BRIEF PROFILE:

 

KMB Investments LLC is a real estate fund registered in the state of New Jersey. We specialize in buying distressed residential properties. Our sweet spot is the first to second time home buyers’ market. Which is homes under $500,000. Simple calculations of mortgage costs and home prices make it evident to buyers that it is cheaper to purchase our homes than renting, hence we can sell them effectively. Our assets under management have grown 400% since inception.  We do not mark our assets to market. KMB Investments is owned by Balram Hingorani who is also the largest partner, so his interests are fully aligned with that of the Limited Partners. 

 

IN WHICH AREA OF THE COUNTRY WILL THE MONEY BE INVESTED/ PROPERTIES WILL BE PURCHASED?

 

Our current focus is primarily Northern New Jersey. We operate in Essex, Passaic, Bergen, 

 

HOW MANY PROPERTIES DO WE OWN PRESENTLY?

 

We have 15 investments and as of November 15, 2017. We currently have 7 rental units. This is a very advantageous time to get involved. 

 

Current Process

 

HOW ARE THE PROPERTIES SECURED – AN AUCTION PROCESS/OUTRIGHT PURCHASE? HOW LONG DOES IT TAKE ON AVERAGE TO REPAIR AND THEN TO SELL THE PROPERTY (TURNAROUND TIME)?

There are several ways to buy a property: through a broker, a lead from another investor, auction or foreclosure, from the bank and from the homeowner. It could take anywhere on average from 2 to 8 months to complete a cycle of finding, fixing and flipping a given property. There are exceptions to this rule, so it could take less or more time.

 

WHO ARE THE BUYERS OF THE PROPERTY – INVESTORS OR INDIVIDUAL FAMILY?

 

Mostly first or second time home buyers. Typically young families.

 

WHO DOES THE CONSTRUCTION – DO THEY EMPLOY OUTSIDE COMPANY OR IN-HOUSE?

 

We re-peat use of qualified licensed contracting professionals. They are outsourced and work as independent contractors. An in house manager overseas the entire renovation and works with designer to pick the materials.

 

HOW MANY PROPERTIES ARE UNDER SALE AT A TIME, IS THERE ANY LIMIT ON PURCHASES?

 

The only limit on purchasing is the amount of capital sourced. We can purchase as many properties as possible as long as capital is allocated for renovations.

 

YOU TAKE 2% MANAGEMENT FEE FOR THE YEAR. ISN’T IT A LITTLE LATE IN THE YEAR TO TAKE THE WHOLE 2% FEE?

KMB does not take whole 2%. It is prorated for the # of days/365 * 2%.

 

Financials

 

WHO WILL MANAGE THE FUNDS? HOW WILL THE FUNDS BE MANAGED?

The funds realized from the sale of limited partnership interest are kept in a bank account belonging to the fund. All properties are purchased and paid out of this fund. Similarly, all the proceeds from the sale of the funds will be deposited back in to the fund’s bank account. The fund manager draws 2% per annum charged @0.5% at the end of each quarter for expense fees. The fund distributes the profit to limited partners and the general partner in accordance with the agreement twice a year.

 

WHAT ARE THE RETURNS ON THE INVESTMENT?

 

The returns are basically gains arising from the sale of properties acquired at auction or from banks. The returns vary from property to property; however, we buy property in such a way that we target a return of 15-20% to the fund on average. Time will tell how close we are to this estimate. 

 

WILL THERE BE REGULAR STATEMENTS PROVIDED?

Investors get statements of their accounts and distribution of profits twice a year. Investors are provided with audited financial statements once a year. Investors will always have transparency for their money. Managers will gladly answer questions and take calls regarding status updates.

 

WHAT WILL BE THE ADMIN COST TO MANAGE THE FUNDS?

 

Cost is restricted to 2% of assets invested per year and prorated for part of the year.

 

CAN I TAKE THE MONEY OUT WHEN I NEED IT?

 

The investor who commits to partner on a deal by deal basis must keep the capital invested throughout the deal they chose. Investors who simply supply capital to the company as return on money are able to submit a withdraw slip every 6 months

 

WHO OWNS THE FUNDS, ARE THE FUNDS KEPT IN ESCROW ACCOUNT?

The fund is owned by limited partners and managed by the general partner in accordance with the limited partnership agreement. Funds are NOT kept in escrow account; they are kept in regular business or money market accounts and managed by the general partner.

 

WHAT IS THE MINIMUM INVESTMENT AMOUNT?

The minimum investment account is $100,000. More details are included in the private placement memorandum.

 

WILL THE SHARES BE ISSUED TO INVESTORS, HOW MANY INVESTORS WILL BE THERE?

There will be no shares issued; your share of the partnership is determined by your contribution divided by total contribution, which will change as more investors come or leave.

 

HOW BIG WILL THE FUND BECOME?

The fund will continue to grow as long as investors keep investing. As the size of investment increases the total dollar figures of returns will be larger to distribute.

 

DO THE COMPANY ACCOUNTS GET AUDITED BY AN INDEPENDENT BODY?

Yes, the fund’s financial statements are audited by an independent CPA firm.

 

DO I GET CERTIFICATES OF MY INVESTMENT?

You get a signed copy of the partnership agreement. Once a year, you get a tax return copy that shows your percentage of capital invested

 

DOES THE MONEY HAVE TO BE KEPT WITH THE FUND MANAGER FOR A CERTAIN TIME?

Yes, as stipulated in private placement memorandum.

HOW ARE THE PROFITS SHARED BETWEEN THE INVESTORS?

The profits are shared between general partner and limited partners in the ratio of 1:4. This translates up to 20% to the general partner and 80% to limited partners. However, General partner at its discretion, charged 0% for the first year, 10% for the next 4 years and 11% for the last two years. This changes from year to year solely at discretion of the General Partner.

 

HOW OFTEN WILL THE PROFITS WILL BE DISTRIBUTED, MONTHLY, QUARTERLY, YEARLY?

The fund distributes 100% of realized gains twice a year. We have made 14 such distributions in the last 7 years.

 

WILL THE REPAIR MAINTENANCE COST BE DISCLOSED TO SHAREHOLDER/INVESTORS?

Upon the sale of the property, full statement of cost and sales amount are submitted to investors. All the details are available for inspection at the office during regular business hours.

 

CAN AN INVESTOR SEE THE DOCUMENTS?

Yes, investors have full access to all documents during regular business hours.

 

CAN THE FUND SECURE A MORTGAGE FROM BANKS FOR THE PURCHASE AND REPAIRS COST?

This may be possibility in future, and for now we have no mortgage on any property. We do have a short-term line of credit that we use to make opportunistic buys.

 

WILL THESE PROPERTIES BE MORTGAGED TO THE BANK?

This may be a possibility in the future, but for now we have no mortgages.

 

IF THE MONEY IN THE FUND IS NOT FULLY INVESTED, OBVIOUSLY, THE INVESTMENT RETURNS WILL BE DILUTED BY CASH SITTING IN THE BANK. HOW WILL YOU MANAGE THAT?

We plan to keep as little in cash as possible provided we have enough to fund construction costs. Plus, we do take advantage of our Line of Credit to acquire new homes and repay it once we receive funds from sale of home.

 

IF YOU LET INVESTORS IN CONTINUOUSLY, HOW WILL YOU VALUE THE FUND FOR NEW INVESTORS TO INVEST?

The new investors participate in assets owned by the fund by calculating the percentage of money invested / total fund assets on the day of their entry. For calculating profit we adopt a different method and there is a one-page explanation appended at the end of this page.

 

IF YOU LET INVESTORS IN CONTINUOUSLY AND THE MONEY IN THE FUND IS MORE THAN CAN BE INVESTED, OLD INVESTORS RUN THE RISK OF THEIR INVESTMENT RETURNS BEING DILUTED BECAUSE YOU LET IN NEW INVESTORS. HOW WILL YOU MANAGE THAT RISK?

Yes, while this is possible, we will not accept the new money if that situation occurs. We can also set up a system that allows investors to commit to funds but subscribe upon call.

 

HAVE YOU CONSIDERED CORPORATE INCOME TAXES? WOULD THE INVESTORS BE SUBJECTED TO DOUBLE TAXATION BASED ON THE FUND BEING ESTABLISHED AS A L. P. LEGAL ENTITY? WHAT KIND OF TAX DOCUMENTS IS THE FUND REQUIRED TO SEND OUT AT THE END OF THE YEAR? IS THERE A WAY TO MAKE THE RETURNS TAXED AS LONG-TERM CAPITAL GAIN?

LP has the benefit of single taxation so all the partners will get a K-1 based on their share of profits, and they will get partnership tax return 1065. Capital gain will occur when we hold and rent a property for more than a year, and it will be indicated so on K-1.

 

ALTHOUGH YOU SAY THAT IT IS YOUR INTENT TO MAKE DISTRIBUTIONS HALF YEARLY, YOU ARE NOT REQUIRED TO DO SO. IN ADDITION, YOU ARE NOT REQUIRED TO MAKE TAX DISTRIBUTIONS. DON’T YOU THINK YOU SHOULD AT LEAST BE REQUIRED TO MAKE TAX DISTRIBUTIONS?

Despite distributions not being required, we pay out all the profits as this is an income fund. As stated previously, we made 14 such distributions in last 7 years. Point to be noted here is that virtually half of our partners have opted to reinvest their profits.
We cannot make any definitive statements about tax payments, because each person has their own taxes that would be due from their percentage of the profits based on their own income.

 

TO BE AN ACCREDITED INVESTOR DO I NEED ASSETS MORE THAN $1,000,000 AND OVER $200,000 IN ANNUAL INCOME, OR ONE OR THE OTHER?

Here is a link from the SEC web site: https://www.sec.gov/files/ib_accreditedinvestors.pdf

 

Benefits/Incentives

 

HOW SECURE IS MY INVESTMENT?

The limited partnership owns the real estate and LP is owned by the limited partners in the proportion of their capital to total capital.

 

Explanation of rate of return for a new partner:

 

These are the steps to investing in the MangoTree Real Estate Holdings, L.P. fund and how a new partner becomes fully vested.

 

GAIN CALCULATION

 

The fund does not mark-to-market assets and existing inventory is valued at cost. So there is an inbuilt unrealized gain that a new partner has access to from the day they join the fund.

 

POINT 1

Suppose Partner A invested $100,000 in the fund on January 1st, 2015. Exactly one year later, on January 1st 2016, Partner B joins the fund and invests $100,000. Let’s also assume that the total capital in the fund after Partner B joins is $1,000,000.
As of January 1st 2016, Partner A & B both have 10% equity in the fund. The difference however is that Partner A’s capital has been put to work for one extra year.
To illustrate this point, suppose that a property the fund purchased on January 1st, 2015 is sold on July 1st, 2016. For every $1 of gain Partner B makes, Partner A makes $3. Given that both are equal partners, the difference in their profit payout is due to length of time they are invested in that particular property.

 

POINT 2

For any properties that the fund purchases after January 1st 2016, Partner A & B will have the exact same profit. As an example, the fund purchases a house on January 1st, 2016 and sells it on July 1st, 2016. In this case, for every $1 of gain partner B makes, Partner A also makes $1. Even though partner A joined a year earlier than B the returns are equal. Again this is based on length of time invested in the property.

 

POINT 3

The above two points are best illustrated by the chart below. This chart reflects actual returns achieved by partners based on length of time they are invested in the fund for the year ended 12/31/2016


 

Disclosure Information:Past performance is not necessarily indicative of future results. Individual returns will vary based on time of investment. Nothing contained in this document should be construed as an offer to sell or solicitation to buy securities. Any investment in or with KMB can only be made by a duly qualified and approved investor in accordance with the terms set forth in a Private Placement Memorandum (the PPM) and pursuant to a duly executed Subscription Agreement accepted by MangoTree Real Estate Holdings L.P. With respect to all information above, the PPM is the sole and exclusive source of information for any potential investor, and there is no warranty or other assurance of the accuracy or completeness of any of the information contained in this document.Our financial statements are audited by independent CPAs.

Investments LLC