Pro Forma Financials and Assumptions:

The attached pro forma financials necessarily incorporate certain assumptions that are typical in the context of forecasting valuations for real estate investments. These assumptions are overviewed below and should be kept in mind in the course of reviewing the attached pro forma financials.

Comparable Sales and Captured Equity: The average market rent for a one-bedroom apartment in San Mateo County is $2,572 per month, according to new rental data released by the San Mateo County Department of Housing. This reflects an 12.3 percent increase from last year. Escalating rents have translated into rising per door prices for multi-family acquisitions as net operating incomes have risen due to higher rental values. Accordingly, comparable sales to date for 2016 establish per door prices for multi-family acquisitions in the range of $475,00 to $505,000 per door. The company believes that it has acquired the subject property significantly under market. This translates into captured equity for the investors. The company conservatively estimates a captured equity range of $50,000 per door. This per door savings multiplied by 5 units equates to captured equity in the range of $250K for this transaction.

Rental Value: The property consists of a single, well maintained building, in the desirable West El Camino rental corridor of Redwood City, CA. In total, there are three, two bedroom units, and two one bedroom units. All units are permitted as part of the original construction, there are no unwarranted units. Based on similarly situated buildings in this location, Menlo Gate estimates a fair market rental rate for this location of $2,900 each for the two bedroom units, $2,250 for the one bedroom units. These rents are estimated at present market. Based on the rental estimates above, we have run the attached pro forma financials at a combined annual rent of $158,400.00. Further, we have estimated a conservative annual rental increase of 5%. The financials also reflect an equivalent vacancy rate for a one bedroom unit going vacant for two months. For the record, we generally do not see units go vacant for more than a month, even in the worst of times.

Further, there is a coin-operated laundry facility in a separate laundry room at the property. The laundry room has a pair of machines set at fair market rates for laundry. We have estimated an annual income of $1,200 from the coin-operated laundry. Moreover, we have added income lines for the recovery of utility costs from tenants through Ratio Utility Billing Systems (“RUBS”). RUBS allows the company to recover pro-rated utility (i.e. water and sewer charges) from the tenants based upon occupancy and use. Accordingly, the building has a combined pro forma Gross Operating Income of $161,100.00.

Financing: There is no present rate lock on this property as the company presently awaits a Commitment Letter from one of its primary lenders. Notwithstanding the foregoing, we have had multiple conversations with our loan broker regarding this property. The pro forma financials reflect present financing rates and terms at or around 3.75% fixed for the seven year hold term.

Repairs: Pursuant to our walk through inspection, the building appears to be in above average condition. All but two of the units have been updated by the present owner. All units are standardized in their modernization. There is limited deferred maintenance and the property is very well kept. Any foreseen repairs would be to units during turnovers to modernize the units. These repairs, however, will be paid for using either tenant deposit withholdings or the cash flow from the property that is discussed further below. The repairs will be performed during tenant turnovers or at the discretion of the management. The pro forma financials also incorporate an annual repair expenditure of $5,000 per year for maintenance of the property. Although we do not expect to require this amount in annual maintenance for the property, this amount is incorporated in order to insure that the pro forma financials reflect a conservative approach for the potential investor.

Expected Sales Price: We have calculated the appreciation of the property at 7% over the next seven years. For those of us that follow the Bay Area market closely, this is a conservative number based upon the timing of the acquisition. Based on this calculation, the property has a resale value of $2,807,165 after seven years at 7% appreciation. The appreciation for the property over seven years may exceed or fall short of this number. The estimated appreciation rate, however, represents a realistic middle ground number for the appreciation of Bay Area real estate. The expected sales price based upon appreciation is also calculated using the proposed purchase price of $1,995,000 which we believe to be an “under market” value for the Property. The figures represented in the pro forma financials are dependent upon risk factors overviewed in the private placement memorandum located at Menlo Gate’s website.

Cash Flow: Based upon the pro forma financials, the property has an estimated cash flow of approximately $44,667.00 per year (see Cash Flow After Tax), or $312,669.00 over the seven year holding period. This is due, in part, to the down payment of $1,000,000 for the property from the Menlo Gate Group Ten capital pool and the ability to capitalize on historically low financing for this transaction. Accordingly, it is anticipated that there will be distributions to the 6 members over the period of ownership of approximately $44,667.00 per member (this calculation includes the company’s carried interest distribution and property management fees). Further, this number does not incorporate rent escalation which would necessarily increase the projected distribution per investor. This provides the investor with an approximated 4.42 % cash on cash return on investment at a 5.01% capitalization rate. These figures do not account for asset appreciation attributable to the investment. These figures represent estimated returns based upon the pro forma financials and are dependent upon the risk factors overviewed in the private placement memorandum located at Menlo Gate’s website.

As always, we are here to help and are available to answer any questions you may have following your review of the attached pro forma financials. We also encourage all potential members to seek the independent advice of their tax consultant, attorney, or accountant regarding this or any significant investment. It is our goal to provide each investor with a conservative investment vehicle that takes advantage of the leveraged rates of return of real estate.

This offering is limited to six members. Three shares have been pre-sold and there are three remaining. The offering amounts for Menlo Gate Group Ten are as follows:

Full Share: $200,000

Half Share: $100,000

Quarter Share: $50,000

Eighth Share: $25,000

Subsequent to Menlo Gate, LLC’s receipt of confirmation of full conscription, this group will be closed.

We look forward to hearing from you and thank you very much for your continued support of Menlo Gate, LLC!