Sheelytown LCA In Action!

Mr. Contractor, the owner of a small contracting business, just received notice from his landlord that he needs to vacate his property in the next 90 days. Mr. Contractor is forced to consider his options for a long-term, feasible property for his business. Mr. Contractor needs approximately 3,000 square feet of space in a centralized location with easy access to all parts of the city. Mr. Contractor is considering an SBA loan to finance the acquisition and development of a suitable property. Mr. Contractor is also considering leasing a new property, but after the upheaval to his business operations due to the unexpected termination of his lease, Mr. Contractor would prefer to own a property. Mr. Contractor learns of the possibility of joining the Sheelytown LCA and requests more information.

Significantly Reduced Cost of Ownership

Mr. Contractor reviews the information provided by the LCA and learns of the significant financial benefits he could receive by becoming a member of the Sheelytown LCA, including:

a purchase price for a brand new property averaging 17% below market, which builds immediate equity;

an implied interest rate that saves him approximately 75% of his effective interest costs;
downpayment requirements that are approximately 86% lower than traditional lenders (70% LTV for commercial lenders vs. 5% for LCA members);
no fees or closing costs (average commercial loan closing costs are approximately 3.75% of loan amount); and
flexible underwriting criteria

A Feasible Alternative to Leasing

Mr. Contractor wants to make sure he considers all of his options and also looks at the alternative of leasing a new property. Mr. Contractor has learned the hard way that leasing does not provide long-term stability due to the uncertainty of long-term occupancy, not to mention the variable leasing costs that seem to never stop increasing. Mr. Contractor compares the benefits of leasing to ownership through the Sheelytown LCA and realizes the significant benefits of LCA ownership vs. leasing, including:

As a tenant, Mr. Contractor builds no equity in the property; with ownership through the LCA, he would build immediate equity;

Mr. Contractor has never enjoyed the benefits of the appreciation of his property’s value; as an LCA member, he would enjoy 100% of his property’s appreciation;
As he knows all too well, as a tenant, Mr. Contractor is subject to unpredictable rising leasing costs; LCA Members enjoy a fixed payment that will not increase during the term of their ownership;
The landlord, not Mr. Contractor, receives the tax benefits of property ownership; as an LCA member, all tax benefits go to him.
As a tenant, Mr. Contractor would remain subject to long-term uncertainty regarding the availability and use of his property, leading to increased variable costs, moving expenses and disruptions to his business; as an LCA member, Mr. Contractor would secure long-term ownership, allowing for fewer variable costs and greater certainty.

Mr. Contractor decides to dig deeper and do a detailed comparison to see how much money he could actually save. He is surprised to learn of the significant cash flow savings as compared to the proposed SBA loan, saving him $1,600 per month in debt service payments, over $114,000 due to a reduced downpayment requirement, and saving approximately $21,375 in closing costs. On top of that, the subsidized purchase price for the property gives Mr. Contractor $120,000 in immediate equity. Mr. Contractor is amazed to discover that ownership is now truly within reach!

The Financial Comparison vs. Traditional Financing

  
        LCA Members
        Market Terms
        LCA Member Savings
      
        Purchase Price
        $600,000
        $720,000
        $120,000
      
        Downpayment
        $30,0000
        $144,0000
        $114,000
      
        Interest Rate
        6%
        10.5%
        4.5%
      
        Payment Amount
        $4,084/month
        $5,751/month
        $1,667/month
      
        Closing Costs
        $0
        $21,375
        $21,375

Although Mr. Contractor recognizes all of these benefits, he wants to sharpen his pencil to determine the economic benefit of participating in the LCA vs. leasing. To his delight, he discovers that the up-front out- of-pocket expenses of the LCA membership are very manageable. Mr. Contractor also is pleased that he will save over $20,000 per year vs. leasing, will receive additional tax benefits, and, most importantly, is projected to have over $350,000 in equity value after only five years ($150,000 of which he gets on day one)!

The Financial Comparison vs. Leasing

  
        Leasing
        Buying
        Benefit to LCA Members
      
        Annual Rent/Payment
        $54,000
        $49,004
        $4,996 saved annually
      
        Downpayment
        $9,000
        $30,000
        -$21,000 upfront
      
        Total 5-Year Cost
        $295,693
        $275,000
        $20,674 saved over 5 years
      
        Annual Tax Benefits
        $17,280
        $26,329
        $9,049 gained annually
      
        Immediate Equity
        $0
        $150,000
        $150,000 gain
      
        Equity After 5 Years
        $0
        $350,750
        $350,750 gain

Express Your Interest in Sheelytown LCA by Completing this Letter of Interest!