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The Fischer Investment Group

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Title: The Fischer Investment Group


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The Fischer Investment Group
  • 5 Years old
  • One of the largest buyers of new homes in US.
  • We focus on buying properties at or below
    estimated replacement cost, calculated on a
    worst economic case basis.
  • We use the Groups buying power and reputation to
    negotiate master discount deals, primarily with
    Builders.
  • We allow the individual investor to buy direct
    from the seller at the net negotiated price

3
Our Primary Focus
  • As Risk Managers, we focus on properties where
    exposure to potential market price decline is
    minimized.
  • As part of this process, we also focus on
    maximizing the relationship between our
    expected returns (profits) and the risk that we
    assume.
  • We choose Areas that have both Serious Growth
    Price Appreciation potential!
  • We dont buy cheap, just because its cheap!

4
Robert R. Fischer
  • Former Professor of Finance and Financial
    Consultant
  •  
  • Specialty Capital Market Theory (Risk
    Management)
  •  
  • Undergraduate and Graduate work concentrated on
    Risk Return Theory
  •  
  • 40 Years of National and International sales
    management experience, negotiating major
    transactions with large companies and foreign
    governments
  •  
  • 12 Years experience selling major financial
    software solutions, including risk management
    software
  •  
  • Started the Fischer Investment Group in 2004

5
Typical questions we are asked most frequently
(by investors) in addition to the standard can I
get a good deal!
  • What really happened to our Economy?
  • Whats likely to happen next?
  • Why invest in real estate anyway?
  • Is it safe to buy now, and how do we know that it
    is?

6
What really happened to our Economy?
  • The manufacturing sector exported millions of our
    jobs to cheaper labor markets without regard to
    the potential Risks to our Economy.
  • With the decline of manufacturing, the last major
    industry, next to Government or the Service
    industry, was Housing!

7
FACT
  • Housing supports 1 of every 6 employees in the
    US! -whether construction workers,
    developers, builders, sales people, advertising,
    financial institutions, real estate agents (3
    million alone), mortgage brokers, etc.

8
Now Housing Became The Focus
  • Over the past 15 years or so, there was a
    deliberate effort by the Government and the
    Financial Industry to expand Housing, without
    regard to how it was done or the financial
    consequences. 
  • Why?
  • Housing was the last major sector for economic
    growth!

9
Now Housing Became The Focus
First, a number of financial products were
introduced to the public.
  • Loans sold off by banks and mortgage brokers to
    loan packagers like Goldman Sachs, Lehman, Morgan
    Stanley, etc. Thus, the evolution of CDOS, MBS,
    etc.
  • Loans were packaged into portfolios of 100
    million, 1 Billion, etc. A grade paper was
    mixed with lower quality in order to increase
    expected return of the portfolio.

10
Now Housing Became The Focus
  • Credit Rating agencies were paid to evaluate the
    Loan portfolios, often as AAA quality. Huge
    portfolios were sold off to insurance companies,
    hedge funds, foreign institutions, and
    Governments.
  • Credit Reporting Agencies (Standard Poors,
    Moodys, and Fitch) failed to include in their
    Risk Management Analysis the possibility that
    home prices could decline. If true Risk
    Management principles had been followed, most of
    these portfolios would not have been sold.

11
Now Housing Became The Focus
  • Anyone who wanted to buy real estate could do so.
    One could buy homes with no verification of
    income, and no investment in the property.
  • Many so called investors (really speculators)
    bought property with the sole intention of
    flipping it. The stage was set FOR ECONOMIC
    DISASTER.

12
Obviously, no one paid attention to the two basic
principles of Risk Return (Reward) Management
Successful Investing
  • The principle is simple for any given level of
    expected return, what investment will have the
    least amount of Risk (or probability of not
    achieving that Return).
  •  
  • The alternative principle is that for whatever
    level of risk one is willing to accept, which
    investment would produce the highest Return.

13
What Risk?
  • In reality, the real collateral for the new
    Financial System was the expectation that housing
    prices would continue to rise.
  • Despite the fact that these large financial
    organizations all maintain Risk Assessment
    Departments, it seems that the Risk side of the
    equation was never considered.

14
Whats likely to happen next?
  • The Housing industry has to recover in order for
    the Economy to recover We believe that both the
    Government and the Financial industry know this
    to be a fact.
  • In order for this to happen
  • Loosen lending restrictions previous
    homeowners, investors this will automatically
    substantially increase housing demand.
  • Government to provide more financial resources
    to the lending institutions and stimulate the
    market by providing income tax credits to all
    buyers (not just to first time home buyers).

15
Whats likely to happen next?
  • Increased Housing Demand will begin to dry up
    Foreclosures, Short Sales, Bank REO deals. Home
    Prices will rise, thus increasing the value of
    the mortgage collateral held by the Banking
    System.
  •  
  • Banks will be able to stop adding to their loss
    reserves.  Some reserves could even be reversed. 
    This would add substantial liquidity to the
    Banking System.
  • 2. Both consumer and Bank Lending confidence
    would rise. People will protect their homes,
    rather than walk away for something cheaper.
  • 3. Existing home inventory will decline and new
    home construction, which declined from over 1.4
    million per year to less than 400,000, will start
    increasing again.
  • 4. Millions of new jobs will be created and the
    Economy will start rising.

16
Why invest in real estate anyway?
  • Home prices need to rise in order to save the
    Banking industry.
  • Median personal housing debt-to-income ratio has
    declined from more than 40 to now only 19.
    Home prices can now increase substantially
    without the typical household (with a 50,000
    annual income) being forced out of the house
    financially.
  • By owning homes and owing mortgages, we can take
    advantage of the coming Hyperinflation. We can
    let the banking system assume the inflation risk
    since typically, 80 of the cost of the home will
    be owed as a note and mortgage.

17
Is it safe to buy now?
The answer is yes, if you invest based on
reasonable Risk Management Principles. Without
this, the investor is always faced with
significant exposure
  • Its probably not safe to invest now, for the
    typical investor who merely acquires an asset
    based on the belief that it has a big discount,
    or that it will probably increase in value some
    day.
  • Anyone can offer you property at a discount. But,
    a discount to what?
  • How do you know that the property could not drop
    substantially from your purchase price?
  • Is the regional location supportive of future
    property value increases?
  • Whats the likelihood of a continued positive
    cash flow?

18
The Fischer Investment Group,
A Successful Approach To Investing
In Real Estate
Our investment strategy is centered on some basic
principles
  • First and foremost - Minimizing our Risk
    (Exposure) to further potential market price
    declines we do this by estimating replacement
    cost on a worst economic case basis.
  • We primarily buy new homes, townhomes, etc from
    builders, with a full year warranty. These
    properties all come rent ready.
  • Second, invest in areas which have reasonable
    potential for future growth, both in population
    and pricing. Were not looking to reinvent the
    wheel.
  • In other words, were not looking to invest in
    out of the way places or in areas that have been
    beaten down, with no realistic expectation of
    recovery in the short or intermediate term.

19
The Fischer Investment Group,

A Successful Approach To Investing In
Real Estate
  • Third, we invest in properties that produce
    positive cash flow, as long as there is
    reasonable financing.
  • And, fourth, we always establish a local rental
    operation to support our investors.
  • Most importantly, we use our buying power and
    superior negotiating skills to establish
    investing relationships where our prices, based
    on or below estimated replacement cost, cannot be
    obtained by any other party (realtor or
    investor).
  • We pass on all of the savings to the individual
    investor. We, as principles, pay the same price
    for property as do the investor.

20
How are we able to get these deals?
  • Builders know that our investors get a great
    deal, because we pass on all of the savings. 
    Thus, they expect a large number of satisfied,
    repeat customers, with a high close ratio. 
  • Builders know that we, as financial experts, help
    our investors to obtain reasonable financing.
  • Builders use our services to seed new
    subdivisions, reduce standing inventory, close
    out subdivisions, raise capital, eliminate
    builder debt, etc.
  •  
  • Builders can still sell property they have
    committed to us.  We have exclusivity on price,
    but not on property.
  •  
  • Sometimes, publicly owned builders need some
    additional revenue to meet publicly forecasted
    revenue targets.

21
How are we able to get these deals?
  • Due to the Fischer Groups purchasing capacity,
    Builders are able to eliminate a fair amount of
    their standard operating expenses when dealing
    with us. Builder savings can include
  • Operating expenses in the building phase
  • Reduced carrying cost of inventory
  • Reduced model center carrying cost
  • Reduced selling expenses no on-site sales
    people
  • Eliminated marketing and advertising expenses

22
Estimating Replacement cost?
  • Land cost
  • Material
  • Labor
  • G A
  • Selling Expenses

23
How to use basic Risk Management principles on a
simplified basis
  • project 5 year investment period
  • This chart indicates the probability of achieving
    the sale price of 200,000 over 5 years is 90
    with a purchase price of 115,000. the net profit
    (net of closing costs would be 75,000 or 326
    (65/year cash on cash))

24
Market Data Shows That Housing Has Already
Started to Recover Current New Home Starts
  • This Recoverys New Home Starts seem to follow
    the same basic pattern as other recent Recovery
    New Home Starts.
  • Vs. other Housing Recoveries, we see that
    currently New Home Starts are at an All-Time
    Low (below 400K).
  • However, there is a very important difference
    here. Today, we have a much larger US
    population than ever before.
  • As Consumer Demand Credit Availability improve,
    there is the potential for a Huge Spike in New
    Home Values New Starts.

25
Market Data Shows That Housing Has Already
Started to Recover Home Price vs. Rent Price
Ratio
  • In 1997, an avg. monthly Mortgage Payment was
    about equal to the avg. monthly Rent Received.
    (Ratio1.0)
  • During 2000-2006, Home prices started to take off
    during the latest Housing Boom. Many people could
    not afford to own Homes anymore started to
    consider Renting.
  • Latest statistics show that most homes are
    quickly approaching an equilibrium point again
    where Housing costsRenting costs.
  • Our Fischer Group only deals are already priced
    below this equilibrium point to give our
    investor buyers substantial positive cash flow
    from their Renters.
  • This overall market equilibrium indicates a
    shift from Renting back to owning Houses again.

26
Market Data Shows That Housing Has Already
Started to Recover New Homes Sales s
  • New Homes Sales seemed to surge at the end of
    past recessions, ultimately, leading to a Housing
    boom.
  • This Graph only shows data up to Jan 2009. It
    does not include recent increases in New Home
    Sales that have occurred in each of the past 4
    months.

27
Current Fischer Investment Group Only
Negotiated Deals
  • We have negotiated Private, Bulk Purchase
    Arrangements in Key Areas of the US that have
    Serious Growth Potential, Substantial ROI,
    Solid Positive Rental Cash Flow.
  • Negotiated deals in Charlotte (NC), Tampa (FL),
    Ft. Myers/Cape Coral (FL) make up our portfolio
    of current Deals.

28
Charlotte (NC) Key Statistics
  • Metropolitan Charlotte (NC) is Home to nearly 1.5
    million people with 6 million people living
    within a 100 mile radius.
  •  
  • Charlotte (NC) is the 2nd Largest Banking
    Center in the US. Bank of America and
    Wachovia are Headquartered there.
  •  
  • Charlotte was Ranked in 2008 among the Top 10
    Cities in the US for Best Places to Live, Best
    Places with Economic Strength, Best City for
    Jobs Entrepreneurs, listed among Americas
    Best Housing Markets.
  •  
  • Charlotte (NC) ranks among the Top 10 Cities in
    the US with the most FORTUNE 500 headquarters.
    Companies like Lowes, Bank of America,
    Wachovia, Duke Energy, and Goodrich
    Corporation. 
  • Charlotte was named among the Top 10 Cities in
    the US likely to have a Housing Appreciation
    over the next 2 Years, according to Forbes.com.
  •  
  • Charlotte (NC) enjoys year-round Weather while
    located relatively close to both the Atlantic
    Ocean the Great Smoky Mountains.

29
Example of our Exclusive, Negotiated Fischer
Group Deals (Charlotte, NC)
  • New Homes
  • Hawks Ridge Community in Charlotte, (NC)
  • Madison plan at 2167 sq ft (A/C) with
    3bed/2bath/1cg
  • Public Price 176,265
  • Our Fischer Group Price 141,012 (or 65/sq ft)
  • Monthly Mortgage, Taxes, Insurance, HOA
     895/month   --(w/ 20 down)
  • Monthly Rent Amount 1350/month
  • Monthly Positive Cash Flow 455/month

30
Tampa (FL)   Key Statistics
  • Tampa Bay Area has a population of over 3
    million residents in Metro Bay area. 
  • Has Lowest Cost of Living compared to other
    Major Southeastern Cities (like (Atlanta,
    Orlando, Miami). 
  • The Port of Tampa is the busiest in Florida in
    tonnage and is home to a rapidly growing cruise
    industry. 
  • Tampa Bays Metropolitan Statistical Area (MSA)
    ranks 3rd among all U.S. metro areas for low
    business costs, according to a KPMG 2004 study.
  • Home to MacDill Air Force Base which
    Headquarters the U.S. Central Command. This Base
    has representatives from 65 Countries involved in
    War on Terrorism. 
  • Corporate Headquarters for companies like
    Outback Steakhouse, Rooms To Go, Walter
    Industries, TECO Energy, and many others! 
  • Home to 2 Professional Sports Teams (Tampa Bay
    Buccaneers Tampa Bay Lightning) and one of the
    Top Cancer Medical Centers (L. Moffitt Center) in
    the US. 

31
Example of our Exclusive, Negotiated Fischer
Group Deals (Tampa/Plant City, FL)
  • New Town Homes
  • Walden Woods Community in Tampa/Plant City
    (FL)
  • Santa Cruz plan at 1635 sq ft (A/C) with
    3bed/2bath/2cg
  • Public Price 156,990
  • Our Fischer Group Price 130,000 (or 70/sq ft)
  • Monthly Mortgage, Taxes, Insurance, HOA
     919/month  (w/ 20 down)
  • Monthly Rent Amount 1150/month
  • Monthly Positive Cash Flow 231/month

32
Cape Coral/Ft. Myers (FL) 
-Key Statistics
  • Home to over 1.1 million Residents in the
    Metropolitan Area. 
  • Ranked as the Best Mid Size City for Doing
    Business in 2006. 
  • Home to World Class Beaches on nearby Captiva
    Sanibel Islands. 
  • Changing from 2nd/Vacation Home destination to a
    vibrant Middle Class population explosion. 
  • Very Desirable location being within 30 min of
    Naples (FL), one of the most expensive
    residential Real Estate markets in the US. 
  • Large Corporations have recently moved Regional
    Operations here such as Comcast, Shaw
    Development, Greystone Pharmaceuticals,
    Somero Enterprises.

33
Pilot Program Improved, Move-In Ready Bank
REOs in SW FLA
  • Located in SW FLA (Cape Coral/Ft. Myers area).
  •  
  • Improved, Almost New properties (New Tile,
    Carpet, Appliances, etc.) are Rent Ready.
  •  
  • Homes have been pre-selected for their location
    condition.
  •  
  • Investor purchasing these does not close until a
    Rental Lease agreement is in place. Most of which
    are Lease Option to Buy agreements for much
    higher price.

34
Example of our Exclusive, Negotiated Fischer
Group Improved Bank REOs (SW FLA)
  • 470 Paddock Street in Cape Coral/Ft. Myers,
    (FL)
  • Built in 2006
  • 1880 sq ft (A/C) with 3bed/2bath/2cg
  • Original Sales Price 225,000
  • Our Fischer Group Price 85,400 (or 45/sq)
  • Monthly Rent Amount 900/month
  • Monthly Expenses
  • Est. Monthly Mortgage (w/ 20 Down) 384/month
  • Est. Property Taxes Insurance 138/month
  • Repair Maintenance Reserves 50/month
  • Total Monthly Expenses 662/month
  • Monthly Positive Cash Flow 328/month

35
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