MERIDIAN REO-TO-RENTAL PROGRAM

LOCATE

LOCATE

ANALYZE

ANALYZE

RENOVATE

RENOVATE

MANAGE

MANAGE

PERFORM

PERFORM

Meridian acquires the largest portion of our inventory as distressed properties from banks, REO sales and auctions. As part of our turnkey real estate process Meridian renovates and stabilizes every investment property. Each property is acquired by Meridian with an all cash purchase and are in conditions that require renovations averaging $15,000-$20,000 per property. All renovations are managed internally and are typically completed in 2-3 weeks, depending on the scope of work required.

As part of the turnkey process provided to investors, all Meridian investments properties have been fully renovated prior to tenanting and sale.

Meridian’s focus during renovation is to:

  • Update properties to high level to attract tenants and protect against vacancy
  • Harden interior of properties to guard against normal tenant wear and tear
  • Replace or repair major property systems to defend against costly failures

All of Meridian’s renovations are done by licensed, bonded and insured contractors and Meridian stands behind our quality of work with a 90-day, all inclusive home warranty for each property. As part of our turnkey investment, we renovate each property to the highest standards. This includes improving:

  • Cosmetic appearance, inside and out
  • Structural integrity: framing, walls, and roof
  • Systems: electrical, plumbing, and HVAC
  • Painting, flooring, countertops and fixtures
  • Landscaping and outdoor structures

After renovation, we provide clients with a comprehensive due diligence report on all

MERIDIAN BUILD-TO-RENT PROGRAM

LOCATE

LOCATE

ANALYZE

ANALYZE

RENOVATE

RENOVATE

MANAGE

MANAGE

PERFORM

PERFORM

In addition to our existing REO-to-rental properties, Meridian has also currently building brand new construction, turnkey investment properties. Partnering with a home developer in our market, Meridian has recently capitalized on a unique opportunity to purchase a select and limited availability of in-fill lots in the Memphis area. These in-fill lots are found the same high quality locations that our existing build homes are located and create a very attractive investment product.

Meridian is purchasing these lots in subdivision that have already been built out, completed and sold in the last 3-5 years. These investment opportunities was created when, for various reasons, a developer was unable to complete the final lots remaining in a project. Depending on the location, Meridian has able to acquire anywhere from 5-25 lots in a subdivision and complete the project.

These brand new construction homes typically require 90-120 days to be built and then are leased and tenanted by our Meridian Property Management team creating a very attractive investment property for our Meridian clients.

Meridian provides a complete rental property market analysis for real estate investors prior to the acquisition stage which allows for confident investing. Prior to our acquisition, an investment property will be put through a number of physical and financial requirements in order to be included as part of our Meridian inventory.

TARGET RENTAL PROPERTY CHARACTERISTICS.

  • Detached single family home priced between $80K and $180K
  • Minimum monthly rent of $900+
  • Rent ratio of 0.75 to 1.0+
  • Minimum 3 bedroom and 2 bath
  • 1980 year built or newer
  • 1,300+ square footage
  • All brick construction
  • Attractive curb appeal and floor plan
  • Attached two car garage

RENTAL PROPERTY LOCATION

Meridian provides a complete rental property market analysis for real estate investors prior to the acquisition stage which allows for confident investing. Prior to our acquisition, an investment property will be put through a number of physical and financial requirements in order to be included as part of our Meridian inventory. Research focus points included:

  • 30-year median home price
  • Investment appreciation projections
  • Rents relative to home values (the rent ratio)
  • Regional rental history and projected trends
  • Investment real estate market stability
  • Regional unemployment rates and employment trends
  • Economic forecast and major regional employers
  • Home valuations relative to median incomes
  • Property tax and insurance rates
  • Flood zone characteristics
  • Weather and geographic factors

RENTAL PROPERTY CONDITION

Once we complete our due diligence on the real estate location, we select, on average, one out of twenty rentals to acquire and renovate. We validate the rental condition based on a physical inspection. Our due diligence checklist for renovations must meet our investment property quality standards for the following:

  • Cosmetic appearance, inside and out
  • Structural integrity: framing, walls, and roof
  • Systems: electrical, plumbing, and HVAC
  • Painting, flooring, countertops and fixtures
  • Landscaping and outdoor structures

PRO FORMA FINANCIAL PERFORMANCE

We carefully research, analyze, and financially model all of the properties that we sell as part of our investment due diligence process. Our investment analysis includes both cash-on-cash return and 10-year internal rate of return (IRR). All of the elements that are needed to identify a quality, performing property are included in this investment analysis, including purchase price, prevailing interest rate, monthly rent, vacancy and maintenance allowances, property taxes, insurance rates, mortgage payments, appreciation rate, expense inflation rate, closing costs and sales costs. All properties that we sell must meet our strict standards for financial performance before we will consider acquiring and renovating them.

Investment Property Due Diligence

Due Diligence: the process of doing investment research and analysis on a property before purchase.

In most real estate transactions, an investor is required to source and review all property due diligence on their own. For out of state investors, this process is the most important step of the entire transaction. An investor will need to know specifics about the zip code, market trends, property conditions, sales and rental comparables and much more.

As part of our commitment to a client-focused culture, Meridian provides a comprehensive investment property due diligence package on behalf of our clients.

Points of research include:

  • Investment property location details
  • Investment property conditions, inspections and clearances
  • Current tenant lease information
  • Pro-forma financial performance of investment

Our belief is that when done correctly and completely, the proper due diligence will allow an investor to purchase with confidence and provide the information needed to proactively manage the investor’s returns.

Investment Property Service Providers

In addition to the real estate due diligence, there are a number of service providers that we evaluate as part of the due diligence process for acquiring a strong investment property. These providers include competitive lenders, title and escrow companies, construction contractors, insurance brokers, property inspectors and appraisers. We conduct investment due diligence on all of our recommend providers on the basis of their professionalism, competitive rates, quality of service and communication.

Investment due diligence is critical to the success of any investment research. When investment analysis is done properly, it can be a long and potentially tedious process that involves knowledge and attention to detail.

Meridian strives to provide quality, detailed due diligence analysis for its investors to create stable, cash flowing properties that make strong long term investments for clients.

There are four common methods of acquisiton that investors can use during a closing with Meridian

ALL CASH PURCHASE

ALL CASH PURCHASE

Requiring a total investment ranging from $80,000 to $180,000, many Meridian investors use available cash to acquire investment properties free and clear of financing. These are much faster and easier transactions and have the lowest overall volatility to the investor’s return.

RENTAL PROPERTY FINANCING

RENTAL PROPERTY FINANCING

Investors looking to take of advantage of leverage and desire to use rental property financing, Meridian has strong banking relationships with traditional, Fannie-Mae financing institutions who will provide individual, recourse loans requiring 20% – 25% down (75% – 80% LTV) with great 15 or 30 year fixed rate mortgages. Including lender closings costs this will amount to a total investment costs per property of $30,000 to $45,000. Under Fannie-Mae guidelines an investor can obtain up to ten total SFR loans including their primary residence.

INVESTMENT PORTFOLIO FINANCING

INVESTMENT PORTFOLIO FINANCING

Meridian can also assist in the introduction and coordinator of SFR portfolio loans starting at loan amounts of $500K and up. These institutions can lend up 65% – 70% LTV on a portfolio loan and also offer non-recourse options.

SELF-DIRECTED IRA

SELF-DIRECTED IRA

Using self-directed facilitators, Meridian has also helped investors deploy capital from IRA accounts to acquire SFR real estate investments.

Meridian Processing

Meridian helps investors with our in-house team that is involved daily in walking the investor through the entire escrow closing process. Meridian helps:

  • Draft and complete sales contracts, addendum and other required purchase documents
  • Proactively contacts client through escrow closing
  • Assists in setting up property appraisals, inspections and clearances
  • Coordinates with lender, title and investor all document needs
  • Creates and sends investor property Due Diligence package
  • Assist investor acquiring insurance quotes for closing
  • Ensures closing with Client, Lender and Closing Attorney

A completed and tenanted Meridian investment property can close escrow within 10 – 45 days depending on the type of acquisition. Most traditional loans can close within 30 days.

Meridian Property Management, LLC (“MPM”) is a subsidiary of Meridian Pacific Properties, Inc. and offers an exclusive, high-end rental property management solution for investors and tenants in Memphis, TN. MPM specialize in leasing and managing premium investment properties located in established, family-friendly neighborhoods primarily in the Bartlett, Cordova, Germantown, and SE areas of Memphis, TN. Meridian offers both residential and commercial property management services.

Formed in the spring of 2012, MPM was developed specifically for RE investors by applying investor business principles to property management to maximize ROI and control vacancy and maintenance experiences. Currently MPM manages over 400 SFR investment properties in Memphis, TN as well as a 128-unit, 10-story highrise apartment building in the downtown medical district of Memphis.

Through this brand, Meridian has created a customer service based offering to ensure long term relationships and managed returns for our valued investors. The Meridian family of companies is built on a culture of continuous improvement, personal and company responsibility, integrity and excellent customer service.

Meridian Property Management duties include:

  • Qualifying, screening and tenanting property
  • Maintaining good relations with tenants and owner
  • Digital and hard marketing of all properties and managing leasing teams
  • Maintaining the property and minimizing maintenance expenses
  • Collecting and dispersing all rents
  • Creating financial reports and maintaining owner rental payments

The property manager carries out the goals of the property owners. In the process, the property manager is responsible for maintaining the owner’s investment and making sure the property earns income. These goals can be accomplished in several ways. The physical property must be maintained in good condition. Suitable tenants must be found, rent must be collected, and employees must be hired and supervised. The property manager is responsible for budgeting and controlling expenses, keeping proper accounts, and making periodic reports to the owner. In all of these activities, the manager’s primary goal is to operate and maintain the physical property in such a way as to preserve and enhance the owner’s capital investment.

Rental Management Services

Meridian believes that to be a successful property management company there are three key areas in rental management services where we must excel. These focuses for our client service model are:

Control Vacancy and Maintenance: These two variables have the greatest impact on an investor return, thus in order to minimize these risks MPM employs the following strategies:

  • Screen tenants rigorously with financials requirements based on debt-to-income ratio, not simple rent to salary ratio as well as secure the longest leases possible for our investors
  • Manage inventory of only select , high quality properties in desirable locations
  • Track performance on all MPM properties– any vacancies and repairs are followed weekly and transparent to entire Meridian company
  • Perform constant market analysis – consistent review and feedback on what properties/features/zip codes provide the highest ROI to our investors
  • Conduct preventative maintenance and scheduled physical inspections (includes tenant upkeep feedback, AC filter replacement, smoke detectors check, tree trimming and other preventative maintenance)

Excellent Communication: MPM communicates early and often to our investors on any and all property management issues to allow for proactive and interactive resolutions.

Provide Clear Owner Statements – MPM provides clear monthly statements and online portal solutions for each investment property in the MPM portfolio.

Meridian believes there is a clear real estate investment strategy required to generate maximum and stable returns from cash flow investment property. Each Meridian property is specifically chosen to help leverage different aspects of an investment portfolio in addition to providing consistent, positive cash flow income.

Meridian works with their investors to select investment property based on this portfolio outline, and then will use it to build out their real estate investment strategy for future property investment purchases.

Like more traditional asset classes, single family real estate has trends, characteristics, and subtle nuances that influence each individual investment property.

Meridian believes there are four distinct single family real estate categories for the greater Memphis metro area, each of which helps create a stable, properly leveraged real estate portfolio: Cash Flow, Equity, Anchor, and Quality Plays.

Combining these four strategies allows an investor to capitalize on each market segment’s benefits while leveraging the portfolio’s risks associated with vacancy, maintenance, market fluctuations, and liquidity.

CASH FLOW

CASH FLOW

Cash Flow properties are found in the lower price points ($90K-115K). These properties are often the strongest cash flow portfolio opportunities. They present the highest rent ratios within the Meridian price point. These are great lower priced/higher returning properties to balance higher price point properties (which will likely have lower cash on cash returns).

ANCHOR

ANCHOR

Anchor plays represent Meridian’s “bread and butter” investment property. These properties are often a great entry point for an investment portfolio. Anchor properties are typically newer vintage, well-constructed, median priced properties ($115K-$140K). These assets are positioned in more stable neighborhoods with solid cash on cash returns and, if needed, ease of liquidity. This property type helps anchor the portfolio’s risk profile.

EQUITY

EQUITY

These opportunities are in the upper range of Meridian’s “Sweet Spot” ($150K-$180K). These neighborhoods have the strongest future growth and appreciation potential. In contrast to cash flow plays, equity plays in the upper end of the “Sweet Spot” have lower ratios of rents related to home pricing. While these opportunities may contribute less to a portfolio’s monthly cash flow, they compensate for those returns with strong future equity potential.

QUALITY

QUALITY

This strategy is primarily location based. Meridian has done extensive research on Memphis submarkets and identififed high quality, well-established neighborhoods with unique fundamentals. Properties in these neighborhoods are often older vintage, but historically hold value. Quality plays are always located in well established neighborhoods with the strongest tenant demographics, the best school districts, and most stable neighborhood markets.

The combination of each of these four strategies will allow an investor to create a well composed portfolio while being properly leveraged across the risks associated real estate investing. These defined strategies can help first time investors decide the most comfortable entry point based on their investment goals and also guide seasoned investors to continue developing a well balanced portfolio.

Investment Disposition

At the point in time that an investor wants or needs to sell an investment property there are four options available. The options largely vary on the investor’s goals and needs for both speed of sale and ability to capture the highest current market value.

  • Sell to Primary Home Owner: Investor would vacate the home, update property to “retail” condition and list with a local SFR RE agent. This option will likely have the longest days on market, especially given the time of year that the home is being listed, however this option should command the highest sales value.
  • Sell to an Investor: Investor would retain the tenant and sell the cash flow to another investor. This option would not force vacancy and could generate a higher qualified buyer however the investor would need to list at or above the current going CAP rates to ensure the home moved quickly.
  • Sell to Tenant: The investor can negotiate a lease option to purchase with the tenant. These are typically 2 year program, where the tenant is restoring credit and has the lowest odds of completion.
  • Sell to Meridian: In unique circumstances where an investor needs a quick, all cash close with the highest certainty of close, Meridian can also be an option as a buyer.

BUILDER & DEVELOPER

Meridian Premier Homes (MPH) and Meridian Development Group (MDG) are builders and developers of new construction properties of both build-to-rent investments and primary homeowner retail sales. Meridian also has an full service renovation team for residential property improvements.