Frequently Ask Questions
“Every person who invests in well selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth.” — Theodore Roosevelt, U.S. President
Syndication is the pooling of investor money where the investor is typically a limited partner, and the general partner puts the deal together and manages the business plan to provide a return for the benefit of all investors.
We underwrite our deals to deliver an Average Annual Return (AAR) in the 15-17% range and an average Cash on Cash return of 7-8% annually. Overall, we are looking for 2x ROI (Return on Investment) over the life of the investment for a 5-7 year hold, with a good portion of that return coming from the sale of the property. Some hold periods are shorter (3-5 years) while some are longer (5-7 years).
Yes. Each property is held in a dedicated LLC from which investors own a proportionate percentage of shares.
A typical deal would have a $50,000 minimum investment but we may offer some lower entry points on certain deals or for repeat investors. Get on our investor list so you don’t miss opportunities that may fit your budget.
Distributions are made quarterly from available operating cash flow and are automatically deposited into investors’ bank accounts. Investors are notified of upcoming distributions and are able to track their distribution history through their investor portal.
We’ll provide monthly/quarterly email updates as follows:
- Monthly Updates: Brief updates on what has occurred during the previous month.
- Quarterly Financials: Detailed financial results and distribution information.
- Quarterly Distributions: Distributions sent 15 days after the close of each quarter.
- Tax Documents: A K-1 is sent on or before March 31st.
- We utilize investor management software which will be your portal to access documents and see the real-time status of your investments.
Apartment syndications are very tax efficient. As a partner in the LLC, you will benefit from your portion of the investment’s deductions for property taxes, loan interest, and depreciation. We like to use a cost segregation strategy as well to accelerate depreciation when beneficial. It’s not unusual on a $100K investment to return actual cash in your pocket of $8K while experiencing a paper loss on your annual K-1. That loss can then be used to offset other income. At the time of sale, the partnership gains are treated as long-term capital gains.
The Private Placement Memorandum (PPM) is required by the SEC and describes the offering, risks, includes the partnership agreement, investment summary, and subscription agreement. It is a lengthy legal document (approx. 100 pages) prepared by a syndication attorney. The subscription agreement section includes basic information regarding purchase and percent of ownership. The risk section highlights just about every possible risk that exists.
Risks are outlined in the Private Placement Memorandum. In 2009, at the bottom of the financial crisis, delinquency rates on single-family homes were 5% vs 1% on multi-family apartments. Additionally, vacancies in Class C and B (older properties where value-add syndicators play) remained steady at 8%. We further mitigate risk by targeting proven assets where the current owner is generating good cash flow (our due diligence includes auditing the trailing 12-month financials, bank records, and tax returns). Additionally, lenders will not partner with us unless we have a good business plan, conservative underwriting (banks will underwrite the deal as well), have adequate insurance, and have an inspection completed by outside experts.
We target a 4–6 year hold on our investments. This provides ample time to execute our value-add plan and then cash flow for a few years while looking for an opportunistic sale. Some investor principal could be returned as early as year 3 from a refinancing event, or we may want to continue to cash flow longer if the market is down in year 5 or 6.
Yes. We believe one of the most important components of being a sponsor is having alignment of interest with our investors. We want our own money in multi-family real estate, just like you do. We are so confident in this asset to the point we go out and raise additional funds through syndication to leverage the size of deals we can invest in.
We won’t want to sell in a down market. The goal would be to continue to cash flow and hold until the market is healthier to achieve a better price at sale. Class B/C value-add properties tend to hold up much better in downturns because folks need a place to stay and rents are more in line with the market/service economy demographic that is typically still employed in downturns versus the higher paid class A renters whose jobs are more at risk.
We’ll let you know we have an investment available when we get a property under contract. We start the equity raise process with investors immediately and it runs concurrent to due diligence and the bank’s underwriting which takes about 5 weeks. Typically, investors reserve their spot in the first 1-2 weeks. In the fifth week, investors review and sign the PPM and transfer funds to the escrow account. Then we close on the property 2-3 weeks later.
Yes. We model different scenarios to show our break-even point for profitability given a decline in occupancy or if rents drop below projections. Most of our scenarios allow occupancy to drop between 65-75% to break even.
Yes. We can help you invest with retirement money from a self-directed IRA, solo 401(k), or a eQRP which has many advantages over the other retirement accounts. Please inquire if you think this could be an option for you!
The returns forecasted to you are post fees. The most common fee is an acquisition fee based on the purchase price and is paid upon closing. This covers the general partner’s costs to find the deal and get it under contract. The second most common fee is the asset management fee which is compensation for holding the property manager accountable, to ensure execution of the business plan, bookkeeping, and distribution of checks and K-1s. The asset management fee is aligned with the investor’s interest as it is based on the property’s revenues. Industry averages are 1-3% for both fees.
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