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Fund Created to Invest in REO-to-Rental Market

DEC 3, 2012 11:54am ET
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US Residential Asset Fund has been implemented to focus on purchasing distressed properties for the single-family rental market.

The investment strategy for the fund is based on acquiring, renovating, leasing, managing and exiting distressed single-family portfolio properties nationwide with a targeted five- to seven-year hold period.

Tenants will have the option to rent the properties with a “contract for deed,” therefore offering the opportunity of homeownership compared to those who otherwise would be lifelong renters. The tenants will work with the fund’s strategic partner, Sagamore Home Mortgage, to resolve their credit challenges, qualify for a mortgage, and purchase the home they are renting.

The Huntersville, N.C.-based fund expects to invest more than $20 million in the SFR market over the next two years, beginning with purchasing assets in Charlotte, Memphis and Chicago. After this, the fund anticipates buying properties in Atlanta, Indianapolis, Tampa and Orlando.

The fund will offer investors an estimated 12% annual internal rate of return. This IRR will be realized in two ways—through operating capital from the properties net rent revenue and through appreciation on the properties.

Also, the fund plans to provide investors a preferred 8% distribution of operating cash flow to be paid quarterly.

“This is a unique fund. We can do something good for the communities we invest in, enable our tenants to become homeowners, and provide double-digit returns for our investors,” said Christopher Crippen, manager of US Residential Asset Fund. “It’s a win-win-win strategy, which is hard to find in this market.”

Besides Crippen, other founders of the Fund include Dana Bradley, Al Espinoza, Patrick Cipolla and Amos Alexander. Overall, the group has over 75 years combined of real estate experience.

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