The "Priceless" ROI of Socially Responsible Investing

Our program also provides a very special return-on-investment. When you invest with EquityBuild, you not only build your own financial future, you help deserving low-income families build theirs. Investors with a healthy and responsible credit history (a rating of approximately 690 or better) can leverage that good credit to provide truly high quality homes to families who most need and deserve them. We believe the return on that kind of investment is literally "priceless."

Despite requiring, in most cases, little or none of your own money, you can bring new homes into the HUD rental subsidy program. EquityBuild then manages these homes for a standard 10 percent of the rental income. Rents are paid by the housing agency, deposited electronically directly into your bank account.

These homes benefit families, primarily working mothers, who are overcoming temporary adversities created by Hurricane Katrina and other factors. These prequalified families have been called "dream tenants" as well as great neighbors. Moreover, they are truly grateful for the beautiful, well-built and maintained homes that you provide using only your credit.

Because this investment complies with legislative housing goals, it also provides what many experts consider to be the most significant tax shelter available today.

Keep Your Money in the Bank

EquityBuild arranges all the financing details so you can take ownership and begin earning rental incomes without using your own cash. Besides a few incidental costs like postage and a credit check, the only out-of-pocket expense cash required is a small fund for unforeseen emergencies. This fund is placed in your own interest-earning escrow account for the first few years of your investment. When the emergency fund is funded from the rental income flow, your original funds with interest are paid back to the investor. In many cases, this escrow account can also be financed.

EquityBuild manages the properties completely and collects your rents directly from a HUD housing agency, so you can relax while your portfolio increases in value. Our fee for property management is the standard 10 percent of rental income but you are welcome at any time to find another service or manage them yourself. You can, of course, check your accounts any time online.

How We Eliminate the Need for Down Payments

To recap, we have spent a total of $50,000 ($35,000 to buy plus $15,000 to renovate) for a house that we could sell for $80,000. We do not, however, sell the house for $80,000. We sell it instead to an investment client, taking only a relatively small markup for our own operating expenses. In this case, let's assume that EquityBuild sells a house that costs us $50,000 to you for $55,000. We also arrange financing for a mortgage loan of $64,000.

The $64,000 figure represents, in fact, 80 percent of the assessed value of the house. Banks normally lend no more than 80 percent of a house's assessed value. This is why, traditionally, home buyers need to "put down" 20 percent of the value of a house themselves.

In our case, however, you are buying the home for less than 80 percent of its market or assessed value. You can therefore borrow the entire price of the house with money left over to cover loan closing fees and immediately pay down the mortgage. As a result, you have significant equity in your property the minute you buy it. In this example, assuming $2,000 in closing fees, you already have earned $33,000 in equity -- without ever having spent a dollar of your own.

With only your good credit, you can buy and own a portfolio of valuable income-producing properties. EquityBuild structures this financing in two stages so that all costs, including rehabilitation expenses and loan closing fees, can be "rolled up" into the final loan. The bottom line is that you can bring houses into the federal Section 8 rental subsidy program where they are needed without ever spending a cent of your own money. In return, government rental subsidies are used to pay off your mortgages.

What's the Catch?

There is no catch. EquityBuild does, however, ask our investors to put $2,000 per house into an interest-earning escrow account over which they exercise complete control. These escrow accounts are established to minimize the chance that, in the unlikely case of some unforeseen emergency, investors would have to come up with cash.

The emergency funds can only be used in the case of unforeseen emergencies with the explicit permission of the owners. All the interest generated by the accounts accrues to the owners and, under normal circumstances, the $2000 and interest is returned to clients within three to four years.

In most situations, this emergency fund is never used. In the rare instances that it is required, funds are usually replenished through insurance coverage as EquityBuild insures properties for every insurable eventuality -- including interruption of rent due to natural disasters. In approximately three to four years, the fund is replaced using 10 percent of the rental income flow. The account is then liquidated and paid directly to the owner along with accrued interest.

Such unforeseen emergencies might, in fact, occur. There are some things even EquityBuild cannot control. Let's take the extremely unlikely scenario, given our exhaustive inspection and maintenance regimen, of a deeply hidden defect such as a termite infestation. It might be necessary to draw on the escrow account to fund repairs. Similarly, an unexpected vacancy early in the occupancy of a property might require that the escrow be utilized.

Note: In some circumstances, EquityBuild can help fund all but the first of these escrow accounts with the excess equity we create through favorable mortgage loans. Excess equity from the first purchase may be used to created a temporary escrow for the second. The excess equity in the second can be used to create an escrow fund for the third, etcetera. Those interested in this program should contact EquityBuild Investor Relations directly for more information.

A True Turnkey Path to Real Wealth

This is a true turnkey financial instrument. EquityBuild takes care of every aspect of this investment from finding and rehabbing the homes to arranging financing and overseeing rent collection.

No matter where you are, with a Web-enabled phone or Internet browser, you can keep track of your investments online. All you have to do to start building equity today is call EquityBuild and agree to watch your wealth grow on a daily basis -- knowing that the people who need your help the most are also benefiting from your investment. We at EquityBuild honestly do not know of another investment instrument that provides so many benefits for both the investors and our society.

If You Change Your Mind

Annually, our financial analysts perform an EquityBuild Value Audit to make sure every component of your portfolio is on track. If we don't like any single property, we anticipate that we can arrange to sell it for you and reinvest in a better property. If, on the other hand, a property has increased dramatically in value for some reason, we may recommend that you take the profit and reinvest in another home.

If you do change your mind about the investment for any reason, you can sell any or all of your properties. You are not locked into anything with EquityBuild. You can liquidate your assets and get out of the program at any time you choose. We can arrange the sale or you can handle it through another broker. The choice is entirely yours.

Moreover, we anticipate that you will probably make an instant profit doing so, though not as much as you will if you stay in the program. Because we only provide our clients with houses well under assessed market value, we have not yet encountered a situation where we have not been able to sell a client's property for more than their mortgage. Though the very best use of your credit will come from holding your portfolio to maturity, EquityBuild never limits your financial options.

How Do We Do It?

Because EquityBuild creates housing in markets that badly need it, U.S. and state government programs provide us, as well as our clients, with unparalleled investment incentives and assistance.

Combined with our understanding of regional real estate markets, we are able to assemble the interlocking parts to this wealth creation machine in a way that no one else has. One of the most significant benefits of this program is the tax shelter aspect of the portfolio.

The (Turn)Keys to Wealth and Security

EquityBuild Inc., provides a remarkable real estate-based investment that requires only your good credit. With little or no cash required, investors receive significant immediate equity and a tax-free positive cash flow from rental incomes that can be used for rapid mortgage paydown. Additionally, tax incentives give most investors an immediate "pay raise" by reducing or sometimes eliminating personal federal income taxes -- all while providing an important and valuable service to the underprivileged community.

EquityBuild does this in cooperation with various government programs designed to incentivize private individuals (like you) and businesses to invest in single and multifamily real estate to fulfill Congress' goal of ensuring that a ready supply of housing is available to those who need it. This fully leveraged, no-money-down instrument provides, we believe, the highest return with the lowest risk of any investment on the market today.

What We Do (Step-By-Step)

While the EquityBuild investment is actually very simple and straightforward, we recognize that those who are not familiar with real estate, government housing programs and tax laws may find the big picture confusing. Please, therefore, follow along as we explain exactly how this exceptional investment opportunity can be used to make you richer in spirit as well as your net worth.

Phase 1. Rescuing (Recycling) Distressed Houses

EquityBuild identifies and buys severely distressed houses. Because of our network of real estate and construction professionals in certain key markets, we know about the homes in good neighborhoods that have been neglected or abused.

These houses are unattractive to most buyers because they require considerable repair and renovation. Few owners are in a position to perform these functions due to the inconvenience and expense of securing contractors with sufficient experience and expertise to do the work correctly.

With our decades of experience identifying and rehabilitating "fixer-uppers," we can quickly calculate exactly how much it will cost to perform the renovations necessary to bring the house up to perfect condition. Moreover, we have millions of dollars at our disposal to acquire these neglected houses and potential homes. When sellers decide to rid themselves of the burden of a badly run-down house at a price that makes sense to us, we buy.

Phase 2. Luxury Renovations at Wholesale Prices

EquityBuild arranges financing in two stages because banks do not provide the funds for future restoration in mortgage loans. We first secure a short term loan to finance restoration so that the entire cost of acquisition can be included in the final mortgage loan. The short term lender is provided a detailed "scope of work" that is verified by a third party contract inspector or a principle of the lender.

At closing, the lender escrows the rehab funds and our team of skilled craftspeople jumps into action. Funds are released only after specific work is performed and two sets of inspectors have verified that it meets the standards set forth in the "scope of work." One inspection is performed by the lender and the other by EquityBuild. Because our inspectors will also be responsible for maintaining the property in the years to come, our inspections are more thorough and our standards more rigorous.

Within weeks, we take neighborhood embarrassments and bring them up to and beyond community standards. EquityBuild transforms rundown eyesore into attractive homes. These renovated or recycled homes meet the highest standards demanded by the administrators of Federal Section 8 Rent Subsidy programs.

Though we pay less to perform specific work than a typical homeowners would pay, we actually spend significantly more than most home renovators. The reason is that we have learned through long experience that rehabilitation is the last place to cut corners. EquityBuild never masks problems with temporary or cosmetic repairs. Our investors benefit because we eliminate or minimize future repair and maintenance expenses by doing the job right the first time. Our tenants appreciate living in a home that is in perfect shape because it is rehabbed for the long run.

Phase 3. Financing the Entire Cost of Acquisition

When the EquityBuild transformation is completed, we have still invested far less than the house is worth on the market. This is the secret to our portfolio program. We can sell these homes at a deep discount to our investors. As a result, we can arrange financing that more than covers the entire cost of buying and rehabilitating houses as well as loan closing fees.

Traditionally, banks will lend between 75 and 80 percent of a house's assessed value. This is why home buyers usually need to come up with approximately 20 percent of the value of houses themselves. They would normally also have to find the money to pay the loan closing fees.

With EquityBuild, you don't pay the market or assessed value of a house. You buy homes well below their market or assessed value. We could turn around and sell these homes for a profit but our purpose is to bring needed homes to HUD Rental Subsidy program and build equity for our investors. This means that your mortgage loans cover the entire cost of purchase, rehabilitation and loan closing -- with money left over to pay down the mortgage.

The minute you buy a home from EquityBuild, you have already vested significant equity in your property. This, however, is only the beginning of our turnkey service.

Phase 4. Finding the Very Best Tenants

EquityBuild tenants go through two rigorous pre-qualifications processes. The first is performed by the Housing Authority itself. The second is done by the EquityBuild Property Management team.

Though the Section 8 voucher program is expanding and is expected to do so in the future, there are far more applicants than their are slots in the program. Housing agency personnel go to tremendous lengths to enroll only the most responsible working families -- families who truly want to succeed. Administrators of this HUD program can and do invest the time and resources to thoroughly check the character of their recipients. Typical property management services are simply not capable of performing this kind of pre-qualifying, for both legal as well as economic reasons.

Due to EquityBuild's reputation and our relationship with administrators of the HUD Section 8 Rent Voucher Program, there is a long waiting list of these exemplary qualified renters who want to move into our beautiful freshly renovated homes. Demand for the high-quality housing that EquityBuild provides is much greater than supply, though we are working hard to increase that supply.

From these applicants, the EquityBuild Property Management team chooses tenants after a second Level of qualification and interviews. These team members are particularly well-situated to help identify program participants who can best use the rent subsidy program because many grew up in or live in the same neighborhoods as the applicants. They are approving not just EquityBuild renters but neighbors.

The recipient families they choose, frequently a working mother and her children, are superb tenants. Many have expressed their appreciation for what our investors and the HUD rental subsidy program are doing to help them help themselves. The EquityBuild Property Management Team members know that protecting the value of the homes, the assets of our investors, encourages others to invest in our program. This increases the number of high-quality homes available to recipients of the rent subsidy program.

Phase 5. Property Management

Because your rents are paid directly by the Housing Authority, we do not engage in one of the primary and time-consuming functions of most property management firms -- collecting delinquent rents. In return for the assistance voucher recipients receive, they are required to take responsibility for the homes they live in. Administrators insist that tenant care for their homes and monitor compliance. Though violations are comparatively rare, those who do not live up to the terms of the program risk having their participation revoked.

In turn, the EquityBuild Property Management team is freed to work proactively with our tenants to solve problems before they become serious or costly. Our property managers have the time to inspect homes on a monthly basis and build positive relations with the renters. We encourage our tenants to report any issues with their homes so we can fix them before they become serious. Our office is open 24 hours a day to our tenants and they appreciate it.

This allows us to work proactively to prevent problems such as mold or infestations that might reduce the value of your investment. We keep your investment, and our tenants' homes, in perfect condition. Both tenants and investors want it that way.

Our tenants are taking an important step up the economic ladder that leads to financial success and independence, and you can give others the same helping hand. In the process, of course, you will enjoy the benefits of one of the most profitable and rewarding investment strategies available. How Do I Participate? All you need to take advantage of this unique program is your good credit. A credit rating of 690 or better is usually required. For those who aren't sure of their credit rating, we have provided a link for a free credit report on our tools page. There may be some minor costs such as credit verification, postage and, if your bank does not provide such services, notary fees. There is no need, though, for you to spend your own money on down payments and mortgage payments. As explained earlier, we also ask that you establish a $2,000 escrow account with all interest accruing to you -- just in case of unexpected emergencies. In most cases, this fund will be returned to you after only a few years. Under certain condition, this escrow fund may be financed.

The EquityBuild Instrument

Some EquityBuild investors own more than a hundred income-producing rental units, managed completely by EquityBuild. A typical investor, however, begins with a smaller portfolio ranging from four to ten homes. A ten-unit portfolio should, we believe, deliver a net increase in real wealth of $500,000 to $1,000,000 in approximately 14 years.

EquityBuild recommends that investors begin by utilizing their 100 percent federally guaranteed home loans. Currently, there are four available, per person, through the Federal National Mortgage Association (Fannie Mae.) For a married couple, this totals eight. If they already have a home which is mortgaged, seven more federally guaranteed home loans would be available to form the core of an investment portfolio. Note: This federal loan guarantee program is available only to legal residents of the United States. Additional mortgage loans or loans to non-residents typically cost about one half point more and add approximately two years to the EquityBuild mortgage paydown process; totaling about 16 years.

About the HUD Section 8 Rent Voucher Program

The extremely popular HUD Section 8 Rent Voucher Program came into being as a result of the notable failure of government housing projects. After years of high-profile but unsuccessful experiments in public housing, the term "the projects" had come to signify high crime rates and welfare abuse. Certainly, many of "the projects" were unsuitable places to raise families despite the best intentions of subsidy recipients to escape their situation and give better lives to their children.

Policy makers realized that another solution was badly needed. They found it in partnerships with private sector providers of housing. Rather than managing government housing projects, housing authorities are actually saving taxpayers money by placing voucher recipients in top-quality but affordable housing in real neighborhoods.

The working families who receive housing vouchers live and raise their children in good neighborhoods, completely escaping the stigmatization of the old projects. Unless recipients choose to share that information, no one else knows they receive the vouchers.

Because EquityBuild provide these deserving recipients with the highest quality homes, both they and the housing authorities want to work with us. We place tenants in our properties faster than the general market and they stay longer -- because they like where they live. Our tenants rent, on average, about five years; as opposed to an average stay closer to three years for the general rental market. This is important because the Housing Authority automatically increases the rental income as long as a tenant is in your property; and they do it at a higher rate than the general market.

When a tenant does leave, we typically find another in less than 30 days, as opposed to the 60 to 90 day wait for the rest of the rental market. Currently, there are approximately 10 voucher applicants for every home we bring to the market. Hopefully, with your participation, we can provide high quality homes for some of the nine we cannot currently serve.

A Single Property Example

To help you understand exactly how our investment opportunity works, let's walk through a typical income property acquisition. We'll use typical prices for this example, though actual properties in a portfolio will vary.

The Leverage Effect

The ability to finance 100 percent of an investment deserves more explanation. If you are familiar with banking practices, this is probably old hat. For those who are not, however, let's walk through a hypothetical example with an assessed/market value of $100,000.

A traditional source will only loan 75 to 80 percent of the value of a property that is completely ready for occupancy. Let's say that you've found a property with a market value of $100,000. In most cases, if you go to the bank to borrow money to buy the property, the bank would loan you 75 to 80 percent of its value. This assures the bank that, in the case of a loan default, it will still be able to sell the house for a profit. It also, however, means that the purchaser of the house has to come up with a 20 to 25 percent down payment plus loan closing costs. In our hypothetical case of the conveniently priced $100 thousand house, that would mean that you would have to come up with $20,000 to $25,000 of their own money.

In our case, though, we get around that by finding an underpriced house in need of major repairs. For the sake of example, assume that we paid $45,000 for the house and did $15,000 of repairs to get it ready. We add $5,000 to cover our overhead and sell it to you for a total of $65,000. We then arrange to to refinance the newly renovated house within 60 days for as much as $80,000.

In this very typical case, you will have purchased a house without spending any of your own money. You would have $35,000 in equity immediately. Buy then such houses and your equity will have already increased by $350,000.

Location, Location, Location

EquityBuild engages only in traditional value-based real estate investment. The key to this strategy is operating exclusively in locations with strong rental markets and undervalued housing. These areas have one thing in common. It costs less to buy a home than it costs to rent.

Where this is a stable economic condition, we are able to provide portfolios of rental properties that generate significantly more cash than they cost to buy and maintain. It's as simply as that. We call these locations "anomaly markets."

This is not some new investment strategy. While others were chasing get-rich-quick schemes based on "flipping" properties, we stuck to a conservative cashflow based investment strategy in stable undervalued housing markets. Ironically, the flippers are now in trouble but our investors, who have a longer more realistic view of markets, have made spectacular profits year after year -- before during and after the real estate bubble. This is the true secret to real estate success, though it is not a secret.

Corrective Transitioning

In anomaly markets with higher rental than purchase costs, there is a built-in catalyst for rent and housing price increases. This is due simply to the relative attractiveness of home ownership. As renters transition to become home owners, home prices increase. These are not the irrational short term increases caused by speculation. This is moderate but stable growth in housing prices based on economic fundamentals.

It is not necessary for housing prices to increase for the EquityBuild Portfolio to work, though it does provide an additional benefit for our investors. The critical point is that an increase in home ownership reduces the rental market, which tends to increase rents. EquityBuild only operates in area where we believe rents are bound to trend upward for the foreseeable future.

Positive Cash Flow from the Beginning

These conditions have created superb rental market conditions for investors. EquityBuild homes typically produce cash flow at about the sixtieth day from first closing. For the typical investor, there will have been no cash payments. The vast majority of investors are receiving rents that exceed the cost of their mortgages by the time the first mortgage payment is due.

The "Instant Pay Raise" of the Depreciation Tax Shelter

Standard straight-line depreciation of rental properties typically shelters 100 percent of rental profits. At the time of sale or transfer, the "paper losses" of depreciation write-offs can be used to reduce taxable income from all sources. They can even be used to refund taxes paid in the prior two years. For people with incomes less than $100,000 per year, a maximum $25,000 reduction in taxable income is available every year. A portfolio of five or more EquityBuild properties will usually provide the maximum $25,000 immediate reduction in taxable income for up to 27 years. A lesser immediate benefit accrues to individuals with incomes more than $100,000 but less than $150,000 per year.

This depreciation tax benefit requires no cash outlay and can be used to significantly reduce income taxes for many years to come. One EquityBuild investor put it this way, "The government is paying me to get rich."

The GO Zone Depreciation Incentive

Until the end of 2008, there are even more depreciation write-offs for our buyers. Special post-Katrina depreciation allowances, commonly known as the GO Zone Depreciation allowance, give you the right to depreciate half the cost of acquisition in the first year of a housing purchase.

This remarkable tax advantage allows people whose income is less than $100,000 a year to reduce their taxable non-passive income by $25,000 in the year of the purchase. At the time of sale or transfer, remaining depreciation write-offs can be used to get much or all of their income taxes in the past five years refunded. It can also be carried forward to shelter future income.

For those whose income is greater than $150,000 a year, these depreciation tax credits apply when the houses are sold. Half the depreciation allowance accrues in the year of the purchase.

Even without the GO Zone incentives, however, depreciation write-offs completely protect your rental profits from taxes. Under normal circumstances, this will allow you to pay off 30-year mortgages in less than half their term.

How Rental Incomes Are Protected from Income Taxes

U.S. tax law mandates that owners of rental properties use straight-line depreciation over 27.5 years. Additional depreciation write-offs can be taken for consumer durables, such as major appliances, in an even shorter time. These depreciation write-offs can be used not only to shelter 100 percent of your rental profits, they can be used for additional income as well. For most people, the use of these depreciation write-offs result in an instant "pay raise" because you pay less taxes on your income from other sources.

The Only "Free" Tax Shelter

Real estate is a unique form of property and is therefore subject to unique tax laws. While land does not lose its value over time, a house "depreciates." That means there is a cost associated with real estate even if you are not putting out actual cash. This means that you, as a real estate investor, are allowed to count depreciation the same as any other business cost, even if you are not actually spending money.

Depreciation deductions provide exceptional tax benefits. Those who understand tax credits may want to skip forward but we will cover the basics of depreciation tax deductions here.

The Basics of Depreciation Tax Deductions

Congress has eliminated nearly all tax shelters. Of the few remaining, many financial planners consider real estate depreciation the most valuable. The IRS requires that real estate investors depreciate their residential income property over 27.5 years on a straight-line basis. Land values, of course, do not depreciate but they account for a relatively small percentage of housing prices in the areas where EquityBuild operates.

Unlike other deductions such as mortgage interest, property taxes, utilities, insurance and repairs, real estate depreciation does not require a cash outlay. As a result, a profitable rental property may appear, on paper and in the eyes of the IRS, as a loss. In those cases, the income from the property is completely sheltered.

In most cases, additional paper losses can then be passed through to reduce your taxable income from other sources. For most individuals, the maximum deduction per year is $25,000. Four or five rental properties would typically provide that maximum deduction every year for up to 27 years.

For investors with incomes less than $150 thousand a year, depreciation paper losses will reduce all taxes paid on income according to your tax bracket. If you are in the 30 percent tax bracket with income less than $100,000 per year, a $25,000 tax deduction results in a tax savings of $7,500 -- without having spent a cent to get it. (25,000 x 30 percent = $7,500.00) If the reduction in your income results in moving you to a lower tax bracket, your taxes savings will be greater yet.

Even better, unused depreciation write-offs can be used to lower taxable income for the previous two years upon sale or transfer without limitation. They can also be carried forward to lower your income taxes in the future. The special Go Zone depreciation allowance, however, applies to the previous five years' income from all sources without limitation for individuals at all income levels. This means that 10 homes with accrued depreciation expenses of $25,000 can be used to lower taxable income by $250,000 -- even five years prior to their sale.

These tax savings do not compare to the levels of wealth created over the life of the mortgage paydown but it is an added benefit to the program. In essence, the U.S. government pays you to make money by using your credit to provide housing to those who receive federal rent subsidies.