About Forward Progress Management Real Estate, Inc.
Since 2003 the Forward Progress Management Real Estate Funds have been purchasing apartment buildings in Los Angeles and distributing above-average returns to their investors on a monthly basis. The Funds offer the unique opportunity for accredited investors to buy into an LLC (Limited Liability Company) that will eventually own up to $14Million in prime Los Angeles real estate. Not only do their investors get monthly returns that should be significantly higher than what you would get in a bank CD, but since their investors actually own the properties, they benefit when the buildings appreciate. Historically, the Funds have produced annual distributions between 7 – 17% tax-free and appreciation of up to double that.
Since FPM Inc., the Fund's Manager employs their own crew; operational costs are much lower than those of the average apartment owner. Economies of scale ensure that many of the fixed expenses are also lower than normal. Naturally the owner of 15 buildings has more leverage than the owner of just one or two properties.
Investors receive detailed newsletters, complete with a breakdown of the month's income and expenses, plus a distribution check each and every month. The investors are also named as beneficiaries to a Key Man Life Insurance Policy. FPM Inc. takes a 15% equity stake in the Fund; therefore they make money when the investors make money. That tremendous motivation ensures that the expenses are as low as possible, and that the income is as high as possible.
The Los Angeles apartment market is one of the, if not the hottest, sectors of the national real estate market. With the median single family home price in Los Angeles now in excess of $520,000, less than 15% of the population is able to afford even the median home price. That means that most people will have no choice but to rent. Additionally there are many apartment owners who are cashing in on the condominium conversion frenzy by converting their for-rent apartments into for-sale condominiums. Los Angeles has experienced a net loss in the number of available rental units during each of the past three years. This problem is being amplified by the number of new residents pouring in daily to the land of opportunity. The demand is outpacing the supply, and this inequity will only intensify as people are living longer lives, having more children and with the best economy of any major U.S. city, Los Angeles is drawing people from around the world in record numbers. The 5-6% annual increases in apartment rents should continue long into the next decade.
Investing into the Fund will provide you with all the benefits of direct ownership in a number of properties without any of the headaches and hassles of day-to-day management. Not to mention the fact that the loans taken out for the properties will not be reflected on your credit report. Plus, you can invest using your IRA or other qualified plan like a SEP IRA, Roth IRA, or 401(k).
The objective is simple; FPM will continue to purchase properties that not only cash flow nicely today, but also represent excellent prospects for future development; either into condos or larger, denser apartment buildings. The best part about owning real estate is that you don’t have to sell in order to capture the appreciation. As they did with the buildings in Fund I, FPM plans to refinance the buildings once they have experienced sufficient appreciation to justify the refinance. All the cash that they would potentially pull out and distribute would be 100% tax free, as it is essentially just a loan. The ordinary income that is derived from our rental income should also be tax advantaged as more than likely there will be non-cash paper losses and mortgage interest deductions in excess of the income, thus creating a tax wash.
