Over the past two years, Praxis Capital, a real estate private equity investment fund, has bought and sold more than 220 single-family homes in Northern California — all distressed properties.

The investment firm now is launching a new venture, the PCL Income and Appreciation Fund, LP. This fund, targeting select Northern California markets, will buy and hold entry level residential properties identified to generate monthly cash flow and yield future appreciation. The fund requires a minimum $100,000 investment.

[caption id="attachment_30024" align="alignright" width="288" caption="Chris Peterson, Brian Burke and Eric Peterson"][/caption]

“We were buying homes in the $150,000 to $250,000 range at first and it made sense to flip them,” said Chris Peterson a managing director and founder of the company. “Now we are buying in the $80,000 to $120,000 range, so why not keep them.”

The theory is that with the rental market becoming more competitive and the home building market in hibernation, by holding onto the properties for five years Praxis can leverage both the current rental market and then have a stock of properties to sell when the housing market comes back.

“In five to seven years, homebuilders will not have a lot of new homes on the market,” said Mr. Peterson.

Praxis Capital is currently the largest buyer of distressed residential properties in Sonoma County and much of Northern California.

Brian Burke, a managing director and founder of the company, has over the past 20 years developed computer software that takes seven sources of data from public documents and puts it into a centralized repository. From that data, decisions can be made about which distressed properties to purchase and for how much.

“We are taking information from bankruptcy courts, tax collector, assessor and other places and the information we generate allows us to be efficient on auction day when houses go to sale,” Mr. Burke said.

“With rental rates projected to increase as much as 10 percent over the next 12 months, and real estate values to bottom this summer, we recognize this as the opportune time to launch this new fund,” he said.

***

U.S. Housing and Urban Development Secretary Shaun Donovan unveiled HUD’s fiscal year 2012 budget proposal. Titled Creating Strong, Sustainable, Inclusive Communities and Quality Affordable Homes.

“The budget provides a roadmap for HUD to work with our regional and local partners to win the future by investing in innovation, building neighborhoods that are connected to jobs and providing greater access to opportunity, so American businesses and communities are the best in the world,” said Mr. Donovan. “The president has said that we need to live within our means to invest in the future. That has meant tough choices, including to programs that, absent the fiscal situation, we would not cut. But American families are tightening their belts and we need to do the same.”

•••

Submit items for this column to Jenna V. Loceff at jloceff@busjrnl.com, 707-521-4259 or fax 707-521-5292.