Wednesday, April 16th, 2014

GO Zone Gateway FAQs

What is GO Zone Gateway? What exactly do you do?

GO Zone Gateway is different from other groups in regards that we do not sign an exclusive agreement with developers. Our goal is to find the best deal in the GO Zone. Most groups are tied to one developer and need to find the reasons why they offer the best investment. The truth is that all investments have their pros and cons.

GO Zone Gateway has sold and closed on every type of construction. Stick built, steel frame, modular, stilt homes and concrete. We are able to deliver any of these and help you find what is best for you depending on what is most important to you. Is it location, quality construction, or highest points for the Small Rental Assistance Program?

We have an expert that manages our GO Zone pipeline, whose full time job is keeping up with the GO Zone laws and the latest routes for financing, as this is a drastically changing market. We offer our services and advice at no cost to the investor.

How do you get your projects and how do you qualify your developer?

GO Zone Gateway is part of YAERD.org, which is the largest free on line investment club. We are a trusted source that ranks highly on Google for any Real Estate search. Our web presence and large Real Estate investor list, allows us to negotiate with developers for the best deal. This presence brings the developers to us. A large number of developers have approached GO Zone Gateway to promote their product.

For us to add a project to our offerings there are certain requirements that developers must meet. Does their project have a price point that allows cash flow? Are they the best quality construction in their location? Where is their location? Do you have a finished product that we can view and investors if they choose to visit? Can they offer incentives, make guarantees and stand behind their product? These are a sample of the requirements that we ask developers before we will consider their project.

GO Zone Gateway is not a broker’s office that received a phone call to promote a product and we slapped it up on our website. I have personally met these developers, their families and office staff. When I call the main office for a contract, I can put a face with the name. This is something that not many groups can offer. I have even gone on a plane ride with our concrete developer. We feel it is important to have a relationship with both our clients and developers.

Why should I use you?

We have a relationship with these developers, but more importantly, we bring them investors. Investors are the most important part of the real estate transaction. Without investors, the developers will not sell anything.

If there is something that goes wrong, who do you think the developer will listen to more? You, who are buying 2 or 3 properties, or us, who have brought the developer several buyers and may continue to in the future based upon their performance?

We perform most of our due diligence and put it on a silver platter for you. It would take you months to learn the ins and outs of the market that we already know.

Our full time job is finding quality projects and assisting buyers in expanding on their portfolios. We know exactly how the process should go and what is standard practice. Plus, we are always offering other projects such as Mexico or North Carolina. Do you want to know when other good deals come along?

What locations are you in?

We are in several locations across the Gulf Coast. Each of these has a unique feature to offer to investors. A lot of people want to know how close we are to the Casinos. Most of our locations are about 15 to 20 minutes from the Casinos. This is because cash flow is such an important part of an investment.

If you want a property in the most desirable location, the price point will not allow it to cash flow, unless you want to put at least 30% or more down. The key for investors is to use leverage and invest in a market where rents support prices. The areas that we have chosen have the same demand for renters and consistent rent. Most of your rentals along the Gulf Coast will range from $1,000 to $1,300 a month for 3 bedroom 2 bath.

We add new locations frequently, so call for the most up to date properties.

How much do I need to invest?

These are preconstruction projects, which is a huge benefit to the investor. Why? A lot of people ask why developers don’t build specs and then sell them completed. The reason is because YOUR out of pocket cost is calculated off of the appraisal, not the acquisition price. Let’s take for example our Jefferson concrete model in Bayside Park.

We recently closed on a few Jefferson models and the appraisal was $245,000 (6/1/2008). The purchase price is $214,000. If you want to do 90% loan to value, you take 90% of the appraisal. ($245,000*.9 = $220,500). This means to show the bank that you have 90% loan to value in the home, they will lend up to $220,500. The purchase price is only $214,000, so you can finance that entire portion.

We have learned through experience that most developers have extremely high financing costs and do not disclose those until they have you in contract. If you are paying more than 4 points total for both the construction and the permanent loan, then you are paying too much. We have negotiated for the developer to contribute $4,000 towards your closing costs, which are roughly 3.6% of purchase price.

Your total out of pocket cost to purchase the Jefferson model is ($214,000 * 3.6% = $7,704). If you did not purchase this home as pre construction, you have to put 10% down to show the bank your 90% loan to value (214,000 * 10% = $21,400), plus you would still have to cover closing costs of $7,704. That would be a total out of pocket cost of $29,104. If you didn’t go through GO Zone Gateway, you would also lose your $4,000 seller concession, so your real out of pocket cost would be ($29,104 + $4,000) $33,104.

Savings by doing pre construction with GO Zone Gateway: (33,104 – $7,704) = $25,400

With the savings alone, you would buy 3 more duplexes, so you can leverage 4 to 1 with our financing.

I heard there are some really good incentives with the GO Zone. What are they exactly? They sound too good to be true.

There are some unbelievable incentives in the GO Zone. The Bonus Depreciation is probably one of the best tax shelters that will ever by offered in our lifetime.

The reason for all of the incentives is the demand for housing. Majority of this market is rental culture. A majority of people in Gulf coast rent their homes, especially after the hurricanes which ruined a lot of people’s credit. Trying to buy home in this credit crisis is very difficult, especially if your credit is below 680.

In order to provide housing for these victims, the government came up with incentives to entice the Real Estate community to invest here. With out investors, it will be difficult to rebuild this coast under current market and economic conditions. Hence, the 50% Bonus Depreciation and Small Rental Assistance Program.

I am happy to go over the 50% Bonus Depreciation in detail, but here are the general things that you need to know. In some shape or form, you will benefit from this. How much and how quickly, will depend on your profession and financial situation. Really the only people that won’t qualify are those who make over $150,000 Adjusted Gross Income and are not a Real Estate professional AND do not own any real estate.

Do I qualify for the Bonus Depreciation?

You must ask yourself a few questions to answer this properly:

Can you qualify for the Real Estate Professional status according to the tax code?

If you or your spouse (married filing jointly) qualify for the RE Pro status then yes, you can use the bonus depreciation no matter how much your income is.

Do you make less than 150,000 per year ADJUSTED GROSS INOME? Yes? Then you do qualify for at least some of the benefit.

If you make less than $100,000 in Adjusted Gross Income you qualify for $25,000 in real estate related write offs (the GO Zone Bonus Depreciation qualifes as one of them).

The benefit decreases by .50 for every $1 over $100,000 in AGI and then caps out at $150,000. So, if your AGI is $125,000 your GO Zone Bonus Depreciation benefits are cut in half to $12,500.

I can answer questions and discuss this further with you by calling 561-404-7353. I also have a CPA who holds seminars to teach other CPAs about the GO Zone tax incentives for the detailed and difficult cases.The Small Rental Assistance Program is a program that is Federally Funded. It gives land lords the opportunity to apply for a “forgivable loan” from the State of Mississippi.

I’ll sum the program up for you simply. You apply for the program. It is judged on a point base system. If you get qualified you are awarded money. For a duplex it is $73,000 total including a completion bonus.

The first round has not yet funded as of June 6th 2008, but on of the programs heads has stated that the closing packets will be going out within this month.

A lot of people have questions about this program and how it has been. I will discuss this with you at 561-404-7353. The news changes daily. I will not give out bad information. Most of what investors are told is incorrect. I get my information from Horne LLP, who is the accounting firm in charge of distributing the funds for the first round and Waggoner Engineering, who is doing the lot surveys.

Waggoner reports to Horne LLP, and Horne LLP reports to Executive director of the MDA, who in return reports to HUD. I have talked with the head of all 3 programs.

What if I want to go visit?

That is great. I have people constantly visiting. I am sometimes able to come and meet you. If I am not able to, I will have our developer or the head General Contractor show you our sites and products. Call 561-404-7353 to set up an appointment.

How long does it take to build these homes?

If you entered into contract today, I would submit your 1003 application to the lender. They would qualify you within 24 hours and begin the underwriting process. This takes about 14 days. At that point, you will close on the construction loan and the developer will begin. Usually, about 65 days later, your home will have the certificate of occupancy and you will close on the end 30 year fixed loan.

About 30 days before closing, you will enter into a property management agreement if you chose and they will begin finding a renter for your home.

Do you have property management available?

We are not property managers, nor are we in the business to be. We do know that a property manager is one of the most important things to your investment. We have screened and qualified 3 different property managers that we recommend. I will give you their contact information and let you decide which company is best for you.

All property mangers that I have talked to, charge ½ of first month’s rent and 10% of gross income. If you do 3 or more with them, they will drop their fee to 8% of gross income.

What is the next step, I am ready to move forward?

I will have you fill out a 1003 application to get approved by the lender. I will also send you the construction agreement with the developer. I read through every document to make sure that our negotiations have been included and help every step of the way.