Operations Plan

Introduction

The Reinvestment and Management Plan was created to address the current foreclosure crisis facing communities in New York City. The plan is to purchase foreclosed multi-family properties via bank REOs and broker listings for rehabilitation. The first phase of homes will consist of five rentals and the second phase involves the sale of five homes. The purpose of this strategy is to develop two lines of operation.

Operations Plan Description

The Reinvestment and Management Plan proposes to acquire and rehabilitate 10 two- and three-family foreclosed homes in neighborhoods determined to be adversely affected by foreclosures. This will be based on their foreclosure rate and other housing data gathered from reports, journals, and internet sites. Using this information, the company will develop a scope of the market for each of the targeted neighborhoods. It can then be analyzed to determine a strategy for purchasing foreclosures. Some of the neighborhoods already identified as having the highest volume of foreclosed properties in New York City include South Jamaica and Staten Island.

Infinite Horizons, LLC is seeking approximately 10, two- and three-family homes to purchase and rehabilitate over duration of 12-18 months.

We will work to acquire bank properties as a start, but are willing and able to facilitate similar arrangements with other institutions such as Real Estate Owned Divisions of banks or other methods including for sale by owner and other foreclosure listing sources. Properties can be located through traditional real estate foreclosure listings, which will be looked into, but we believe our opportunity to achieve the best value would be to acquire directly from the banks’ Real Estate Owned Divisions.

There are various cost-saving factors associated with this approach of purchasing foreclosed properties that include: reducing the banks’ holding cost and time associated with taxes, insurance, interest, maintenance, and operations (potential estimated monthly cost of $10,000), and quick sale turnaround from initial offer to closing. This transaction becomes beneficial to the bank and the company due to the cost savings associated with purchasing the defaulted properties at less than market value along with the decrease in the bank’s holding time and cost.

Infinite Horizons, LLC has identified potential banks and agencies that have foreclosed properties available for acquisition. They include Wells Fargo, Freddie Mac, Fannie Mae and Bank of America.

A portion of the acquisition cost will be provided in the form of equity (10%-20%) as a percentage of the initial purchase price of the property. Other sources of financing would consist of bank loans or private financing. A government subsidy is available to the purchaser through the Neighborhood Stabilization Program.The purpose would be to sell the property at the most affordable price and receive a developer’s fee upon final sale. If the company cannot achieve the projected sale price, the property can then be converted to the rental fallback scenario. This will generate cash flow to pay down loans, cover maintenance and operating costs, along with providing a management fee. Infinite Horizons, LLC will manage the projects from acquisition through final sales or lease up. The company believes setting a benchmark for safe, affordable housing and the best customer service possible.
Infinite Horizons, LLC understands the benefit of collaborating with local community-based
nonprofit organizations to assist in identifying foreclosed properties, contracting for repair work, and qualifying purchasers. Many community-based organization nonprofits are involved with foreclosures and have identified properties that are impacting their community.By collaborating with these organizations, a process can be established to remove these properties from the market. Infinite Horizons LLC can work with community-based contractors for pricing repairs at a more affordable price. Interested purchasers can be given referrals to local nonprofit organizations to assist with homeownership counseling.

Operations and Technology

Infinite Horizons, LLC can manage its cost due to the company’s size and using advances in technology to make it easier to identify large volumes of properties in various locations.
Software programs, such as GSI and Lot Info, cut down on time and expense in identifying multiple tracks of real estate. Foreclosed properties can be first identified via multiple
listing services on the internet, and can then be put into a prospective list to be furthered
researched to determine the potential of each site. Using municipal records that can be accessed via the internet can provide further property-specific information and background.
Municipalities have public records of taxes, payments, deeds and other records pertaining to properties that are now available on the internet. For instance, the New York City Department of Buildings website has specific information on properties, such as work permits,violations, and copies of certificates of occupancy, available on the internet.Technology gives a small business like Infinite Horizons, LLC the ability to stay mobile and manage its operations in a seamless and more fluid way. Communication with customers and clients is efficient with the ability to provide continued quality customer service with internet and voicemail access on mobile devices. The use of technology also helps the company multi-task various duties in an organized and efficient manner. The conveyance of data, research materials, and contact information is easier to exchange with word processing and internet resources.

Expenses would be managed in areas such as administrative costs for project, construction and property management due to the availability of mobile communications, such as black berries and laptops. This makes operating the business more seamless and cost effective by reducing the need for excess staff. Infinite Horizons, LLC will also use such software such as Microsoft Project Management, Microsoft Small Business, and other Microsoft applications including Word Perfect, Excel, Power Point, etc. These programs will assist with the management of projects and internal company operations. Infinite Horizons, LLC will manage its book keeping using the Quick Books program.

Infinite Horizons, LLC has legal counsel for review of legal documents for deals,transactions and closings. The company also uses the services of a certified public accountant.

As the company begins to expand, the use of satellite office spaces to conduct larger meetings or host clients can be incorporated at a minimal cost to the budget.

Foreclosure Pricing Research for Market Value

Infinite Horizons, LLC will use the average foreclosed market value for a property as a start ing price point to begin targeting homes for purchase. This information will be gathered from various foreclosure websites including Property Shark, Zillow.com, and ForeclosedProper ties.com. We can compare the foreclosed price to the average market price for similar types of existing property in the targeted neighborhood to determine what the potential foreclosed resell price would be after construction is complete. This information assists us in deciding on a reasonable selling price for properties based on the market value for properties in specific neighborhoods.

Inspection and Negotiation

Immediately upon a property becoming a Real Estate Owned, Infinite Horizons, LLC will view the exterior and interior then negotiate an appropriate sale price. Infinite Horizons, if necessary, will provide a letter of interest on the home to be purchased, triggering a preliminary valuation discussion to determine whether there is likely to be an agreement on final sales pricing. Once a price is established, a contract for sale will be drawn up within five business days, closing attempted within 45 days.

Acquisition Process

The acquisition cost of a potential foreclosed property is one of the most important aspects to the overall development of the project. It makes up for an average of 80% of the project cost. This is essential to the selection process in acquiring the best property with the greatest resale potential to be sold at a later date on the market.

The company would look to purchase multiple family properties (two or more units) that fit into specific criteria based on price, rehabilitation, operating and carrying costs. Operating and carrying costs such as taxes, insurance and utilities, can be assumptions based on average carrying costs for an existing two- or three-family property. By taking into consideration the construction cost and the final sales price to the buyer, we are determining potential acquisition cost in the most fair and equitable manner in relation to its impact on the entire project.

Rehabilitation

Repairs will be made utilizing minority- and women-owned contractors which we have developed relationships within the industry. The scope of work is expected to include a combination of roofing, siding, windows, flooring, painting, mechanical, electrical, plumbing, bathrooms and kitchens and is expected to cost between $15,000 and $50,000 depending on the physical condition of each individual site. Infinite Horizons, LLC would incorporate in the design of the homes “Energy Star-rated” high performance appliances, mechanical ventilation timer controls, carbon dioxide monitoring, non-toxic materials and efficient heating systems including items such as separate heating zones for each unit, insulation on all heat piping and energy efficient boilers.

Infinite Horizons, LLC will perform the initial cost estimates, create work scopes, and perform the oversight of the general contractors work. Infinite Horizon’s goal of keeping costand budget on track and looking for cost savings whenever possible will ensure receiving the best sales price on the finished product. Other costs related to the project are closing cost, marketing, and carrying cost. After construction is complete, an appraisal would be ordered to determine final market value.

The company can also participate in programs sponsored by the New York State Energy Research and Development Authority (NYSERDA) that includes funding to install energy efficiency in new or renovated buildings. Infinite Horizons, LLC would eventually incorporate Leadership in Energy and Environmental Design (LEED) features into its projects to provide sustainability to site development, water savings, energy efficiency, better material selections and indoor environmental quality for its homes.

The Use of Minority Contractors for Rehabilitation

The Infinite Horizons, LLC believes that by using locally-based minority contractors we will be able to receive a better construction price, which is important to the final sale price to the purchase. Also, by using locally based contractors, we are developing long-lasting relationships that will be useful in future real estate ventures. All of this underscores our continued commitment to building homes, stimulating economic growth, and revitalizing neighborhoods.

Marketing

Marketing for Infinite Horizons, LLC projects will be outsourced to a Community Based Organization two to six weeks prior to final construction completion. During the marketing, the Community Based Organization will start the process of looking for potential purchasers. Infinite Horizons, LLC will also publicize and promote the project through its contacts with local community organizations, civic groups, block and tenant associations, schools, hospitals and other groups. The company will send brochures to neighborhood residents and to people on its own mailing list (when established). Information about the project could also be included in community newsletters or affiliated newspapers.

Resale

Infinite Horizons, LLC would look to provide subsidy financing available through the Neighborhood Stabilization Program as an incentive to the buyers. This would assist in reducing the final sales price to the buyer. An incentive for resale after the work has been completed to the owner is the potential “walk in equity” available upon purchase of property, with rental income that reduces the mortgage payment making the property affordable to the owner.

Asset Development

The acquisition process is considered more closely when critiquing a property as a long term asset. This criterion would include more consideration for the amount of units, maintenance costs, holding period, and market value of the property.

The goal of the asset development strategy is for long term growth to generate cash flow. The rental line would provide the necessary cash flow to reinvest back into operations and management of the homes. The rentals would have subsidized tenants (Section 8). The rental line could also provide the necessary cash flow to reinvest back into company operations and provide a consistent source of revenue. This can be viewed as a potential fungible income when applying to a bank for a business loan.