In recent years, the city of Philadelphia has experienced a revival of sorts. With it's historic attractions, fine dining and exceptional nightlife, the rejuvenation of this city has been astounding. Along with major city improvements, the Philadelphia Real Estate market has flourished. There has been an excellent trend of appreciation on all properties located within the city.

The city of Philadelphia is located in a prime location for consistent growth. This city is positioned between the financial capital of the world, New York City, and the nation's capitol, Washington D.C. While real estate prices in those markets are

astronomical, Philadelphia Real Estate is still very affordable.

Philadelphia Real estate overview

From an investment perspective, local single and multifamily properties will remain attractive for their relatively predictable cash flow growth and the difficulties likely to be incurred in new construction. Property prices may grow only modestly in the months ahead. Still, the absence of rent controls in Pennsylvania counties will continue to draw buyers eager to add value

by raising rents to market rates.

With current conditions of foreclosure growth and existing inventory of properties, buying today in Philadelphia’s areas such as Northeast and Central City looks as attractive investment with low risk level.

Prime areas of interest located in the following zip codes: 19120, 19124, 19149, 19111, 19152, 19103

Investment goals

• Taking conservative approach in cash flow calculation and by setting price frame for this financial structure we should be able to get 14-19% “cash-on-cash” return.

• Upon sell of the property the goal is to get 30-35%min. profit for cash initially invested.

• Positive cash flow and working capital funds should be reinvested into the future multi-family properties

• All calculations in this presentation are based on example of 1-family rental property. Cash flow and prices for multi-family properties should be calculated based on the same logistics.

• Very important core idea :By purchasing 2-5 properties monthly it is possible to create cash substantial monthly cash flow and have inventory of the properties for sale and reinvesting.

Strategy

Best strategy is to:• Purchase property for cash for 60-70% of its value• Fix it for potential tenants and by doing it gain equity

(approximately 20-30%)on the property.• Get tenants start paying rent.• Refinance the property for 70-80% LTV. Tenant pays

mortgage including principal and generates cash flow for the owners.

• Owners getting initial investment back, plus cash out from refinancing while still receiving positive cash flow.

• Move to next property.Note: In 1996-2000 market price went down by approx. 20%.So, buying it at 60-70% of

the value would minimize the risk of investment. (See slides below)

Cash purchase scenario

Yearly figures Purchase price 47,200 1-st year 2-nd year Gross Potential Rent $9,000 750 $9,300 775 Gross Potential Income $9,000 $9,300

Less: Vacancy/Deductions $1,350 15% $465 5% Effective Gross Income $7,650 $8,835 Less: Expences $0 $0 Net Operating Income $7,650 $8,835 Reserves $0 $0 Net Cash Flow Before Debt Service $7,650 $8,835 Debt Service $0 $0

Expences Cleaning and maintenance, lawn care $0 $0 Repairs (annual turnover rate 15%) $5,000 $750 Painting and decorating Misc. (office+ Admin) $0 $0 Legal Expence $0 $0 Taxes $700 $700 Insurance $700 $700 Management Fee (% of gross income) $720 $800 Electricity Water and Sewer Heat/hot water Other expences (garbage, etc.) $150 licences $150 Total Expences $7,270 $3,100 Net Operating Income $380 $5,735 Return on investment 1% 12%

$47,200.00

Partners invest -

$33,040.00 (70%)

Working partner invest -$14,160.00

(30%)

Profit from rent is split

50/50%

($5,735.00)

Working partner receive $2,867.00

Partners receive $2,868.00

Tenant pays monthly rent

$750.00

Cash investment scenario (2-nd year of rental excluding $5000.00 initial repair)

Price: $47,200 Downpayment 10% 20% 25%

Downpayment $4,720 $9,440 $11,800 Closing cost (5%) $2,360 $2,360 $2,360

Repairs $5,000 $5,000 $5,000 House Insurance $700.00 $700.00 $700.00

Total at closing $12,780 $17,500 $19,860 Monthly expenses

Mortgage payment $276 $245 $230 PMI $140 $0 $0

Taxes $54.17 $54.17 $54.17 Insurance $58.33 $58.33 $58.33

Utilities, sewer, garbage $13 $13 $13 Management fee $60.00 $60.00 $60.00

Repairs, maimtenance, cleaning, lawn care $63 $63 $63

Total Monthly expense $663 $492 $477

Monthly Income $750 $750 $750

Cash flow for month $87 $258 $273

Expenses for a year $7,956 $5,909 $5,725

Rent roll for 11 month $8,250 $8,250 $8,250

Total P/L for a year (11 month occupancy) $294 $2,341 $2,525 Total P/L for a year( 12 month occupancy) $1,044 $3,091 $3,275

Decrease of principal for 1st year $439 $390 $366

Balance P/L for a year (11 month occupancy) $733 $2,731 $2,891

Balance for a year (12 month occupancy) $1,483 $3,481 $3,641

Return on Investment (11 month) 5.7% 15.6% 14.6% w/o decrease of principal 2.3% 13.4% 12.7%

12 month occupancy 11.6% 19.9% 18.3%

12 month occupancy w/o decrease of principal 8.2% 17.7% 16.5%

Finance/refinance purchase

$47,200.00

Partners invest -

$12,500 .00 (70%)

Working partner invest

-$5,000.00 (30%)

Profit from rent is split

50/50% ($3,480.00)

Working partner receive -$1,740.00

(after debt payment)

Partners receive -$1,740.00 (after debt

payment)

Tenant pays monthly rent

$750.00

Purchase Financing scenario (1 year occupancy)

Initial saving comparison Financing vs. Cash

Numbers are based on $47,200.00 purchase price

Mortgage financing Cash purchase

Closing cost (@5%) $2,360.00 $0.0

Minimum of 2month mortgage payment $490.00 $0.0

Total initial saving: $2,860.00

Total initial saving in %: 6%

Cash purchase RefinancingFix and repair Finding tenant and start receiving rent.

Taking cash out and put it in other property, keeping positive cash flow

on current property

2-3 weeks

3-4 weeks4-6

weeks

Total turnaround time is 9-13 weeks

Time-line flow

Cash Property Rent

Investors

Mortgage

Next Property

1. Purchase property for cash for 60-70% of its value

2. Fix it for potential tenants and by doing it gain equity (approximately 20-30%)on the property

3. Get tenants start paying rent

4. Refinance the property for 70-80% LTV. Tenant pays mortgage including principal and generates cash flow for the owners.

5. Owners get initial investment back, plus cash out from refinancing while

still receiving positive cash flow.

Investment structure into Philadelphia Real Estate Market

Real Estate Fund/ Investment corp

Working Fund’s ManagerFund Members

Members will contribute 70% into

the fund

Working Manager will contributes 30%

into the fund

• Fund Members may participate actively in purchasing properties or be a “silent investors”.

• Members will have opportunities to check location and the property (if it is not on Sheriff sale)

• Members can recommend maximum price for purchase as well as number of properties in portfolio.

Working Manager responsible for:• Deal Origination. • Due Diligence. • Deal structuring. • Management of Real Estate Investments • Liquidation and Exit

Detail explanation of responsibilities

• Deal Origination: Manager deals with contractors, financial institutions, attorneys, business associates and agents as well as attending Sheriff Auctions and purchasing properties

• Due Diligence: The due diligence process includes compilation of business plan, market and competitive analysis, financial analysis, tenant reference checks, credit checks as well as an examination of financial structure and legal issues.

• Deal Structuring: Finding and negotiating financing terms with Financial Institutions and Outside Shareholders, as well as addressing accounting, tax and legal issues.

• Management of Real Estate Investments: Responsibilities at this stage include providing strategic guidance, establish short and medium term goals, implement management systems and accounts, out source non critical services and execute strategies and plans to achieve goals set.

• Liquidation and exit: The final stage of the investment cycle involves planning an exit strategy once set goals have be enriched and the property has achieved its maximum value. This phase could be delayed with real estate investments having the potential to be continually upgraded to keep track with new market trends and consumer expectation.

• Due diligence information, as well as, area comparison analysis will be presented to the investors by the manager for review and approval. (See next slides)

Roma

Sales data in 19124 zip code

Sales data in 19149 zip code

Typical Property for $40,000.00-$55,000.00 buy range

Typical Property for $40,000.00-$55,000.00 buy range

Typical Property and neighborhood for $40,000.00-$55,000.00 buy range

Risk assessment of investment into Philadelphia Real Estate Market

Purchase trough RE sources

Time to complete purchase – 2months

Property remains unoccupied during mortgage payments

Difficulties to obtain mortgage for small amount . Plus 5% closing

cost

Potential issues

Real Estate Fund /Investment corp

Working Fund’s ManagerFund Members

Purchase trough Sheriff Auction

Can not see the property before purchase

Have 30 days time frame to complete purchase (possible extension for extra 30 days)

•Title issued within 8 weeks after closing.

• Tenant possibly still occupying property

Potential issues

# Bedrooms Feb Jan Dec 3 Month % changeStudio $1,103 $1,070 $1,215 9.2% 1 Bed $1,176 $1,215 $1,314 10.5% 2 Bed $1,652 $1,748 $1,831 9.8% 3 Bed $2,812 $2,761 $2,777 -1.3%

Average Rents In Philadelphia, Pennsylvania

(end of 2007)

Sources to cell property

• Using LOCAL REAL ESATE agency is very beneficial and shows much higher possibilities to attract LOCAL residents, instead of just listing it on MLS

• Using personal adds (such as graigslist.com) shows increase of interest in comparison to just listing it and placing on MLS.

• Attracting NY investors by putting NY based adds and offering full service with cash flow.

Source of Tenants

Section 8 Tenants

Need to pass initial inspection

Initial Lease is for 2 years (usually includes utilities) with yearly re-inspection.Tenants pre-qualified to the rent.

Direct deposit of the rent from City to owners account.Owners are not dealing directly with tenants.

Usually rent is less by approximately 5-10% in comparison to regular tenants

Source of Tenants

Regular Tenants

Need to check credit/criminal history

Owners can charge higher rent in comparison to section 8 tenants

Higher possibility of eviction

Property can be rented based month-to-month or 1 year terms

244-341545 W. Elkins Ave. 19120 61st Wd 2,257.50

sq. ft. BRT# 612030900 Improvements:Residential Dwelling

VINCENT BERCAW C.P. October Term,2007 No. 003820 $78,757.07 Mark J.

Udren, Esq.

244-458869 N. Uber St. 19130 15th Wd 914.68 sq. ft.BRT# 151063300 Improvements: Residential

DwellingEUGONDA BUTTS C.P. December Term,

2001 No. 000444 $37,752.98 Mark J.Udren, Esq.

244-5544507 N. 8th St. 19149 49th Wd 1,035 sq. ft.BRT# 491246300 Improvements: Residential

PropertyKEVIN ROBERTSON C.P. September

Term, 2007 No. 002145 $62,139.86

Example of foreclosed properties for upcoming Sheriff Auction

Exit Strategy

• Market is not favorable to sell • Offer rent-to–own option. • Initially property should be owned by

Corporation. Then by selling it to individual investor (who is a member of Corporation) for a full market price partners can recover initial investment, as well as, cash-out funds based on difference between purchased price and sell price.

• Combine few properties and sell it as a “package” to investors.

• Market is not favorable to sell property.

Potential issue Issue solution