FAQS
Syndication is the pooling of investor money where the investor is typically a limited partner and the general partner, or active partner, puts the deal together and manages the business plan to provide a return for the benefit of all investors.
Annual returns are targeted in the 8-10% range and with an average IRR in the 15% range over the hold period. In a value-add project, a large part of the investor returns come in the year of sale. Actual returns vary on a property by property basis. See the private placement memorandum (PPM) for specific property investment risks.
We model each investment with a 5 year hold period. 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 2 from a refinancing event or we may want to continue to cash flow till year 7, if the market is down in year 5.
Minimums vary from deal to deal but generally are set at $50K with preference given to investors with more to invest.
Yes – You can invest in real estate with certain types of retirement accounts. We can assist you in moving part of your IRA funds to a self-directed IRA (SDIRA) which has the flexibility to invest in more than just stocks and bonds. The majority of wealthy individuals boost their IRA investing returns with real estate investing this way.
Investor distributions vary from deal to deal but most our syndications make monthly or quarterly distributions. Distribution amounts typically increase as we hold the property longer and the improvements we make allow us to increase rents in addition to organic natural rent growth.
Yes – We operate on a core value of treating investors’ money as if it were our own. We invest alongside our clients in every deal. Additionally, we individually sign on the loans and also are required by the bank to maintain 10% of the loan amount in liquid funds in our personal accounts..
Apartment syndications are very tax efficient. As a limited partner, you will benefit from your portion of the investment’s deductions for property taxes, loan interest, depreciation, etc. We will also use a cost segregation strategy to accelerate depreciation. Your portion of this "tax loss" can then be used to offset other income depending upon your individual tax situation. At the time of sale, your gains are treated as long-term capital gains.
We’ll provide monthly email updates on the investment’s progress including renovation status/pictures, rents we are getting, and the distribution amount for the period. You will also receive a K-1 statement from us in March of each year for your tax filing.
Yes – We model different scenarios to show our breakeven point for profitability given a decline in occupancy or if rents drop below projections.
Fees are described in the private placement memorandum (PPM) and vary from deal to deal. The most common fee is an acquisition fee based on purchase price and is paid at closing. This covers the general partner’s costs and time to find the deal and get it under contract and closed. This process is very time consuming. The second most common fee is the asset management fee which is compensation for time and expense spent managing the property management company, to ensure execution of the business plan, bookkeeping, yearly insurance and property tax negotiations, ongoing management of the bank relationship and distribution of checks and K1s. 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.
The Private Placement Memorandum 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 prepared by a syndication attorney. The subscription agreement section includes basic information as to amounts being purchased and percent ownership. The risk section highlights just about every possible risk that could happen.
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