Real Estate Investments, just like any investment, involve a considerable amount of risk.  You could lose your entire investment.  In addition, the Company is affected by many different risks.

In this document, "Company" refers to Raleigh Funding Group, Inc. or any partnership now existing or formed in the future and controlled by Raleigh Funding Group, Inc. or its subsidiaries or affiliates.  "Management" refers Raleigh Funding Group, Inc. or any future assigned management company.  "Property" or "Properties" refer to any property or other similar investment purchased by the company and/or contributed to the Company.  "We" and "our" refers to the Company and the partners jointly and severally.

Safe Harbor Statement

This web site and other material contains various "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. For this purpose, any statements contained in this filing that relate to prospective events or developments are deemed to be forward-looking statements. Words such as "believes," "forecasts," "anticipates," "intends," "plans," "expects," "may," "will," "could," "should," "estimates," approximate," "guidance" and similar expressions are intended to identify forward-looking statements. These forward-looking statements reflect the Company’s current views with respect to future events and financial performance, but involve known and unknown risks and uncertainties, both general and specific to the matters discussed in this filing. These risks and uncertainties may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward looking statements. Such risks and uncertainties include the national, regional and local economic climates, the ability to maintain rental rates and occupancy levels, competitive market forces, changes in market rates of interest, the ability of home buyers to obtain financing, the level of repossessions by home lenders and those risks and uncertainties referenced under the headings entitled "Risks" contained on this web site. The forward-looking statements contained herein speak only as of the date hereof and the Company expressly disclaims any obligation to provide public updates, revisions or amendments to any forward-looking statements made herein to reflect changes in the Company’s expectations of future events.

Economic, Market, and Insurance issues Could Adversely Affect Our Economic Performance

Unfavorable Economic Conditions and Other Factors Could Adversely Affect the Value of Our Properties and Our Cash Flow. Several factors may adversely affect the economic performance and value of our Properties. These factors include:

• changes in the national, regional and local economic climate;
• local conditions such as an oversupply of properties or a reduction in demand for properties in the area, the attractiveness of our Properties to customers, competition from alternative forms of housing (such as apartment buildings);
• our ability to collect rent from customers and pay maintenance, insurance and other operating costs (including real estate taxes), which could increase over time;
• the failure of our assets to generate income sufficient to pay our expenses, service our debt and maintain our Properties, which may adversely affect our ability to make expected distributions to our partners;
• our inability to meet mortgage payments on any Property that is mortgaged, in which case the lender could foreclose on the mortgage and take the Property;
• interest rate levels and the availability of financing, which may adversely affect our financial condition;
• the financial condition of our residents could be affected by national, regional or local changes that could negatively affect our occupancy;
• we may be unable to attract or retain residents at our desired rental rates causing a decline in rental income, extended vacancy, and greatly reduced return on investment;
• changes in laws and governmental regulations (including rent control laws and regulations governing usage, zoning and taxes), which may adversely affect our financial condition; and
• changes in social, economic and other factors in the neighborhoods in which we own houses could adversely affect the value of the properties.

New Acquisitions May Fail to Perform as Expected and Competition for Acquisitions May Result in Increased Prices for Properties. We intend to continue to acquire properties. Newly acquired properties may fail to perform as expected. We may underestimate the costs necessary to bring an acquired property up to standards established for its intended market position.  Difficulties in integrating acquisitions may prove costly or time-consuming and could divert management attention. Additionally, we expect that would-be homeowners and other real estate investors with significant capital will compete with us for attractive investment opportunities. Such competition increases prices for properties. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms.

Because Real Estate Investments Are Illiquid, We May Not be Able to Sell Properties When Appropriate. Real estate investments generally cannot be sold quickly. We may not be able to vary our portfolio promptly in response to economic or other conditions, forcing us to accept lower than market value. This inability to respond promptly to changes in the performance of our investments could adversely affect our financial condition and ability to service debt and make distributions to the partners.

Some Potential Losses Are Not Covered by Insurance. We carry comprehensive liability, fire, and loss of rents insurance on all of our Properties. We believe the policy specifications and insured limits of these policies are adequate and appropriate. However, there could be unanticipated losses that are not covered or which exceed the coverage we carry.  Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a Property, as well as the anticipated future revenue from the Property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the Property.  In a lawsuit, judges, sympathetic with a potential plaintiff’s position, could award damages in excess of insurance coverage, which could result in charging orders against the partnership.

Changes to Entity Taxation Laws Could Affect the Partnership’s and Partners’ Profitability.  Currently taxable income on real estate is generally reduced by allowable business expenses, depreciation, and amortization.  Federal, State, and local governments could change taxation laws, disallowing certain deductions to income.  Such changes could adversely affect the Partnership’s and the Partner’s taxes owed.

Debt Financing, Financial Covenants and Degree of Leverage Could Adversely Affect Our Economic Performance.

Scheduled Debt Payments Could Adversely Affect Our Financial Condition. Our business is subject to risks normally associated with debt financing. Typically properties are acquired at 95% loan to value.  Our substantial indebtedness and the cash flow associated with serving our indebtedness could have important consequences, including the risks that:

• our cash flow could be insufficient to pay distributions at expected levels and meet required payments of principal and interest;
• we will be required to use a substantial portion of our cash flow from operations to pay our indebtedness, thereby reducing the availability of our cash flow to fund future acquisitions, capital expenditures and other general business purposes;
• our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
• the lender may require early repayment of principal, and we may not be able to refinance existing indebtedness if required by the lender, and, if we can refinance, the terms of such refinancing might not be as favorable as the terms of existing indebtedness;
• if prevailing interest rates or other factors at the time of refinancing (such as the possible reluctance of lenders to make commercial real estate loans) result in higher interest rates, increased interest expense would adversely affect cash flow and our ability to service debt and make distributions to stockholders.

Financial Covenants Could Adversely Affect Our Financial Condition. If a Property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose on the Property, resulting in loss of income and asset value. The mortgages on our Properties contain customary negative covenants which, among other things, limit our ability, without the prior consent of the lender, to transfer the property to another entity (such as this partnership) for asset protection and planning.  The lender could require early payment of principal (i.e., "call the note due") should any partner violate these covenants.  We may not have the ability to meet such a call to payoff the principal wherein the lender could begin foreclosure proceeding.  Foreclosure on mortgaged Properties or an inability to refinance existing indebtedness would likely have a significant negative impact on the guaranteeing partner’s credit rating, our financial condition and results of operations.

Our Degree of Leverage Could Limit Our Ability to Obtain Additional Financing. Over time, increased debt will have a negative effect on our ability to acquire more properties with additional financing.  The high degree of debt makes us more vulnerable to a downturn in business or the economy generally.

Government Regulations, Statutes and Environmental Liability Could Adversely Affect our Economic Performance

The Company is subject to significant regulation that inhibits our activities and may increase our costs.  Local zoning and use laws, environmental statutes and other governmental requirements may restrict expansion, rehabilitation and reconstruction activities.  These regulations may prevent the Company from taking advantage of economic opportunities.  Legislation such as the Americans with Disabilities Act may require the Company to modify its properties.  Future legislation may impose additional requirements.  No prediction can be made as to what requirements may be enacted or what changes may be implemented to existing legislation.

The Company is subject to statutes regarding landlord-tenant issues, including eviction for tenant violations of lease agreements.  Those laws are subject to change potentially offering protection for tenants and putting our investments and profits at risk.  The Company is also subject to magistrates’ and judges’ sympathy toward tenants as well as their interpretations of existing statutes.  Specifically, some small claims magistrates hold the opinion that any option to purchase offered to tenants disqualifies an eviction case from small claim court, requiring the case to be heard in district court.  Should eviction cases have to be heard in district court, the total time required to evict a defaulting tenant would increase substantially.  This is an unresolved issue as certain district court judges disagree with the small claims magistrates’ opinions on the matter, and even certain small claims magistrates disagree among themselves. 

In its history, Management has had several eviction cases dismissed from small claims court on the basis of our having granted the tenant an option to purchase.  As of this writing, Management has been able to resolve the issue with the tenants without having to take the case to district court. 

Environmental Liability Risks

Environmental liabilities could affect our profitability.  Current and former real estate owners and operators may be required by law to investigate and clean up hazardous substances released at the properties they own or operate or have owned or operated. They may be liable to the government or to third parties for property damage, investigation costs and cleanup costs.  Contamination may adversely affect the owner’s ability to sell or lease real estate or to borrow using the real estate as collateral.  There is no way of determining at this time the magnitude of any potential liability to which the Company may be subject arising out of unknown environmental conditions or violations with respect to the properties it owns.  Environmental laws today can impose liability on a previous owner or operator of a property that owned or operated the property at a time when hazardous or toxic substances were disposed of, or released from, the property.  A conveyance of the property, therefore, does not relieve the owner or operator from liability.  The Company is not aware of any environmental liabilities relating to its properties which would have a material adverse effect on its business, assets, or results of operations.  However, no assurance can be given that environmental liabilities will not arise in the future.

Currently, no house managed by Management is subject to radon, asbestos or lead-based paint monitoring requirements.  Although the Company could be required to monitor, mitigate, remove or encapsulate any of these hazards for any property.