on investment in the land several times. It is important to understand what attracts potential buyers: access roads, the security of the area, the presence of public amenities nearby (swimming pools, party halls, playgrounds, etc.).
The first VERA FUND transactions took place in the direction of land development, namely: the purchase of land; the search for concepts that were not disclosed during the sale; planning to increase the density of the site; generating, together with city authorities, engineers, architects, lawyers, alternative approaches to the use of existing land areas and the sale of plots with a completely different perspective at the level of a new project. At that time, our company was not engaged in construction on the purchased land plots, only sold them.
Land development is an interesting business, quite profitable. Meanwhile, at the current moment you may not make a profit, since you have to invest a lot of money for some time in the maintenance of plots in the form of annual land tax, in the form of payments for land maintenance (road construction, garbage removal, landscaping, etc.).
Nevertheless, in order to develop the FUND's production processes in a promising way and interest in the growth of current income, our attention gradually began to shift from the preparation of land plots for the needs of a particular client to activities with commercial real estate. We have started work on finding independent and non-contiguous objects that are owned, preferably together with a large plot of land, with a planned profit of at least 7%, with hidden potential.
Since 2018, the company has been engaged in a new line of activity -investing in commercial facilities.
In fact, at least 100 commercial real estate objects fall into the company's monthly initial analytical sample. Only 10 objects remain in the secondary list, and then only one object is selected, which will be considered as an investment object based on its successful location, zoning, potentials and other indicators. In other words, if the value of the object is $ 1 million, then its expected annual profit should be $70,000.
Studying the history of the object that the FUND plans to buy, we begin to monitor - net income. In business, net income as an entity's income represents the funds that an organization will receive minus the cost of expenses, depreciation and amortization, interest and taxes.
Before starting the purchase of an object, the accounting and legal service of the FUND conducts a complex and rather long procedure for compiling an objective view of the investment object - due diligence.
Even before the start of due diligence, potential investors are identified, with whom a number of documents are signed, for example, a client agreement and investment intentions. The minimum investment amount is from 500,000 US dollars. Based on the information provided by the seller - owner about the object and a preliminary agreement on its price, funds for the planned transaction are transferred to the escrow account.
Then the due diligence method begins checking the object, which allows us to collect and analyze information not only provided by the owner of the property, but also take into account information from independent sources, assess all possible risks to make a final decision regarding the future project.
Practice shows that only 1% of objects have positive results according to the results of due diligence. This is due to the fault of the owners or managers, who often provide information about the object that does not correspond to real indicators, profitability. Sometimes financial reports are not submitted or are submitted with negative data and references to large САРЕХ (capital expenditure — capital expenditure). When checking, a mandatory request is made to the tax authorities about the real state of affairs with the managed object.
The indicator of one percent of the sample of one hundred objects indicates that there are very few commercial objects that are managed properly. If 50% of the space in the building is rented out, even with the available percentage of profitability from 5 to 8%, then this is a sign of poor management of the object. If 100% of the premises are leased in the building, then, as a rule, the rent for them is small and, accordingly, you should not count on a good profit. Most likely, interest will be aroused by a building where there is a small percentage of available space, and 93 to 94% of the space is leased.
If the due diligence check was completed with a positive result, then the next stage of the purchase of the property will be the completion of its registration for a separate company. For example, VERA FUND-8, VERA FUND-10, etc. This is done in order to accumulate funds only for the current transaction. On the day of the transaction, the title company transfers money to the owner.
The property is transferred to new owners - the FUND (general partner) and investors (limited partners). Let's say a commercial object worth 2 million rubles, 75% of which is distributed equally among three investors for 500,000 dollars and 25% of the value is invested by the FUND. For limited partners, the final decision remains with the agent-partner, who has a high level of expertise, the necessary connections for interaction. The planned income of 7% per annum in the amount of $140,000 from the acquisition of 2 million property is distributed among all partners as a percentage of the contribution. If there are any other significant expenses for the management of the facility, they are included in them capital call - a requirement for the investor to contribute funds to the investment fund in accordance with his obligations for unforeseen expenses.
VERA FUND company acquires commercial real estate in such areas of South Florida as Fort Lauderdale, Boca Raton, Hollywood, Palm Beach, Aventura. Currently, plans regarding the geography of the acquisition of commercial facilities are significantly expanding with the acquisition of licenses for activities in the states of Colorado, Georgia, Connecticut, Illinois.
In the future, such commercial real estate as neighbourhood offices, which causes demand in economically developed urban centers, is of particular interest to our business.
For example, one of these interesting deals took place in the premium area of Oakland Park. It was a beautiful and unusual building in the colonial style - Executive Suites, which represented office space for small businesses, which could be reached from home in 5 minutes. Accordingly, the proximity to the house, saving time on movement, looked very attractive for tenants. The management of the building could be assessed as quite high, since 93% of all office space was rented out of 63. The available premises and common use services: office secretary, accounting, meeting rooms, coworking room, conference room, coffee break room, etc. - satisfied various entrepreneurs: financiers, doctors, specialists of additional education, household services, etc., occupying separate offices.
It is believed that such local neighborhood offices are potential sources for profit, not only as commercial real estate, but also when planning their reconstruction into multi-apartment residential facilities.
We hope that our forecasts regarding the development of a certain type of commercial real estate, the expansion of the geography of VERA FUND's work, will contribute to the achievement of well-being for the company as a whole, as well as for its employees and customers.