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.
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 and risk possibilities. The risk section highlights just about every possible risk that could happen.
While return projections vary from offering to offering, assets we pursue generally aim for annual returns targeted in the 12% + range and an average IRR in the 15%+ range over the whole period.
We model each investment with a 5 – 7 year hold period. This provides ample time to execute our business plan and then cash flow for a few years while looking for an opportunistic refinance or sale. Some investor principal could be returned as early as year 2 or 3 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.
Investor distributions vary from deal to deal but distributions are typically quarterly.
We’ll provide monthly or quarterly email updates as the business plan progresses including but not limited to 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.
As a limited partner, you will benefit from your portion of the investment’s deductions for property taxes, loan interest, depreciation, etc. We may also use a cost segregation strategy to accelerate depreciation. The tax loss can then be used to offset other income depending upon your individual tax situation. At the time of sale, the partnership gains are treated as long-term capital gains. *Please consult with your accountant for further information.
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.
Yes – We model different scenarios to show our breakeven point for profitability given a decline in occupancy or if rents drop below projections.
Yes – You can invest in real estate with certain retirement accounts. We are happy to discuss how to boost your IRA investing returns with real estate investing.
The returns forecasted 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 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 K1s. The asset management fee is aligned with the investor’s interest as it is based on the property’s revenues.