Model 1:
What is
Model 1?
A Model 1 investment gives investors options. Investors may use their Model 1 note to purchase a new home at a discounted price. Alternatively, they can opt to earn a fixed rate of interest on their investment.
Investment Security
The investment notes are secured in the following ways:
• BuildX will invest all note proceeds in the selected projects as preferred equity.
• Upon project completion, BuildX's Model 1 note holders will be entitled to repayment before any distributions of profit are made to the project developers.
Purchase Option
As described above, investors have the option to purchase a condo unit at a locked-in, discounted price at the end of the investment term in lieu of the accrued interest. This discounted price is based on a price per square foot as determined at the time the note was purchased – which is a significantly lower price than the market value of the same square footage at the time the project is completed. In essence, the investor may use the repaid principal to purchase a fully completed and ready to live-in home at a pre-completion price. The principal amount of the note must be equal to or greater than the size of the selected unit multiplied by the locked-in price per square foot. Investors may also aggregate and combine multiple notes in exercising the purchase option.
Sometimes the specifications of the completed project slightly deviate from the initial architectural plans due to changes that arise during the construction phase. If, upon project completion, the square footage of the selected unit is larger than anticipated due to architectural changes and the investor chooses to continue with the purchase, they may make up the difference in principal at the time of purchase. Conversely, any excess of principal over price per square foot will be refunded to the investor.
Investors considering exercising the purchase option may reserve a unit or multiple units at any time throughout the term of the investment, provided that the principal value of investment note is enough to accommodate the requested units to be reserved. Reservations may be canceled or modified at any time before purchase, subject to availability.
Model 1 Benefits
Model 1 investments offer a strong and predictable rate for investors seeking to generate an interest return on their investment. The investments also offer a predictable exit date for those concerned about potential delays that are sometimes encountered during the construction process.
Model 1 also offers a convenient way to purchase a new home at a discounted price. The price per square foot is locked at the time the investment is made. When the project is complete, the investor may opt to purchase a unit at the locked pre-completion price per square foot, despite the market value becoming significantly higher. Early investors are rewarded with the biggest discount. The offered price per square foot gradually increases as the project development progresses. The earlier the investment is made, the greater the discount toward purchase. The discounted price will not be affected by making, changing, or canceling a unit reservation. The locked-in, discounted price is set for the lifetime of the investment to the available price for the specific unit on the date the note purchase is made. After purchase, the unit may be used for any purpose, such as to live in or to rent out.
The chart below compares a Model 1 investment of $810,000 pre-construction with the option to purchase a unit upon completion at a price of $900 per square foot (discounted from $1,350 market rate upon completion), versus purchasing a unit from a completed project with $810,000 at $1,350 per square foot:
| Early model 1 investment | Completed project | ||
|---|---|---|---|
| Total cost | $810,000 | $810,000 | |
| Price per sq.ft | $900 | $1,350 | |
| Floor area available to purchase | 900 sq.ft | 600 sq.ft | |
| Market value upon completion | $1,215,888 | $810,000 | |
| Amount available to refinance out at 70% | $850,000 | $567,000 | |
| Actual cost* | $–40,500 | $243,000 | |
* Listed cost does not include taxes, legal fees, and other applicable transactional costs.
The next chart below compares a Model 1 investment in a 600 square-foot unit pre-construction with the option to purchase the unit upon completion at a price of $900 per square foot (discounted from $1,350 market rate upon completion), versus purchasing a 600 square foot unit from a completed project at $1,350 per square foot.
| Early model 1 investment | Completed project | ||
|---|---|---|---|
| Floor area | 600 sq.ft | 600 sq.ft | |
| Price per sq.ft | $900 | $1,350 | |
| Unit cost | $540,000 | $810,000 | |
| Market value upon completion | $810,000 | $810,000 | |
| Amount available to refinance out at 70% | $567,000 | $567,000 | |
| Actual cost* | $–27,500 | $243,000 | |
* Listed cost does not include taxes, legal fees, and other applicable transactional costs.
Model 1 also offers a tax advantage to investors who choose to purchase a unit at the end of the investment term. Neither the discounted purchase nor the refinancing of an purchased unit is subject to income tax. Investors are strongly advised to consult with a qualified accountant or other tax specialist.
Making and
Managing a
Model 1 Investment
If you would like to make a Model 1 investment, please follow these steps to complete the investment process:
1
Open an account at buildx.us"."
2
Decide how much to invest and consider funding your BuildX account in advance via wire or ACH transfer. Wire transfers may sometimes take 2-3 days and ACH transfers can often take up to 7 days. Alternatively, investors may mail a check to BuildX, but checks will not be considered effective until they are cleared by the bank. To avoid delays during the note purchase process, we recommend initiating the funding while you explore the available note offers.
3
Choose your desired note from the available offers. If you want to reserve the option to purchase a specific unit, please check the availability of the units and current discounted price first, so as to decide the note amount. The note amount should not be less than the current discounted price of the requested unit.
4
Review and electronically sign all subscription documents pertaining to the note purchase.
5
Complete purchase of the note by making the requisite payment using your BuildX account fund balance or unused note balance.
6
At this time, you may optionally choose a desired unit for purchase reservation.
7
After the project is completed and a Certificate of Occupancy (CO) is issued by the New York City Department of Buildings, or alternatively if you choose to terminate your investment after three years, you must decide whether to accept repayment of your investment principal with accrued interest, or to waive the interest and apply the principal toward purchase the chosen unit by exercising the unit purchase option.
If you opt to purchase the unit(s), you may be able to refinance all or part of the capital out and use the proceeds for a new investment in a Model 1 note.
