The Veterans Angel Fund For Investors
“Consider a 7.00% Preferred Return while helping California’s military Veterans achieve their ideal home."
- Low volatility
- Unique diversification
- Non-correlated assets…a compliment to your portfolio
- Full capital deployment – no idle funds sitting in cash
- Strategic investment exposure to real estate opportunities with increased liquidity
A Confidential Introduction to
The
VETERAN’S ANGELS FUND, LLC
A California Limited Liability Company
San Juan Capistrano Corporate Plaza
30448 Rancho Viejo Road, Suite 120
San Juan Capistrano, CA 92675
Tel: (949) 829-5674
Fax: (949) 388-4314
E-Mail: Peter Van Brady: pete@socalvahomes.org
Websites: www.socalvahomes.org
www.sartrellc.com
Forward-Looking Statements
This confidential document and the Veteran’s Angels Fund LLC Memorandum contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the benefits of investing in the LLC, future financial and operating results, the LLC’s plans, objectives, expectations and intentions with respect to future operations; and other statements identified by words such as “anticipate,” “believe,” “plan,” “expect,” “intend,” “will,” “should,” “may,” or words of similar meaning. Such forward-looking statements are based on the current beliefs and expectations of the LLC and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and beyond the LLC’s control. Actual results may differ materially from the results anticipated in these forward-looking statements.
The Story Took a Leap Forward in 2010
This is the seventh private equity real estate investment offering since SARTRE LLC began in early 2009. After launching our first fund to take advantage of distressed assets in 2009, I witnessed a very interesting business model. Ultimately, I utilized it to generate profits for our original Auctionflo LLC investors. I observed this model created by a former Home Shopping Network (HSN) employee, Jeremiah Hartman. Hartman built a $100M a year business, modeling HSN and using a live television auction format.
He purchased 24/7 exclusive airtime, buying his own channels on Dish and Direct TV. In between hawking jewelry and collectables, three nights a week, he sold low priced homes located all over the Eastern United States to small real estate investors from coast to coast. These investors bought thousands of homes, sight unseen, participating in a live TV auction format. It was brilliant. I got to
know Jeremiah Hartman well and witnessed the auctions live at the studio several times.
Auctionflo LLC (named for selling homes at auction in Florida) was one of six previous offerings by my company SARTRE LLC, formed to take advantage of surplus distressed real estate inventory after the Great Recession. Auctionflo LLC sold real estate on Jeremiah’s platform at America’s Auction Network, known as AANTV. Ultimately, Auctionflo sold more than 160 homes with Jeremiah, through AANTV, splitting gross profits with AANTV, which averaged more than a 50%.
AANTV ultimately closed. It was burdened with approximately $2M a month in satellite TV programming costs. But along the way, I learned two important lessons. First, I learned how AANTV had developed a large and growing captive audience thanks to the massive amount of product it was selling nationwide. By default, through its sheer size and sales, part of that audience had an appetite for real estate investments. AANTV’s customer base was not affluent or sophisticated. Rather, AANTVs real estate investor clients could be characterized as “mom & pop.”
Unique Business Model Provides Valuable Take-Aways
The take-away - the education - was this development of the captive audience of mom & pop real estate investors. AANTV’s primary business developed a large audience, from which this sub-audience emerged and the real estate auctions benefitted tremendously.
The second important insight that stuck with me was the advantage Jeramiah Hartman had by selling real estate he already owned, having purchased it at discounted prices. He was flipping homes that he bought at REDC auctions (now Auction.com). Auctionflo, LLC, bought homes primarily from “bulk” sources such as brokers who had strong relationships with banks, and Auctionflo simply fed these homes individually into Hartman’s process as one of Auctionflo’s exit strategies.
Jeremiah wasn’t brokering for a fee…AANTV had successfully made its OWN market. He was the owner and seller and he had the captive buyers. He wasn’t a participant in a marketplace extracting a fee, like a toll booth, he WAS the market. He literally owned both sides, the buyer and the seller. I had never seen anything like it before or since. But the valuable lessons from the experience can be used by Veteran’s Angels Fund LLC.
The Opportunity:
Stage 1: Attracting a “Veteran Home Buyer Audience”
SoCalVAHomes.org conceived of its Dreamweaver Home Purchase ProcessTM in 2011: http://www.socalvahomes.org/dreamweaver-home-purchase/. The marketing message on the website explains how we buy a home for cash (for the benefit of our client, the Veteran). Then we renovate the home to their custom desires and sell them the home using their VA benefit, ideally for zero down and
zero closing costs. The message resonates extremely well with our audience. Two other unique programs were added to our suite of offerings: 100% VA construction financing and The Veteran’s Angel ProgramTM
We will continue to develop product / program differentiation to further add value to the Veteran home buying experience. As we continue to promote, transact and further promote, we anticipate getting additional media attention for pioneering new and better ways for Veterans to tackle their home ownership goals. In addition to public relations, we continue to expand our spend for online paid search, SEO-SEM and social media marketing (SMM). We feel strongly these campaigns and continued efforts to increase relationships within the Veteran organization community in addition to strategic partner relationships will collectively produce significant gains in market share.
The Local Market: Veterans buying homes - the “VA market” - has grown over 555% nationally from 2007 to 2017. We have been tracking VA purchase loan production data through this growth phase. In the five Southern California counties that we currently operate in, average volume is approximately 1350 homes purchased each month. Although I expect that rising interest rates could ultimately have an effect on volume, that has yet to be the case. August 2018 transaction volume is approximately the same
as when rates were 1.00% lower and home prices were lower. Demand remains strong.
SoCalVAHomes intends to continue to expand its inventory of VA home buyers. Most of our transactions will occur utilizing programs other than the Dreamweaver Home Purchase ProcessTM . However, there exists a substantial opportunity to utilize this growing inventory of VA home buyers to execute Dreamweaver property flips and reward members of the LLC.
Stage 2: Becoming the Seller & Owning Both Sides of The Transaction
At the time of this offering, SoCalVAHomes has completed five Dreamweaver transactions, buying all five homes for cash. They have all been profitable to varying degrees. We have generated ABC TV coverage, as you can see on our home page. ALL five of these transactions were purchased retail, from MLS listings. Purchasing “off market” homes at a bigger discount will create larger margins. Enter “We Buy Ugly Houses” - HomeVestors of America.
David William Brady (eight years my senior) and his partner, Dan Bettencourt, purchased a HomeVestors franchise in the San Francisco bay area in July of 2017. This is a twenty-year seasoned franchise opportunity with a defined business model. AdVestors is the marketing wing of HomeVestors of America. AdVestors currently spends $50M per year to advertise to motivated property sellers, generating leads for HomeVestors franchisees. These sellers respond to a cash offer and quick close from an investor. This model is has worked for decades. The target acquisition purchase price is typically around 65% of the A.R.V. (After Renovated Value), buying these houses at a significant discount.
Dave Brady and Dan run DB2 Contractors in Concord, CA, near where I grew up in Orinda. DB2 performs both retail renovations as well as speculating as real estate investors. Auctionflo LLC has been an active capital partner for more than three years with Dave and Dan at DB2. The family relationship increases effectiveness in many aspects of the deal-to deal-process. However, to ensure objectivity and discipline in the decisioning process, this is the mantra I use: “On each and every transaction, we must act as if we don’t know each-other.” I regularly visit the assets we are invested in, which surround the S.F. Bay Area.
SARTRE LLC, CA is considering buying a HomeVestors franchise in Southern California. Additionally, the real estate “wholesale” marketplace in Southern California is an active one. I have been to the “Deal Maker” meetings sponsored by HomeVestors, in which local investors outside the network are encouraged to participate. These meetings are platform pitches for investors making
wholesale property trades. Sellers such as the current HomeVestors franchisees throughout the state (and many other real estate investors) actually prefer a “wholesale” transaction as an exit strategy. A wholesale transaction happens when the investor (cash buyer of off Market home) sells to another investor by “assigning” their current purchase contract to another investor who would like to renovate and then sell at a profit. In this manner, the first investor earns less money, but turns transactions much
more rapidly, often with just an earnest money deposit as the investment.
Both the direct discounted, off-market acquisition and wholesale off-market purchase techniques present valid property sourcing models to purchase at a discount and then to execute profitable property flips to Veterans and reward the LLC members. But in our model, the motivated Veteran home buyer is the key first component of the equation.
This is The Secret Sauce to Predictable Gains
- Predictable profit margins, because purchase price, renovation costs and exit price are “known” at entry. No speculation on exit pricing.
- Little to no sales costs and selling commissions.
- Reduced asset holding time frames, because buyer is locked in.
Ideally, we don’t buy a home unless we know the Veteran buyer intends to purchase the property from us. This has been our execution strategy thus far. VA appraisal concerns aside, in this model we thereby eliminate the “speculation” on the final price because the Veteran home buyer executes a purchase contract the day we record our ownership of the home. We also eliminate sales costs because
we pay nothing to a buyer’s agent for representation. And we consolidate holding time periods because the buyer is ready to close at time of the completion of renovations – zero marketing time. There are also no marketing costs because SoCalVAHomes.org has born the burden of acquiring the buyer, through its efforts to support its primary business.
This business model is similar to the successfully executed model of Jeremiah’s AANTV real estate auction, where AANTVs primary business bore the cost of buyer acquisition through its core business. If we can profitably run the core business, as it incurs its typical marketing costs, the Veteran’s Angels Fund investors should benefit nicely, as we make some Veterans very, very happy home owners.
To enhance Stage 2, it is important to network into the wholesale real estate investor community, starting with our current HomeVestors contacts. We can also acquire homes through active probate cases, a common strategy for real estate investors/flippers. Becoming a HomeVestors franchisee would accelerate that process, but it’s not a necessity.
Additionally, we’ve had a solid performance history with DB2Contractors. Veteran’s Angels Fund LLC intends to continue its relationship with DBContractors, investing in their HomeVestors property flips and other undervalued real estate opportunities, as Auctionflo LLC has been doing for years.
Staying Fully Invested Boosts Total Returns
SARTRE LLC, CA (The Manager) has learned two other valuable aspects of managing real estate investment capital. First, a manager must have patience and be selective when purchasing assets for the fund’s investors. This is especially true when operating within the confines of a Preferred Return, promised to the members plus a Manager’s incentive over and above the Preferred Return.
There is an important balance that must be struck between the motivation to buy (investing for anticipated profits) and the discipline to apply reservation to achieve preservation of capital. There always exists product to buy. Only patience and discipline produce profits and enhance total returns over longer time horizons.
Secondly, to achieve patience and apply discipline, a manager must have a way to achieve yield on idle cash…or rather to eliminate buying pressure. To achieve this goal, the Fund invests its idle cash in trading stock index options. Three advantages are achieved when implementing this active management between real estate assets and stock index options.
- Because our goal of the stock option investing is income, and the tactic is implemented month-to-month, it is a very liquid option. We can easily move funds to buy property.
- The opportunity cost of idle cash is relatively high. Therefore, the trading strategy, intended to produce consistent income eliminates much of that cost.
- Because the cash is not idle – because it is invested, SATRE LLC, The Manager is free from that pressure to deploy capital with the intent to achieve the desired returns. Patience and discipline can be more easily exercised.
The fund utilizes a 30 year relationship and a six year trading history with a professional money manager to implement its stock index option trading.
We would be delighted to answer any questions and forward you a confidential copy of the complete Veteran’s Angels Fund LLC Memorandum.
Please direct your inquiries to:
VETERAN’S ANGELS FUND, LLC
A California Limited Liability Company
San Juan Capistrano Corporate Plaza
30448 Rancho Viejo Road, Suite 120
San Juan Capistrano, CA 92675
Tel: (949) 829-5674
Fax: (949) 388-4314
E-Mail: Peter Van Brady: pete@socalvahomes.org
Websites: www.socalvahomes.org
www.sartrellc.com
