DISCLAIMER

The analysis of Eden Fund, LLC may include certain statements and projections of the anticipated performance of
certain assets. Such statements and projections reflect the opinion of Eden Fund, LLC regarding anticipated results and
are subject to economic uncertainties. The information contained within has been prepared solely for informational
purposes.

This presentation is not a recommendation or solicitation to buy or sell any securities.

EDEN FUND LLC

 WHY WE LIKE LAS VEGAS
R E A L E S TAT E Each market has its own dynamics based on variables like
inventory levels, employment prospects, migration trends,
and property taxes.
There has been a once-in-a-lifetime housing bust in the
United States that has destroyed misguided notions that This chart shows the variation in median home prices across
home prices rise year after year. various markets. As you can see, the magnitude of the
housing bubble was far from uniform nationwide.
Bullish sentiment that lasted for generations has
disappeared without a trace. Gone are the days of the zero
down, negative amortizing, adjustable-rate mortgage.
Now it is time to get back to reality.

The operative word right now is panic: Foreclosures are

rising; banks have tightened lending standards; and
unemployment is elevated. It appears there is no worse
time to buy a home.

So why am I now turning bullish on

Las Vegas real estate?

Simply put, Las Vegas real estate is too cheap on a relative

basis. There is a time and place for every market.

I believe it is Las Vegas' time.

EDEN FUND LLC

 LAS VEGAS
R E A L E S TAT E M A R K E T

The Las Vegas real estate market has been hit especially
hard by this housing crisis, which makes sense if you think
about it. As a hub of discretionary spending, the Las Vegas
real estate market will tend to be procyclical.

In other words, it will rise more than other markets in

times of economic expansion, and it will fall more than
other markets in times of economic contraction. In a
sense, it is the ultimate leveraged play on real estate.

It is important to understand that Las Vegas real estate is

no longer a bubble; in fact, it is at pre-bubble levels.
Distressed sale prices are converging with conventional
sale prices, which is a positive for buyers. Prices continue
to fall as short sales, foreclosures, and REO sales rise.

Buyers are hesitant to step in right now because they

think another major dip in home prices is coming.
I personally think the worst of the housing crisis in this
particular cycle is over, and I'll explain why.

But first I want to take some to time to explain how real

estate works as an investment.

EDEN FUND LLC

 U N D E R S TA N D I N G R E A L E S TAT E

The most important thing to understand about real estate is

that it is an investment that depends on leverage. The
implementation of the 30-year mortgage helped support
home prices during the Great Depression by allowing the
average person to bring 30 years of earnings forward. Once
the 30-year mortgage was in place, home prices rose more
or less in line with inflation.

It was only after the introduction of leverage via securitized

products that housing expanded way beyond the rate of
inflation.

Now that these securitized products have blown up, it is

reasonable to believe that housing will rise in line with
inflation.

Loan-to-value ratios represent the leverage in an

investment. While loan-to-value ratios have fallen
considerably from their peak, they are still very attractive.
A standard 20% down payment still represents 5 to 1
leverage. You will be hard-pressed to find this kind of
leverage in any other mainstream investment. The upside
potential in these kind of leverage plays is tremendous.

EDEN FUND LLC

 C A S H F L O W V S C A P I TA L G A I N S MONTHLY REVENUES AND EXPENSES
SOURCES USES / COSTS
Home Price Total Monthly
Real estate should not be bought as a speculative purchase; it (1% Monthly Monthly Monthly Monthly Net
should be bought when the cash flow from rents exceeds the Yr Appreciation) Rent Mortgage Maintenance Costs Income
cost of carry. With a positive cash flow position, one can ride out 1 $100,000.0 $1,000.0 $429.5 $166.7 $596.1 $403.9
cycles in real estate while building equity through loan
2 $101,000.0 $1,010.0 $429.5 $168.3 $597.8 $412.2
amortization.
3 $102,010.0 $1,020.1 $429.5 $170.0 $599.5 $420.6

This presents a very cookie cutter, "safe" return in most 4 $103,030.1 $1,030.3 $429.5 $171.7 $601.2 $429.1
economic environments. However, by catching the right cycle, 5 $104,060.4 $1,040.6 $429.5 $173.4 $602.9 $437.7
one can return many multiples on invested equity. 6 $105,101.0 $1,051.0 $429.5 $175.2 $604.6 $446.4
7 $106,152.0 $1,061.5 $429.5 $176.9 $606.4 $455.1
Here's a very simple example of the potential returns in real
8 $107,213.5 $1,072.1 $429.5 $178.7 $608.1 $464.0
estate with the following assumptions.
9 $108,285.7 $1,082.9 $429.5 $180.5 $609.9 $472.9
10 $109,368.5 $1,093.7 $429.5 $182.3 $611.7 $481.9

ASSUMPTIONS FOR 3 BR RESIDENTIAL HOME IN LAS VEGAS

Price $100,000 ($ on monthly basis)
Home Price Appreciation 1.0% Rent: $1,000.0
Down Payment on Property 20.0% Cost of Carry: $596.5
Mortgage Rate 5.0% Mortgage Payments: $429.5
Closing Costs 2.0%
Selling Fees 5.0%
Property Taxes 1.5%
Maintenance & Insurance 2.0% Down Payment $20,000.0
Income Tax Rate 25.0% Closing Costs $2,000.0

Monthly Rent Total Initial

Appreciation 1.0% Costs $22,000.0

EDEN FUND LLC

 ANNUAL REVENUES AND EXPENSES 10 YEAR IRR
ANNUAL Price in Principal
Net Income Yr 10 Balance Equity Yr Cash Flow IRR
Net Net Mortgage After
Income Property Income Interest Deduction Mortgage $28,026.
(Pre-tax) Taxes (Post-tax) Payment (25%) Deduction $109,368.5 $81,342.1 5 0 ($22,000.0) 21.9%

1 $4,588.1
$4,846.5 $1,500.0 $3,346.5 $4,966.5 $1,241.6 $4,588.1
2 $4,654.2
$4,946.5 $1,515.0 $3,431.5 $4,891.0 $1,222.8 $4,654.2 3 $4,720.2
4 $4,786.1
$5,047.5 $1,530.2 $3,517.3 $4,811.7 $1,202.9 $4,720.2
5 $4,851.8
$5,149.5 $1,545.5 $3,604.0 $4,728.3 $1,182.1 $4,786.1 6 $4,917.2

$5,252.5 $1,560.9 $3,691.6 $4,640.6 $1,160.1 $4,851.8 7 $4,982.3

8 $5,047.1
$5,356.6 $1,576.5 $3,780.1 $4,548.4 $1,137.1 $4,917.2
9 $5,111.4
$5,461.7 $1,592.3 $3,869.4 $4,451.6 $1,112.9 $4,982.3
10 $28,026.5
$5,567.8 $1,608.2 $3,959.6 $4,349.7 $1,087.4 $5,047.1

$5,675.0 $1,624.3 $4,050.8 $4,242.7 $1,060.7 $5,111.4

$5,783.3 $1,640.5 $4,142.8 $4,130.2 $1,032.5 $5,175.4

As you can see, buying real estate when it provides positive cash
flow results in solid returns even with very modest home
appreciation assumptions. Buying when the costs of carry are
covered by rents defines your downside to an extent. This is your
“margin of safety.” The optionality of real estate is derived from
capital gains.

EDEN FUND LLC

I N F L AT I O N - A D J U S T E D H O M E P R I C E S

When thinking about real estate, it’s important to distinguish

between nominal and real prices. Nominal prices, or prices not
adjusted for inflation, are what most people focus on.

However, the savvier investor focuses on real home prices.

As I’ve demonstrated before, home prices nationally have
more or less tracked inflation for generations.

Currently, the real price of homes nationally is slightly above

the long-term trend in inflation.

However, in Las Vegas, not only have nominal prices

collapsed, but real prices have as well. In fact, real prices are
currently below 1987 levels, which was before the initial
boom in Las Vegas courtesy of Steve Wynn.

Prices in Las Vegas have overshot to the downside, and it is

reasonable to expect the pre-bubble trend in real prices to
reappear.

No matter how bearish you are on housing or the economy in

general, you must understand that every asset has a price in
which the expected return justifies an investment. This is a
situation that is developing in Las Vegas.

EDEN FUND LLC

 HOME AFFORDABILITY
30 YEAR MORTGAGE RATE
There are three key factors that affect the affordability of homes:
mortgage rates, household income, and home prices. While U.S.
median income has stayed relatively stable, mortgage rates and
home prices have fallen off considerably from their peak.

Normally you would expect home prices to move inversely with

interest rates; however, home prices have fallen along with interest
rates in this particular cycle. This is a positive scenario for potential
homebuyers.

One metric used to calculate whether real estate is overvalued,

undervalued, or trading at fair value is the median home price to
median income ratio. Historically, the national ratio is 3.5, which is
just about where we are trading at now.

In comparison, the ratio in Las Vegas is currently 2.5. In other

words, homes are very cheap in Las Vegas relative to the income of
its residents. This phenomenon will work to support prices moving
forward.

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 U.S. MEDIAN INCOME

MEDIAN INCOME TO MEDIAN HOME PRICE

EDEN FUND LLC

AVERAGE MONTHLY MORTGAGE PAYMENT AS % OF
MEDIAN INCOME
Another way of determining home affordability is to measure the
portion of income that goes towards housing. Due to the curious
situation of mortgage rates falling with home prices, mortgage
payments have actually fallen as a percent of income, even during
the recession.

As you can see, the data simply does not support the notion that
home prices are overvalued. Real estate is a market dominated by
irrational fear. At tops, everyone is exuberant; at bottoms,
everyone is fearful. This is just how markets operate.

EDEN FUND LLC

 WHO WILL RENT?
A R E N ’ T VA C A N C I E S H I G H ?

Obviously all cash flow projections go out the door if there

are no renters. This is why you should have a huge margin of
safety when you invest in real estate. By realistically
accounting for expenses and vacancy rates, you are doing
yourself a favor. Based on conservative projections, we can
calculate our breakeven vacancy rate using the projections
from Page 4.

Keep in mind that even in this somewhat drastic scenario,

we are still paying off the mortgage with other people’s
money- hence in a flat market, we are still making a return.

EDEN FUND LLC

 ECHO GENERATION, ANYONE?
Demographics play a huge role in any real estate market. Most
people know about Baby Boomers and the effect they will have
on our economy. However, fewer people know about the Echo
Generation, which is composed of people born between the mid
1970’sand the early 2000’s.

The Echo Generation represents another “Baby Boom”

generation, albeit smaller in scale. The average person in the U.S.
now buys a home when they are 38. In other words, the majority
of the Echo Generation is still renting. Shortage of renters?

EDEN FUND LLC

 HOME OWNERSHIP RATE

The home ownership rate in America gives us an idea of the

number of renters there are at any given time. A lower home
ownership rate means there are more renters, which favors
those who own rental properties. According to the Census
Bureau, the homeownership rate has fallen, and with rising
foreclosures, it will likely continue to fall.

Each percentage point drop in the home ownership rate is

equivalent to about 2 million people becoming renters.
Everyone talks about foreclosures, underwater homeowners,
and distressed sales as if it were a bad thing for owners of rental
properties. But these seemingly “negative” housing indicators
actually increase the supply of renters and put upward pressure
on rents. From the following chart from rentbits.com, it appears
rents have stabilized even while home prices continue to fall.
This is very bullish for owners of rental properties.

EDEN FUND LLC

 BABY BOOMERS
One of the most important things to consider is the We believe you will see a converging of real estate prices
migration pattern of Baby Boomers. The two things on the top between the overvalued markets (NYC, Los Angeles, etc.) and
of Boomers wish lists for housing are: the undervalued/distressed markets (Las Vegas, Miami, etc.)
as domestic Baby Boomer migration trends emerge.
1) low costs of living
2) favorable climates While the Echo Generation will determine rental income, the
Baby Boom generation will determine home appreciation.
Las Vegas scores high on both counts. Boomers by and large are not affected by recessions; they are
affected by interest rates. They are the only demographic that
Baby Boomers who planned on using their home equity to has the ability to spend in a downturn. In other words,
retire are now in trouble. While a rising market benefited the Boomers will provide liquidity to the housing market.
net worth of Boomers, it didn't necessarily improve their cash
flow situation. Many Boomers are now finding that they are
sitting on a liability with rising property taxes and energy
costs. This is leading to the next big trend for Boomers:
Trading down.

The majority of the wealth in the country is concentrated in

the Baby Boomer demographic. By extension, the most
expensive markets are dominated by Baby Boomers.

EDEN FUND LLC

 CONCLUSION

After the bursting of the real estate bubble, housing has become a relatively shunned investment. There is no better
time to invest than when an asset as a whole is hated, especially when objective metrics suggest huge undervaluation.
No one is rushing to buy Las Vegas real estate, which means we can slowly build a position and capitalize on the
eventual appreciation.

Considering the macroeconomic backdrop, mortgage rates, and prices, we believe 20% annualized compounded
returns are a very conservative forecast. In our opinion, a bottom in real estate is going to come sometime between
late 2011 and late 2012. The countertrend recovery cycle in real estate should last 3-5 years, and Las Vegas should be
one of the prime beneficiaries.

It is just time to invest in Las Vegas real estate.

EDEN FUND LLC

 C O N TA C T U S

Moses Kim & Victor Yun

Managing Partners
Eden Fund LLC
edenfundllc@gmail.com
expectedreturnsblog.com

EDEN FUND LLC