Q4 2011

 

Sandalstone Group, LLC.

Highlights
Overall Market:  

Sandalstone wrapped up 2011 with record rental revenues and zero vacancy.  Leading the way is that the rental markets in East Bay, California have continued to solidify as the Bay Area economy continues its recovery.  The recovery is a bit spotty as clearly the tech sector is enjoying a strong uptick, while the public sector and construction are still lagging.  

Sandalstone also sees a pick up in the Las Vegas market as days to fill new acquired properties continue to be measured in single digits.  Reports are that the economy sees a pick up in new jobs as companies are choosing to expand/relocate to take advantage of a number of factors including really cheap real estate and from an influx of retirees.  Tourism is also rebounding as many of you personally helped during this month's CES.  Unemployment is still higher than the national average and is trending down year to year.  We continue to see opportunities to add to our position in this market as the fundamental demand for housing is intact - we provide a means for shifting from owning to renting.   

On the asset valuation side, there is not much to report as markets continue to move sideways off what we believe is a bottom.  This provides us with an opportunity to continue to purchase assets that make sense using our models - which is to say at prices that provide a favorable return on investment while we wait for a return to “fair” or historical prices.  On the supply side, a number of large - hedge fund sponsored vehicles were introduced in this quarter to take advantage of the opportunity.  Also, there have been overtures by the Obama administration to facilitate the transfer of properties from banks to structures that have the ability to manage them as rental properties.  Both these private and public sector programs we believe will help soak up the inventory of foreclosed properties and lead to the recovery of asset prices.  We remain committed to our OPINION first articulated in 2007 that this uptick won’t happen until 2016 to 2019. We continue to base our projections with this long term view and advise our clients/investors on how to play the cycle with this in mind.   

Insert graphic from Zillow:
Zillow Price Chart

Getting back to matters at hand - we closed, rehabbed and rented two properties in Las Vegas in the Qtr.  The two properties proved the success of the Operations model - which is to say the ability to EXECUTE!  The process of acquiring a property at the right price, knowing what’s needed, being able to fix it and make it aesthetically pleasing and then attracting the right tenants is an integral part of the business.  We have partnered with the right people who make this happen and as a result our confidence in getting this right is high.  Having done this for the past 9 years and now 4 times in Las Vegas market we are able to accurately budget which enables us to have Pro-Forma’s which we can confidently project.

 
Cove Landing          Back Woods

Additional investment into Sandalstone and Clarameda Fund continued as investors enjoy the steady returns offered by the Company.  The Company met all its Investor obligations in 2011 as it has every year of its existence (since 2003).  
In total the Company raised $200,000 in new funds in Q4.   

Clarameda Fund, LLC:

  • Purchased two Properties in Las Vegas, NV
    • Cove Landing:  3BDR, 2BA - $86,900 purchase price, $102,000 all-in rehab price.
      • Rented for $1050/month within two weeks of rehab
    • Back Woods:  4BDR, 2BA - $95,500 purchase price, $110,000 all-in rehab price.  
      • Rented for $1200/month within two weeks of rehab
  • In Contract for one more home with similar Pro-Forma characteristics, expected close February 2012.  
  • East Bay Operations - No vacancies, however, tenant at 75th Avenue reported a theft which resulted in about $600 in damage to the property.  The lesson of not buying in “D” areas continues to be reinforced.
  • Continued record of paying 37 straight months of distributions of the Preferred amount to Partners.
  • Partners will get a “TAX LOSS” as we utilize Section 179 to accelerate depreciation on acquisition expenses and repairs.  For those of you wondering how Mitt Romney only pays 15% while you pay what you pay - this is one of those ways - we get CASH distributions and a Tax LOSS...  
  • Seeking additional Partners - check out the latest Presentation which more fully describes the opportunity!

Investment Opportunities:

  • Instituted a 3% Note program, whereby investors get paid 3% rate of interest annualized and have the ability to ask for their money back at any time.  Sandalstone blocks off credit line to ensure its ability to pay back this note on demand.  
    • THIS OPPTY IS CURRENTLY CLOSED AS WE ATTRACTED OUR LIMIT - contact me if you would like to be placed on the wait list
  • Clarameda Fund is actively seeking new Partners.  This Company is expected to return 10 to 12% to investors (5.5% preferred distribution plus 50% of profits for new investors).  Company has paid 37 straight months of distributions (plus Special Distributions which boost distributions in “profitable” years - and TAX loss in “unprofitable” years).  
    • Raised $200,000 in new money this quarter.  

In Summary, once again I wanted to note what a fantastic time this is to own real estate as an investment.  I want to share the story of my 30 year old client who came to this country when he was 19 years old.  Nothing fancy, he studied to be a civil engineer and works currently in the NY City school system.  That he was able to buy a 3BDR/2BA house in a nice part of Las Vegas - all cash illustrates the generational buying opportunity.  Anyone in an older generation (my father) recalls the pride they felt when they were able to write that last check to their mortgage company and OWN their house after years and years of paying.  Now you have 30 year olds who can write a check up-front and own from day one!  INCREDIBLE!  
If you have read this so far - consider owning real estate either on your own or through:  

  • Sandalstone’s 3% Note program provides a way to earn a typical interest rate on “deposits”
  • Clarameda’s Partnership offers you the chance to take over the mortgage business from banks PLUS make more money when housing markets recover.  

We encourage you to take action and call today to see how you can reasonably grow your investments by taking advantage of this situation.   
Cheers!
Biren
Biren Talati
Managing Member
Sandalstone Group, LLC
650-799-4447
biren@sandalstone.com

VANGUARD REIT ETF:

http://chart.finance.yahoo.com/z?s=VNQ&t=1y&q=&l=&z=l&a=v&p=s&lang=en-US&region=US

CURRENT YIELD:  3.54%  Compare to Clarameda... 5.5% for New Investors and Tax Advantaged!

HEADLINES

WSJ:  Private Equity getting involved
A Market Builds for Single-Family Rentals Private-Equity Fund GI Partners Is Investing in Waypoint, Which Buys Foreclosed Homes and Then Rents Them Out

Las Vegas Sun:  Waypoint entering Las Vegas Market:

 

WSJ:  Discusses some approaches that are beginning to be implemented

3 Ways to Give Housing Market Aid
 

VEGAS INC:  Unemplyment - steady at 12.7%
http://www.vegasinc.com/news/2012/jan/23/las-vegas-unemployment-rose-december-state-reports/