Foreclosure-investment company unveiled

By John Rebchook, Rocky Mountain News (Contact)

Monday, May 12, 2008

Real estate investor Christian Hageseth today will unveil Fusion Real Estate Investments, a company designed to streamline the process for investing in Denver-area foreclosures.

Hageseth, founder and president of another real estate company, Home Investment Portfolio Partners, said prospects for appreciation may be on the horizon.

During the previous real estate cycle, foreclosures peaked in 1988, and home values continued to stumble until 1990, "when they hit the trough," before rising in value for almost a decade, Hageseth said.

"If you had bought in the trough in 1990, and you held the property until 1993, you could have sold the home for a good profit," Hageseth said.

"If you bought in the late 1980s and early 1990s and held on to the home for 10 years, your investment would have tripled - and in some pockets of Denver gone up by much more. I think today we are at or pretty close to the trough."

HIPP used investors to buy real estate. Investors who bought about a dozen homes at the top of the market are struggling, but more than 250 other properties performed well, Hageseth said.

With Fusion, he has identified what he calls "real estate operators" - real estate experts who know the market.

He then matches the operators with investors - people with steady jobs and good credit - who can either buy the homes with cash or make down payments of 10 percent to 20 percent.

One of the operators is Travis Steffens, who owns about 60 properties he bought from banks. Twenty-two are under contract to investors.

"A friend introduced me to Chris (Hageseth), and I liked him the second we met," Steffens said. "He seemed to have a lot of integrity, and the company was a perfect match for what we do."

Steffens buys structurally sound homes owned by lenders following foreclosures.

Typically, the interiors are a mess.

"They are usually very trashed," he said. He sends in a team to fix them up but doesn't include amenities such as granite countertops.

After Steffens rents the houses, he tries to sell them to investors, who are prescreened by Fusion.

The homes are selling from about $75,000 to $125,000 and have positive cash flow of $200 to $700 a month.

The homes initially sold from about $140,000 to $200,000.

Steffens doesn't want to reveal how much he paid for them, "but obviously, we had to pay for them at heavily discounted rates for it to make sense."

After the investor buys a house, Steffens can arrange everything from property management to collecting rents to handling the sale. Investors also can do that work themselves.

But if the investor uses Steffens' services, he will share in some of the profits when the home is sold. The percentage depends on several factors, and the terms are spelled out in a contract. The expected holding period is three to five years, so this is not a "fix and flip" for the investor.

Independent real estate broker Gary Bauer said concepts such as Fusion's can work but that consumers must be vigilant.

"This type of business model works under a couple of conditions," said Bauer, after the Rocky Mountain News explained the concept to him.

"First, you have to make sure management is really there working for you. And second, and most important, as an investor you know exactly what your outlay is and there are no surprises. The model is an interesting one, and if done right, it should make money for everyone."

Also, investors should be aware that they are tying up their money for at least three years.

Also, Bauer said these types of companies are not regulated by state or federal agencies.

Hageseth notes that he is not acting as a real estate broker, and he encourages investors to use their own real estate agents as well as have accountants and lawyers look at the transaction.

"We want to be totally transparent to investors," Hageseth said.

rebchookj@RockyMountainNews.com or 303-954-5207

Fusion, step by step

Step 1 Real estate operators buy foreclosed properties at deep discounts from lenders, renovate them and either rent the houses or make them ready to be rented. Renters often are people who lost homes in foreclosures.

Step 2 Wealthy investors or those who just have good credit histories and steady jobs buy one or more rented houses from operators. Fusion receives a negotiated fee for bringing investors to the real estate operators.

Step 3 The operators are willing to arrange things such as property management and collecting rents, for a price and a piece of the profit when sold. Or, investors can do all the work themselves, increasing their return, but also the hassles of being a landlord.

Step 4 Property is sold. Holding period expected to be three to five years.

• May 13, 2008

  3:15 p.m.

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  SASQUATCH writes:

  TODAY'S FORECLOSURE IS TOMORROW'S AFFORDABLE HOUSING!