GO ZONE INVESTMENTS
Freedom Growth and Hanover have developed a structure that allows individuals to partner with their IRA to purchase a Go Zone property and still receive the majority of the Go Zone benefits. The investor partners with their IRA and sets up a Special Purpose LLC. They then borrow the remainder of the money from one of Hanover's lenders at very competitive rates. This allows the individual to purchase the property with no money down other than their IRA contribution. Check out the structure here. Not everyone qualifies for this type of investment so please contact us to learn more.
Gulf Opportunity Zone
We have recently formed a strategic alliance with Hanover Companies to execute our Go Zone investments. The managing members of Hanover have been in the business of real estate investing for over 40 years and condominium conversions for thirty-one (31) years, while they are involved in SFR and MFR rentals, they have developed a unique business model with condos that we love.
The senior member of Hanover has agreements to purchase the unsold condo units located in a number of residential condominium communities in the Gulf Opportunity Zones in Mississippi and Louisiana, directly from the Go Zone developers. Each separate unit is re-sold to individual purchasers, many of whom are looking to take advantage of the Go Zone benefits.
After the purchase of a unit is completed, a purchaser may select Hanover to lease the condo for up to 24 months! The rent you receive as part of your lease agreement generally leaves you cash flow positive to cover your mortgage, taxes, HOA and maintenance for the term of the lease. After 24 months, you can decide to continue to hold on to the condo for your own use, lease it out, sell it, or even hire Hanover to continue as the property manager. Of all the Go Zone investments that we’ve reviewed, we feel Hanover offers the best properties, incentives, and least amount of hassles.
Below our partner Hanover Companies answers 10 questions which offers an overview of Go Zone investments available.
1. Tell us a little about you and your company.
My name is Matthew Stearns and I am a Senior Associate for Hanover Companies. The managing members of our company have been in the real estate business for over 40 years as real estate investors, and property managers and in the condominium business for over 24 years.
2. Please tell us about your real estate opportunity.
Our opportunity is ideal for business professionals that want to purchase real estate but don’t want the hassle of every day leasing and operating problems. We offer A+ properties with huge incentives in amazing locations all throughout the country.
For buyers looking for turn-key investments with little hassle and positive cash flow, Hanover is definitely the best option out there. Because of the current market conditions and the low cost of purchasing as opposed to developing, we are currently buying with bulk purchase agreements, directly from developers of new condominium projects. Our purchases are for all cash with no financing or re-sale contingency, giving us tremendous bargaining power and access to some of the best deals around.
We then re-sell the units to individual purchasers that otherwise wouldn’t be able to take advantage of these opportunities. After purchasing a unit or portfolio of units, our buyers are offered the opportunity to take advantage of our “Total Leasing Program”. You can simply lease your unit to our management company for up to 30 months, leaving you cash flow positive throughout the term of lease
3. Where does your opportunity exist?
Our opportunities are in “make sense” markets. The primary market of focus right now is the Gulf Opportunity Zone of Mississippi in an area called the GO Zone. The GO Zone applies to the areas included in The Gulf Opportunity Zone Act of 2005, signed into law by President Bush on December 21, 2005. It contains significant economic incentives to rebuild the Gulf Coast, as well as to attract new investments to the affected areas. This market was rated #1 by realtor.org in 2008 and offers huge tax incentives to investors and home buyers. We have limited inventory and demand is high because of the strong economic conditions of housing and the jobs market in Mississippi.
4. How long have you been offering this real estate opportunity?
As I mentioned earlier, the members of Hanover have been in the business for over 40 years, starting originally in Texas in the late 1960s and then Ohio, New York and Florida beginning in the early 70’s. Currently, we are active in seven states with a special focus on the Gulf Opportunity Zone in Mississippi.
5. Does your opportunity help investors build long term wealth, immediate cash flow or both?
These opportunities build both. Our purchasers can if they choose, participate in our leasing program and realize immediate cash flow from the rent they receive. The rent generally covers their mortgage, taxes, HOA fees and maintenance costs. Of course, this doesn’t take into consideration the tax benefits or future capital appreciation potential that we believe the Gulf Opportunity Zone offers.
6. Is financing available for your opportunity?
Yes. We work with non recourse lending institutions for those investing in their IRA and private, portfolio, and conventional banks for those that want to purchase with cash. Our lenders still can go as high as 90% financing for qualified purchasers.
7. Are there any special tax advantages?
The "Go Zone Act" offers a one time 50% bonus depreciation for in the first year they place the property into service, for qualified Go Zone investors. I would like to be sure that all of your readers realize that they must consult their own tax professionals for specific Go Zone qualifications and tax planning information.
Go Zone tax benefits may be a significant reason for purchase and therefore requires significant investigation and professional advise. Take a $200k offering. You can (assuming you qualify) take your normal depreciation plus an additional 50% of the depreciable asset you purchase, in the first year you place that asset into service. This loss from depreciation may be used to offset other qualifying income.
8. Why is your opportunity ideal for self-directed IRA investing?
This is a fully leased real estate purchase that cash flows. It’s as easy as watching your IRA statements coming to you in the mail. Moreover, non-recourse lenders for IRA’s are just like commercial lenders and they look at the performance of the asset, not the individual. This makes the approval process very easy. Investing in real estate through your IRA is the fastest growing segment of the retirement market.
9. How does your company make money?
Hanover makes money by subletting the unit out to local renters after the investor purchases the property and signs a lease with Hanover. This is possible because when we purchase from the developer we purchase with an all cash agreement that gives us a discount. That discount is passed onto the investor through the "total leasing program", a discount they could not generally obtain on their own. Our profit is made by then subletting the unit. After our lease is up at 30 months, we will be happy to manage the property for the purchaser and take a management fee.
10. What type of results can investors expect with your opportunity?
A lease with Hanover generally pays high enough rent for a positive cash flow…a turn-key solution. As I mentioned previously, it’s a real estate purchase with a lease option offered to the purchaser after closing. Additionally, purchasers can take advantage of the "Go Zone" bonus depreciation and tax credit, if they qualify.
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