The Benefits - How Investing with Grady Associates Works

All markets have cycles. Some are dramatic and some are more like slow waves. The dramatic are the boom and bust markets like Las Vegas. Emerging markets are ones that have begun a strong upturn in their economy and growth of renters is outstripping housing unit inventory. For a more complete explanation of emerging markets, ask for our Emerging Markets CD presentation.

To begin, we identify markets with several characteristics. The most important two are:

1.  In-migration - New job seekers
2.  Job Growth

For example, in San Antonio we see these trends in the graphs on the left. Notice that this year’s value is already above last year’s pre-crash level.

We must also look at what is driving the economic growth and whether or not it is going to sustain.

Once we have indentified a market, we then must look into that market to see what properties are available. We use several marketing methods to identify properties that may have the right characteristics. We must also identify motivated sellers among the properties offered for sale.

We can also mount a marketing campaign to all property owners in a target area seeking to make contact with motivated sellers who have not yet placed their property on the market. This can sometimes yield the best deals at the lowest cost since the price will not have been inflated by a broker and other market considerations.

We look for properties that can produce an annualized return above twenty percent for a three to five year hold. Using our analysis software we determine if the property is capable of a cash flow in that range. Our models are very conservation and we only buy properties that will cash flow properly under the most conservative conditions. We set our strike price based on the profit and loss statements of the property (NEVER on proforma numbers) and never pay more than that for the property. When we find one with a motivated seller, we negotiate a contract that is favorable to us.

At this point we bring into the deal investors like yourself to fund the acquisition costs and buy the property. You receive a Property Package that describes the property and provides financials and projections for the property. If more than one investor is in the deal, the offering will be made by Private Placement Memorandum in compliance with SEC regulations. We give our investors the majority of the cash flow and the equity. These returns on investment begin quarterly, if desired. One’s tax situation can alter the structure of the cash flow payment.

From the moment an investor declares in on the deal, weekly conference calls begin to keep you informed of the progress and any changes in the deal as we do the due diligence and any renegotiation of the deal based on what find as we inspect and verify the financials of the property. When the property is closed, there will be a review with the investor(s) on what we actually got compared to what we originally thought we were getting, and the plans for how the property will be taken over and run will be presented.

A professional property manager is then brought in and the plan is executed. Weekly conference calls follow as the plan is implemented and the property is stabilized under our management. Once stabilization is achieved, the conference calls will be extended to once a quarter. However, the investors will receive monthly financial statements and have at least email access at any time. In the event of any unusually good or bad event, all investors will be contacted immediately and informed of what is being done to handle the situation.

As the hold period unfolds we will monitor the market to be sure we time our exit correctly for that market. We want to get out of that market before it starts its next downturn.

When the property is sold, the investment principles are returned and the profits are divided per the investment agreement. Returns will be determined by the specific property performance and will vary from property to property.