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Funded
Multifamily
497 Dean Street - Brooklyn Value Add Multifamily
Brooklyn, NY
INVESTMENT STRATEGY
Value-Add
INVESTMENT TYPE
Equity
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100% funded
Offered By Inception Investors
13.7%* TARGET IRR 12.7%-14.7%
4.5%* TARGET AVG CASH ON CASH
1.95* TARGET EQUITY MULTIPLE
Estimated Hold Period 5 years
Estimated First Distribution 3/2018
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Explore this Project
Overview
Value Add acquisition of a well located multifamily property in Brooklyn, NY by an experienced repeat Sponsor.
Property At A Glance
Year Built 1930
# of Units Eight
# of Stories Four
Current Occupancy 100%
Acquisition Price

$2,875,000

Investment Highlights
Well located in a gentrifying neighborhood of New York City in close proximity to retail amenities, public transportation and public parks
Repeat local Sponsorship with experience purchasing and adding value to rent stabilized multifamily properties in Brooklyn
Low Leverage: the loan being used to acquire the Property is 61% of purchase price and 52% of total costs
Attractive Basis: The Sponsor is acquiring the Property for $359,375/unit at a 4.5% cap rate which compares favorably to comparable transactions in the market
Significant Sponsor Equity: The Sponsor is investing 51% of the total equity alongside Realty Mogul 84, LLC investors
Management
Cumulative Distributions

Inception Investors

Inception Investors is a private real estate investment and operating company that was founded in 2012. The company is headquartered in New York City and has offices in Brooklyn and Manhattan.

The Sponsor’s investment strategy is to acquire properties with attractive growth potential through either a combination of active property and asset management and market growth. They generally target cash flowing Class-B multifamily properties and give key consideration to the following criteria:

  • Gentrifying Tri-state area markets with high population density and strong market fundamentals.
  • Capitalize on shifts in demographic trends and property investments that include an increased preference for urban living by baby boomers, millennials, and young professionals as well as assets that are in close proximity to transit or places of employment.

The Sponsor is an affiliated entity to The Clairmont Group – the same sponsor who transacted on the 23-Unit New Jersey Multifamily deal with RealtyMogul.com in March 2016. Two of the three principals with Inception are also principals of the Clairmont Group. The two companies share asset management, accounting, and back office operations and invest together as principals, so it truly is one company at this time. They have maintained their respective names due to legacy and relationship reasons. 

Sponsor Track Record (includes transactions the management team completed as Principals of other firms prior to joining Clairmont and Inception Investors)

http://www.inceptioninvestors.com
  • Ryan Colbert, Managing Partner
  • Chesky Engel, Managing Partner
Ryan Colbert, Managing Partner

Mr. Colbert has over a decade of institutional real estate equity investment experience in both domestic & international markets and has acquired over $1 billion worth of commercial real estate. His experience includes investments in distressed real estate & note purchases, recapitalizations, JV partner buy-outs and direct secondary investing across all major asset classes.

Mr. Colbert was a Director at Madison Marquette and formerly a Vice President at the Lightstone Group, one of the nation’s largest real estate investment firms. While at Madison Marquette, he closed over $400 million of multifamily, office and retailacquisitions. While at the Lightstone Group, he was responsible for rebuilding the firm’s hospitality portfolio as well as expanding its existing multifamily portfolio, closing over $100 million of acquisitions during his tenure. Prior to joining Lightstone Group, Mr. Colbert was a member of the investment team at Madison International Realty, a real estate private equity firm focused on the acquisition of direct secondary’s and structured equity investments. While at Madison International Realty he was involved in the recapitalization of over $200 million of real estate. 

Mr. Colbert holds a Series 7 & 63 license and completed his dual-undergraduate degree in Political Science & Finance with minors in German Studies & Law at Cornell University.

Chesky Engel, Managing Partner

Mr. Engel is Co-Founder & Managing Member of Inception Investors with primary responsibility for operational excellence, transaction sourcing, construction and development. Mr. Engel is responsible for daily operations, transaction sourcing, construction and development of Inception Investor's transactions in the Tri-state area. Mr. Engel brings 20 year's investing experience in New York City real estate and is a Brooklyn native. Mr. Engel has been involved in numerous high-profile re-development and re-positioning projects which have been featured in the Real Deal, Brownstoner, and Crain's New York Business. Mr. Engel has also completed over $1 billion of transactions in the New York City area including investments in distressed real estate & note purchases, recapitalizations and JV partner buy-outs across all asset classes. Mr. Engel holds a Bachelor's Degree from Gateshead Talmudical College in Gateshead, United Kingdom.

Track Record

Inception Investors Track Record
Expected Investment Performance
April 1, 2016
Investment  Date of Initial
Investment 
 Date of
Liquidation 
 Property Type   Property Location  Market Value (a) Invested &
Committed
Capital (b)
Fairfield Inn Jul-10 TBD  Hotel   East Rutherford, NJ  $18,700,000 $3,940,983
Everson Pointe(c) Dec-10 Jan-15  Retail   Atlanta, GA  9,000,000 4,664,000
TownePlace Suites Jan-11 TBD  Hotel   Metairie, LA  15,300,000 6,055,449
Rego Park(c) Mar-11 TBD  Multifamily   Queens, NY  19,000,000 15,132,500
Crowne Plaza Boston North Shore Mar-11 TBD  Hotel   Danvers, MA  27,000,000 23,590,184
Holiday Inn Express(c) Jun-11 TBD  Hotel   East Brunswick, NJ  9,000,000 6,196,498
Crowe's Crossing Oct-11 TBD  Retail   Atlanta, GA  12,000,000 2,069,210
Marriott Courtyard(c) Nov-11 TBD  Hotel   Parsippany, NJ  10,000,000 11,925,000
DePaul Plaza Shopping Center Nov-11 TBD  Retail   St. Louis, MO  20,000,000 8,745,154
Shasta Crossroads Dec-11 Dec-14  Retail   Redding, CA  9,000,000 6,954,373
Hampton Inn Mar-12 TBD  Hotel   Woodbridge, VA  10,500,000 4,021,019
Meridian Village Apr-12 TBD  Retail   Bellingham, WA  15,000,000 4,225,100
Washington Business Park Sep-12 Dec-12  Office   Lanham, MD  45,000,000 11,000,000
The Center Building Dec-12 Mar-15  Office   Queens, NY  84,500,000 18,947,840
Cotton Exchange Hotel Mar-13 Jun-13  Hotel   New Orleans, LA  30,000,000 13,600,130
331 Carroll Street Aug-13 TBD  Multifamily   Orange, NJ  1,250,000 725,000
7000 Central Park Sep-13 TBD  Office   Atlanta, GA  75,000,000 13,264,192
The Edge Dec-13 TBD  Retail   Brooklyn, NY  45,500,000 19,445,772
Free Market Portfolio Dec-13 TBD  Multifamily   Brooklyn, NY  5,000,000 916,187
Paces Village Apartments Dec-13 TBD  Multifamily   Greensboro, NC  15,000,000 4,379,994
Marina Shores Apartments Mar-14 TBD  Multifamily   Virginia Beach, VA  54,000,000 18,292,593
23 Harvard Street Jul-14 TBD  Multifamily   East Orange, NJ  1,000,000 500,000
Broad Street Apartments Sep-14 TBD  Multifamily   Richmond, VA  11,000,000 3,144,136
BankNote Building Sep-14 TBD  Office   Bronx, NY  120,000,000 28,204,512
Eastern Parkway Portfolio Oct-14 TBD  Multifamily   Brooklyn, NY  10,000,000 2,287,600
Brooklyn 9 Portfolio Aug-15 TBD  Multifamily   Brooklyn, NY  30,000,000 7,137,217
Park Avenue Apartments Mar-16 TBD  Multifamily   Plainfield, NJ  3,000,000 1,100,000
330 E. 22nd St. Jul-16 TBD Multifamily Brooklyn, NY 4,750,000 1,859,504
Total Portfolio         $709,500,000 $242,324,147

(a) Purchase price, UPB, or appraised value, whichever is greater at time of acquisition.

(b) Includes capitalized expenses allocated to each investment and co-investments made by third parties.

(c) Invested & committed capital represents Day 1 equity investment.  Performance expectations include assumed refinancing distribution upon asset stabilization.

 

Note: The management overview and track record detailed above was provided by the Sponsor and has not been verified by RealtyMogul.com or NCPS.

Business Plan

In this transaction, RealtyMogul.com investors are to invest in Realty Mogul 84, LLC, which is to subsequently invest in 497 Dean Street LLC, a limited liability company that will hold title to the Property.  The Sponsor (Inception Investors) is currently under contract to purchase the Property for $2,875,000 ($359,375/unit).

Upon acquisition, the Sponsor intends to negotiate buyouts with tenants currently occupying the five units subject to rent stabilization(1). The Sponsor has budgeted $30,000 per unit to perform these buyouts, in line with the amounts they have offered at their other rent stabilized properties. The Sponsor has already begun conversations with tenants about the business plan and reported that two tenants have already expressed willingness to accept a buyout. Once those units are vacated, the Sponsor intends on implementing a capital improvement program of $30,000/unit in order to renovate the units and capture the maximum allowed rental increases upon completion. The rent guidelines limit rent increases to 1/40th of the cost of construction(2).

Planned renovations include a full kitchen renovation including new appliances, stove and counter tops as well as bathroom renovations with new shower heads and toilets. The Sponsor will also replace the dated flooring, improve the lighting, and will install new video intercoms for the tenants.

Capital Expenditures Budget
CapEx Item $ Amount* Per Unit
General Interiors (5 units)    
   Sheetrock $20,000 $4,000
   Moldings $10,000 $2,000
   Electric $19,500 $3,900
   General Plumbing $15,000 $3,000
   Closet $12,500 $2,500
   Intercom $5,000 $1,000
   Paint $10,000 $2,000
Kitchen    
   Cabinets $5,000 $1,000
   Sink $2,500 $500
   Faucet $2,000 $400
Bathroom    
   Tub & Plumbing $22,500 $4,500
   Toilets $2,250 $450
   Vanity $1,750 $350
   Medicine Chest $750 $150
   Faucet $750 $150
   Floors $16,000 $3,200
   Light Fixtures $3,250 $650
   Smoke and Carbon Monoxide Alarms $1,250 $250
Total $150,000 $30,000

*Includes 10% Construction Management Fee

The Sponsor plans to engage EPP Management to manage the asset. EPP Management is a wholly owned subsidiary of Inception Investors and they currently manage over 400 units in the New York market. The management company is run by Chesky Engel, one of the principals of the Sponsor. Inception engages EPP Management for all of its assets. The Sponsor intends to sell the Property in five (5) years, however the hold period could potentially be shorter or longer.

RM has invested in two prior transactions with the Sponsor (New Jersey Multifamily & Brooklyn Multifamily), both of which are performing well. As of Q1 2017: NOI since inception (March 2016) at New Jersey Multifamily is trending at 43.7% above proforma. At Brooklyn Multifamily (closed July 2016), the Sponsor has completed renovations and leases on four rent stabilized units (with one more in process), ahead of proforma projections of three units in the first year (for informational purposes only, past performance is not indicative of future results). 

(1) Per the New York State Division of Housing and Community Renewal Office of Rent Administration, the Rent Guidelines Board sets rent increases in stabilized apartments. These guidelines are set once a year and are effective for leases beginning on or after October 1st of each year. Rents can be increased during the lease period in any one of three ways as described here.

(2) - Rents for renovated units are subject to the Individual Apartment Improvement (IAI) rules which limit rent increases to 1/40th of the cost of construction (for properties with 35 units or less) as described here. Vacant units are subject to 20% increases over the last legal rent per the Board guidelines as described here.

Property

RealtyMogul.com, along with Inception Investors (the "Sponsor"), is providing the opportunity to invest in the acquisition of 497 Dean Street, an eight-unit multifamily Property located in a gentrifying neighborhood of Brooklyn, NY the "Property".

The primary objective of this investment is to acquire the Property, remove existing rent stabilization restrictions through tenant buy outs, perform interior renovations to capture rental increases, then sell the Property within approximately five (5) years. The Sponsor sees this investment as an opportunity to capitalize on a well located asset in a gentrifying neighborhood that can be improved through the removal of rent stabilization restrictions and implementing a targeted renovation plan. 

Property Details

Built in 1930, the Property is comprised of one building containing eight units and is currently 100% occupied. Unit types are all four bedroom/two bathroom units averaging 894 SF across four stories. There are no parking spaces and amenities/common areas at the Property are limited, as is typical for smaller walk up multifamily properties in New York, however one of the ground floor units has access to a private backyard which is a rarity in the market. Five of the units are subject to rent stabilization restrictions while the remaining three units are free market and were previously renovated by the seller. 

Unit Mix
Unit Type # of Units Avg SF/Unit In-Place Rent Rent/SF Stabilized Rent Rent/SF
4 Bed, 2 Bath - Free Market 3 894 $3,217 $3.60 $3,600 $4.03
4 Bed, 2 Bath - Rent Stabilized 5 894 $1,005 $1.12 $2,023 $2.26
Total 8 894 $1,834 $2.05 $2,614 $2.92


Above: the Property in the foreground with 461 Dean Street, the tallest modular building in the world, under construction in the background. 

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Comparables

Free Market 4 Bed Rental Comparables
  Subject 150 4th Ave 148 5th Ave 170 Ashland Pl 79 Adelphi Street 435 Grand Ave Total / Averages
Average Rental Rate  $3,600 $3,995 $3,995 $4,400 $3,600 $3,600 $3,918
Baths 2.0 1.0 1.0 2.0 2.0 1.5 1.5
Distance N/A 0.6 mi 0.5 mi 0.7 mi 1.2 mi 1.0 mi 0.8 mi
Sales Comparables
  340 Clinton Ave 336 Clinton Ave 155 Prospect Pl 76 Douglass St 372 St. Johns Pl Total / Averages Subject
Date October-16 November-16 October-16 July-16 June-16   July-17
# of Units 7 9 8 7 16 9 8
Year Built 1905 1905 1931 1920 N/A 1915 1930
Purchase Price $2,850,000 $2,500,000 $2,440,000 $2,950,000 $7,750,000 $4,396,170 $2,875,000
$/Unit $407,143 $277,778 $305,000 $421,429 $484,375 $379,145 $359,375
Cap Rate 3.14% 4.20% 3.86% 4.50% 4.04% 3.95% 4.53%
Distance 0.9 mi 0.9 mi 0.3 mi 1.5 mi 0.9 mi 0.9 mi  
Location

The Property is located in the Prospect Heights/Park Slope neighborhood of Brooklyn, home to historic buildings, tree lined streets, top-rated restaurants, bars, and shops. The Property is located near the intersection of Flatbush Avenue and Atlantic Avenue within one mile of Prospect Park, one of the highest rated parks in New York, Brooklyn Heights, the Atlantic Mall, Atlantic Terminal, which is the nexus of public transportation in Brooklyn, as well as being located across the street from Barclays Center, home to the New York Nets, a community park and fire station. The Property also lies within the Pacific Park Brooklyn project, a $4.9 billion mixed use redevelopment project. 

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Pacific Park Brooklyn

Pacific Park Brooklyn is a 22 acre, $4.9 billion mixed use development project that when completed, will include approximately six million square feet of residential space (6,430 units of affordable and market-rate housing), a state of the art sports and entertainment arena, the Barclays Center, 247,000 square feet of retail use, approximately 336,000 square feet of office space and eight acres of publicly accessible open space. The project plan permits a program variation which could allow for up to 1.6 million square feet of commercial space. The project also includes major transportation improvements, including a new storage and maintenance facility for the LIRR and a new subway entrance to the Atlantic Terminal Transit Hub, the third largest hub in the city. The Master Plan was designed by Frank Gehry and the development was renamed Pacific Park Brooklyn in July 2014. 461 Dean Street, part of the Pacific Park Brooklyn development and the tallest modular building in the world, sits across the street from the Property.  More information about Pacific Park Brooklyn can be found at: http://pacificparkbrooklyn.com/

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Market Overview

Per the Bureau of Labor Statistics, job growth in the New York-Jersey City-White Plains, NY-NJ Metro Division was 1.4% in March 2017, slightly below the national figure of 1.5%, reflecting 93,700 jobs added over a one year period. Axiometrics forecasts New York-Jersey City-White Plains, NY-NJ Metro Division's job growth to be 1.3% in 2018, with 89,639 jobs added. Job growth is expected to average 1.3% from 2019 to 2021, with an average of 90,446 jobs added each year. The largest job sectors in the market are Education and Health Services (20.8%) and Trade, Transportation and Utilities (16.9%). 

Market occupancy as of 1Q 2017 was 96.5%, up slightly from 96.4% the year prior, and well above the national average of 94.5%. The market has averaged an occupancy rate of 96.4% since 1999. The market saw effective rents decrease slightly by 0.2%, but is forecast to be 2.9% in 2018 and average 3.8% from 2019 to 2021. As of May 7, 2017, Axiometrics has identified 28,370 apartment units scheduled for delivery in 2017, of which, 3,361 have been delivered. This is a substantial decrease from 2016 which saw 14,268 apartment units delivered. (Source: Axiometrics)

Submarket Overview - Kings County

As of Q1 2017, occupancy in the submarket was 95.9%, down slightly from 96.1% in Q4 2016. Effective rent decreased from $3,664 in Q4 2016 to $3,644, a decrease of 0.5%. The submarket saw an annual decrease in effective rent of 0.6%, below the market average of -0.2%. Forecasted growth for 2017 is expected to be 0.2%, and average 2.6% from 2017-2019. Effective rent growth has averaged 3.4% per year since mid-2012. Based on Axiometrics' identified supply of properties under construction, the submarket is expected to deliver 6,697 units in 2017, of which, 669 have been delivered. Overall market deliveries increased from 14,277 units in 2016 to 26,464 in 2017, and the total is expected to lower to 22,397 units in 2018. (Source: Axiometrics)

Axiometrics Market Performance Summary Report - Kings County Submarket
  2016 2017 2018 2019
Submarket Vacancy 3.9% 4.4% 4.3% 4.0%
Avg. Rent Growth 0.5% 0.2% 3.1% 4.5%

Demographic Information

Demographics

Distance from Property 1 Mile 3 Miles 5 Miles
Population (2017) 163,519 1,273,974 2,805,384
Expected Growth (2017-2022) 4.9% 4.4% 3.6%
Median Household Income (2017) $91,359 $58,369 $64,188
Median Household Value (2017) $1,015,014 $798,301 $731,161

*Demographic information was obtained from CoStar.  

Photos
Financials
Sources & Uses

Total Capitalization
Sources of Funds Cost
Debt $1,760,000
Equity $1,645,500
Total Sources of Funds $3,405,500
Uses of Funds Cost
Purchase Price $2,875,000
CapEx/Buyout Reserve $300,000
Broker Dealer Fee $40,000
Acquisition Fee $30,000
Working Capital $20,000
Closing Costs $140,500
Total Uses of Funds $3,405,500
Debt Assumptions

The projected terms of the debt financing are as follows:

  • Lender: New York Community Bank
  • Estimated Proceeds: $1,760,000
  • Rate: 3.50% fixed years 1-5. Floating at Federal Home Loan Bank of New York Prime rate +275 bps years 6-10, with an option to fix at Prime +300 bps subject to a 1.0% extension fee. 
  • Amortization: 12 months Interest Only, 30 years thereafter
  • Term: 10 Years
  • Prepayment Penalty: 4, 3, 2, 1, 1% years 1-5. Open to prepayment years 6-10 unless the Sponsor elects to fix the rate in years 6-10, in which case the prepayment penalties in those years will be 5, 4, 3, 2, 1%. 

There can be no assurance that a lender will provide debt on the rates and terms noted above, or at all. All rates and terms of the debt financing are subject to lender approval, including but not limited to possible increases in capital reserve requirements for funds to be held in a lender controlled capital reserve account.

Distributions

497 Dean Street LLC intends to make distributions to investors (Realty Mogul 84, LLC and Sponsor, collectively, the "Members")  as follows:

Operating Cash Flow

  1. First, to Members for any accumulated unpaid 7% preferred return
  2. Second, a cumulative quarterly-compounded 7% annual preferred return
  3. Then, any excess balance will be split 75% to Members ​pari passu and 25% to Sponsor.

Capital Events (sale, refinance)

  1. First, to Members for any accumulated unpaid 7% preferred return
  2. Second, return of capital
  3. Then, any excess balance will be split 75% to Members pari passu and 25% to Sponsor to an 18% IRR Hurdle
  4. Then, any excess balance will be split 60% to members ​pari passu and 40% to Sponsor.

Note that these distributions will occur after the payment of the Company's liabilities (loan payments, operating expenses and other fees as set forth in the LLC agreement, in addition to any member loans or returns due on member loans).

Realty Mogul 84, LLC will distribute 100% of its share of excess cash flow (after expenses and fees) to the members of Realty Mogul 84, LLC (the RealtyMogul.com investors). 

Distributions are expected to start in March 2018 and are expected to continue on a quarterly basis thereafter. These distributions are at the discretion of the Sponsor, who may decide to delay distributions for any reason, including maintenance or capital reserves. 

Cash Flow Expectations
  2017 2018 2019 2020 2021 2022
Effective Gross Revenue $91,652 $212,902 $251,062 $267,103 $280,588 $293,466
Total Operating Expenses $23,890 $49,675 $52,535 $54,434 $56,253 $58,081
Net Operating Income $67,762 $163,227 $198,528 $212,669 $224,335 $235,385
Debt Service $30,800 $78,219 $94,838 $94,838 $94,838 $94,838
Asset Management Fee $5,000 $10,000 $10,000 $10,000 $10,000 $10,000

Distributions to Realty
Mogul 84, LLC Investors

$7,869 $24,545 $33,684 $95,681 $46,309 $1,435,895
Fees

Certain fees and compensation will be paid over the life of the transaction. The following fees and compensation will be paid:

Type of Fee Amount of Fee Received By Paid From Notes
One-Time Fees
Acquisition Fee $30,000 Sponsor Capitalized Equity Contribution  
Broker-Dealer Fee $40,000 North Capital (1) Capitalized Equity Contribution  
Recurring Fees
Property Management Fee 4.5% of Effective Gross Income EPP Management, a wholly owned subsidiary of the Sponsor Operating Cash Flow  
Construction Management Fee 10.0% of Construction Costs EPP Management, a wholly owned subsidiary of the Sponsor Capitalized CapEx Budget  
Asset Management Fee $10,000/year Sponsor Operating Cash Flow  
Management and Administrative Fee 1.0% of amount invested in Realty Mogul 84, LLC RM Manager, LLC Distributable Cash  RM Manager, LLC is the Manager of Realty Mogul 84, LLC and a wholly-owned subsidiary of Realty Mogul, Co. (2)

Notes:
(1) Certain employees of Realty Mogul, Co. are registered representatives of, and are paid commissions by, North Capital Private Securities Corp., a Delaware corporation ("North Capital"). In addition, North Capital pays a technology provider services fee to Realty Mogul, Co. for licensing and access to certain technology, reporting, communications, branding, entity formation and administrative services performed from time to time by Realty Mogul, Co., and North Capital and Realty Mogul, Co. are parties to a profit sharing arrangement.

(2) Fees may be deferred to reduce impact to investor distributions.

The above presentation is based upon information supplied by the Sponsor or others.  Realty Mogul, Co., RM Manager, LLC, and Realty Mogul 84, LLC, along with their respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein.  The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.

Disclaimers/FAQs
Disclaimers

Forward-Looking Statements

Investors should not rely on any forward-looking statements made regarding this opportunity, because such statements are inherently uncertain and involve risks. We use words such as “anticipated”, “projected”, “forecasted”, “estimated”, “prospective”, “believes”, “expects”, “plans”, “future”, “intends”, “should”, “can”, “could”, “might”, “potential”, “continue”, “may”, “will” and similar expressions to identify these forward-looking statements.


Non-Transferability of Securities

The transferability of membership interests in Realty Mogul 84, LLC are restricted both by the operating agreement for that entity and by U.S. federal and state securities laws. In general, investors will not be able to sell or transfer their interests. There is also no public market for the investment interests and none is expected to be available in the future. Moreover, the estimated investment holding period described herein is only a projection, and there can be no assurance when or if an investment may be liquidated. Persons should not invest if they require any of their investment to be liquid. This is particularly important for persons of retirement age, who should plan carefully to assure that their assets last throughout retirement.


Credit Risk

Realty Mogul 84, LLC's investment in 497 Dean Street LLC will relate to a Property that will undergo some degree of renovation, a situation that does not always meet the financing criteria for conventional financing from institutional sources. Credit risk is inherent in the real estate financing industry, and there can be no assurance that the credit worthiness of the Sponsor will be sufficient to assure the full repayment of the Realty Mogul 84, LLC's common equity investment and thus Realty Mogul 84, LLC's ability to provide returns (or even repayment of principal) to investors.


Mortgage Risk

The Sponsor has a signed term sheet with a lender to provide the debt financing for the acquisition of the Property, but there can be no assurance that the lender will complete financing on the rates and terms included in the underwriting being presented in the model for this investment opportunity. All rates and terms of the debt financing are subject to final lender committee approval, including but not limited to a modification in lender held capital reserve requirements that may result in a corresponding movement of certain funds currently projected as being held in a Sponsor controlled capital escrow account.


Interest-Only Loan Period

The loan being used to acquire the Property is expected to have an interest-only period during the first 12 months of the loan term, which means that there will be no reduction in the principal balance during that interest-only period.


Management Risk

Investors will be relying solely on the Sponsor for the execution of its business plan. The Sponsor may in turn rely on other key personnel with relevant experience and knowledge, including contractors and consultants. Members of 497 Dean Street LLC (including Realty Mogul 84, LLC) will agree to indemnify the manager in certain circumstances, which may result in a financial burden if any litigation results from the execution of the business plan. While the Sponsor has significant operating experience, 497 Dean Street LLC is a newly formed company and has no operating history or record of performance. Realty Mogul 84, LLC is pursuing a venture capital strategy through its investment in 497 Dean Street LLC, and the manager of Realty Mogul 84, LLC is expected to be treated as an investment adviser exempt from federal or state registration under this strategy.


Manager of Realty Mogul 84, LLC Will Participate in Sponsors' Promote Interest

The manager of Realty Mogul 84, LLC will be entitled to a participation in the value of any excess distributable cash flow and any appreciation of the Property realized upon its sale. This could lead to a potential conflict of interest between the manager and Realty Mogul 84, LLC. Investors must recognize and agree to waive and bear the risk of this conflict of interest.


Capital Call Risk

The amount of capital that may be required by 497 Dean Street LLC from Realty Mogul 84, LLC is unknown, and although 497 Dean Street LLC does not require that its members contribute additional capital to it, it may from time to time request additional funds in the form of loans or additional capital. Realty Mogul 84, LLC does not intend to participate in a capital call if one is requested by 497 Dean Street LLC, and in such event the manager of 497 Dean Street LLC may accept additional contributions from other members of 497 Dean Street LLC. Amounts that the manager of 497 Dean Street LLC advances on behalf of Realty Mogul 84, LLC will be deemed to be a manager loan at an expected interest rate of 10%. Amounts that are contributed by existing or new members will be deemed to be additional capital contributions, in which case Realty Mogul 84, LLC's interest in 497 Dean Street LLC will suffer a proportionate amount of dilution.


Real Estate Market Risk

497 Dean Street LLC's economic performance and value, and thus the value of investors’ investment in Realty Mogul 84, LLC, is subject to various risks associated with the Property. Real estate markets are affected by many factors, such as general economic conditions, supply and demand for real estate investments, interest rates, the availability of financing, and other factors. Investments related to real estate are also subject to market valuation risks that may be caused by changing economic and local market conditions such as local real estate market conditions. The Property’s economic performance and value, and thus the value of investors’ investment in Realty Mogul 84, LLC, is subject to such risks, all of which are beyond the control of both Realty Mogul 84, LLC and 497 Dean Street LLC.


Apartment Complex - Competition

Competition in the Property’s local market area is significant and may affect the Property’s occupancy levels, rental rates and operating expenses. The Property will compete with other residential alternatives to attract tenants, including but not limited to other apartment units that are currently available for rent, new apartments that are built and condominiums/houses that are for rent or sale. If development of apartment complexes by other operators were to increase, due to increases in availability of funds for investment or other reasons, then competition with the Property could intensify. If the Property is not able to successfully compete with the competitive residential alternatives in the local or regional area this could adversely affect the ability of Sponsor Entity to sell the Property, rent its units as necessary to maintain occupancy, and/or to increase or maintain unit rental rates.


Lease-up Risks

The Property currently has a 100% occupancy level, and the Sponsor intends to implement a capital improvement plan in its effort to maintain and/or increase that occupancy level. There can be no assurance that such renovations will be consummated on a timely basis, that such work will not materially adversely affect other aspects of the operation of the Property, or that the plan will result in the Property maintaining its occupancy level at rental rates in line with those projected. Any delays or adverse effects of such work could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment. Although the Sponsor believes that comparable properties are currently achieving rental rates that are in line with those expected from the Property, there can be no assurance that such rental rates will be achieved. Failure to realize such increased rental rates could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment.


The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Issuer Document Package for a discussion of additional risks.

The above presentation is based upon information supplied by the Sponsor and others. Realty Mogul, Co., RM Manager, LLC, and Realty Mogul 84, LLC, along with their respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein. The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.

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