Investor Overview

Executive Summary

Property valuations in the Greater Cleveland area have declined significantly – in some cases, houses are selling for 70-80% less than their peak in 2005-06. In addition, virtually no mortgage money is available to borrowers. Meanwhile, foreclosures are turning former home owners into renters and the rental market overall is improving. However, the challenging economy is also creating financial pressure on tenants.

Rental properties are operationally intense and require hands-on management and exceptional leasing services. In addition, while many properties on the market do not require substantial renovation, we must offer a competitive advantage, reasonable pricing to our tenants and attractive amenities to make sure our properties are fully occupied. Based on our initial discussions, we are inclined to recommend that we engage in “straight rental” and not offer clients lease options at this time. Such is the case because the mortgage market makes financing renters very difficult, sale prices may be very depressed at this time and our objective is to generate maximum rental income with the least amount of capital allocated. However, this idea is open for discussion and we would like to hear your thoughts.

Additional Factors for Your Consideration
Realty Corporation of America has existing real estate capabilities in place that can be utilized to manage and market rental properties. These capabilities include the following:

1) A construction services team that we have available to service our bank asset management clients and our auction services business. The key members of this team include John Caputo, Rod Whittington and Ryan Towne.

2) Our sales team is willing to assist leasing properties for a flat fee.

3) The Realty Corporation of America website can be utilized to promote rental property.

4) We could go to market under the name Realty Corporation of America because we already have an established brand name.

5) Realty Corporation of America has the ability to give “first look” at properties coming onto the market because of our REO business and our Auction Division.

6) Realty Corporation of America would make extremely low cash offers to buy properties and can easily track market times of homes and follow up with low offers on an on going basis to make sure the prices we pay for properties are as low as possible.

7) Because we are a real estate broker, we can easily list properties for sale and have some advantage in terms of an exit strategy.

Bottom line: With no overhead, we could start a rental business.

Property Acquisition Candidates

For discussion purposes only, we are pleased to provide you with several samples of the profiles of properties we may consider acquiring. Of course, we would not pay the ask prices for any property. Kindly consider the following:

2-family – 948 Royal in Cleveland, Ohio 44110

This property in the Collinwood community appears to have been renovated recently and requires modest repair. Key features include:

2 bedroom 1 bath each unit
2,012 sq ft
No garage
Asking Price: $14,900
Estimate Rental Income: $500-$600 each unit

3-family – 1646 Coventry in Cleveland Heights, Ohio 44118

This 3 family home near the Cleveland Heights/ East Cleveland boarder sold for nearly $200,000 2 years ago and appears to have been upgraded recently. Cleveland Heights has a point of sale, often with escrow requirements that must be addressed prior to close. Key features include:

3 bedroom 1 bath first 2 units, 3rd unit 1 bedroom 1 bath
3,298 sq ft
2 car detached garage
Asking Price: $29,900
Estimate Rental Income: $800 each 2 units - $400 3rd unit

The following three single family homes are likely to command higher rent that two family properties and are described as follows:

Single family – 4906 E 88th in Garfield Heights, Ohio 44125

3 bedroom 1 bath
1,664 sq ft
No garage
Asking Price: $14,500
Estimate Rental Income: $900-$1000

Single Family – 832 Lecona in Cleveland Heights, Ohio 44121

3 bedroom 1 and ½ bath
1,562 sq ft
1 car detached garage
Asking Price: $14,900
Estimate Rental Income: $800-$900

Single Family – 3327 Euclid Heights in Cleveland Heights, Ohio 44118

Large Brick Center Hall Colonial
4 bedroom 1 and ½ half bath
2,554 sq ft
3 car detached garage
Asking Price: $35,000
Estimate Rental Income: $1000-$1200