About the
Distressed Realty Fund I, LLC

The current real estate recession started in 2002, when millions of eager homebuyers were purchasing houses with a minimal down payment. Mortgage loans were easily acquired without having to prove any loan application information. Meanwhile, Wall Street brokerage firms bundled billions of dollars of home mortgages into securities and sold them to investors around the world.

Everybody was happy, until it all collapsed in 2008, when the economy nose-dived into a deep recession. Suddenly, millions of subprime borrowers could not pay their monthly mortgage payments or property taxes. The result was a massive quantity of lender foreclosed REO (real estate owned) houses/properties, acquired redeemable tax deed houses and deed houses by government agencies that are now available in the U.S. In turn, this surplus of available foreclosed and acquired houses/properties has caused a major decline in the value of all houses nationwide.

The Distressed Realty Fund I, LLC was created to take advantage of the current distressed residential home buyer's market. The Fund is designed primarily to purchase selected foreclosed houses, REO houses from lenders, pre-foreclosed and short sale houses. The Fund may also purchase condominiums, townhomes, duplexes, 2 to 4 unit buildings and residential buildable lots. The Fund may purchase redeemable tax deed houses from county treasurers and deed acquired houses from various federal and state government agencies. Realty Fund Management, Inc., the Managing Member of this Fund, will purchase houses/ properties that are expected to produce rental incomes to the Fund of 10% to 50% per year and/or profits to the Fund of 20% to 40% per sale.

The Fund will purchase houses while raising the $3,000,000 of investment capital from accredited investors via the Private Placement Memorandum (PPM) offering document and continue to purchase additional houses throughout its operating life. All purchased houses will have titles recorded in the Fund's name. Houses will be purchased in larger cities where there is normally strong local employment and expected future growth.

The timing has never been better for a private Fund to offer Investors the opportunity to participate in purchasing distressed priced houses/properties. Since 2006, most houses in the U.S. have lost 25% to 50% of their value. It has been estimated that over 2,000,000 houses have already been foreclosed. Some economists predict that there will be several million additional houses foreclosed by 2012. Now is the time to invest, while there are thousands of available distressed houses/properties to purchase in every major city.

After each purchased house has been renovated, it will be listed for rent or sale. Managing Member anticipates selling at least 50% of all renovated houses and renting the balance. Due to the current weak economy, renting is fast because of high demand. Rented houses will later be sold for expected higher net profits to the Fund.

The selling price of each renovated house will be based on current real estate comparable values of other like - kind houses recently sold in the immediate neighborhood. A licensed real estate appraiser may be hired to submit a report on some houses suggesting the rental and selling price. Each owned house will be insured for fire loss during renovation, while listed for sale, and when rented. To further protect the Fund, each house will also be insured under a $2,000,000 blanket liability policy.

Accredited Investors will enjoy the benefits of both rental and sales income streams. When renovated houses are rented, Investors will receive part of the rental income each quarter. As renovated houses are sold, Investors will receive part of the net profits each year. The process of producing net profits includes purchase, renovation and selling the house/property that may take several months.

Realty Fund Management, Inc. is the Managing Member of the Distressed Realty Fund I, LLC. David Zussman is the Chairman and President of the Managing Member. He also currently manages three prior distressed property Funds; the R E Tax Lien Fund I, LLC, the Tax Lien Income Fund I, LLC and the Yield & Profit Lien Fund I, LLC. These three prior Funds have purchased and renovated numerous houses in Atlanta and Memphis. Most of them have 2 - 3 bedrooms, 2 - 3 bathrooms, and range from 1,400 to 2,000 square feet. Houses purchased in the suburbs are around 20 years old, while those in the city are over 35 years old. The purchase price of these houses has averaged $55,000, with additional costs for renovation averaging $30,000, for a combined total cost averaging $85,000. To view all houses in Atlanta and Memphis the three prior Funds own, please visit the Fund's website.

Most renovated houses have been listed for sale at $120,000 and sold for an average net profit of 20% to 40% ($20,000 to $30,000) per house to the Fund. Renovated houses will rent for $950 per month. The rented houses are expected to produce an annual net income of 7% to 8% to the Fund. Houses listed for sale up to $417,000, can be purchased using FHA Government financing of 96.5%, requiring only a 3.5% down payment. Also, the federal government is currently offering tax credits to house buyers.

When the Fund buys a REO house from a lender, it receives clear title in its name at close of escrow. When buying an acquired house from a government agency, the Fund receives either a redeemable tax deed or deed title in its name. The sale is final when buying foreclosed and acquired houses from the federal government. The houses can be redeemed, when buying a redeemable tax deed from the county treasurer.

Every REO house must meet the Managing Member's due diligence standards prior to purchase. All REO houses include termite and structure inspections done by local licensed professionals. Inspectors provide written reports with supporting photos indicating existing problems. If a house requires normal renovations, the Fund usually completes the purchase within two weeks. If any serious structural, mold or termite damage is found, the Managing Member may renegotiate a lower purchase price, require the seller to make the repairs, or withdraw its offer.

The Fund will continue to purchase, renovate, rent, and sell houses for the next three years. The Managing Member expects this Fund to be able to purchase houses similar to those already acquired by the three prior managed Funds and with the same average cost and profitable percentages. As the economy improves and demand for houses increases, the purchase and renovation costs are expected to increase along with the final selling price. The Managing Member expects that it may cost more to acquire and renovate houses in other parts of the country.

The Managing Member expects the average purchased house to cost approximately 30% to 40% of the final selling price. The average renovation cost and selling expenses (escrow, title, and commissions) of each house are expected to cost 30% to 40% of the selling price. The average net profit from the sale of each house is expected to produce a 20% to 40% profit to the Fund.

Assuming the current average house will cost approximately $85,000 (including renovations) and that $3,000,000 will be raised (net $2,760,000 available to invest) from the PPM offering, the Fund could initially purchase and renovate up to 32 houses. During the Fund's operating life of 5-6 years, the Managing Member expects to purchase, renovate and sell 100 to 150 houses. The Managing Member expects each sold house to produce a $20,000 to $30,000 net profit to the Fund. If additional investment capital is raised and/or the Fund uses leverage from borrowed capital, the Fund is expected to purchase additional houses to renovate and sell for a profit.

At the end of the third operating year, the Managing Member will decide whether the Fund should operate for an additional one to two more years while liquidating its inventory of houses. If the Managing Member continues the Fund's operations, all newly purchased and acquired houses/ properties will only be sold, after necessary renovations. All remaining rented houses will be listed for sale as their leases expire. During each quarter of the final operating year, the available original invested capital, rental income, and the split of net profits from all sold houses will be distributed to Investors.

The Managing Member will receive the following fees each time these specific services are provided; an acquisition fee of 1.25% of the purchase price of each house at the close of escrow and a renovation fee of 1.25% of the total cost of each renovated house. The fee for renting houses will be a 1.25% per year, (paid quarterly) of the total cost of each rented house. The Managing Member will receive a minimum fee per year of 3% (paid quarterly) of the total cost of all houses owned by the fund.

Investors will receive their quarterly income payments and annual net profit payments at the same time. The return of investment capital to Investors is expected to be at the end of the final operating year of the Fund.