Frequently asked questions

Q. Is this risky?

A. Any investment carries risk. While we cannot guarantee anything, real estate—and in particular, multifamily real estate syndication—has proven to be among the safest investments available. Remember: rent keeps rising. Our process of uncovering devalued assets and turning them into desirable ones is a proven one. And we also invest right alongside our investors.

Q. What is an accredited investor?

A. An accredited investor is a person that can invest in securities (i.e. invest in a commercial syndication as a limited partner) by satisfying one of the requirements regarding income or net worth. The current requirements to qualify are an annual income of $200,000 or $300,000 for joint income for the last two years with the expectation of earning the same or higher OR a net worth exceeding $1 million either individually or jointly with a spouse.

Q. Do I need to be an accredited investor to invest?

A. Not necessarily. We try to make our investments as accessible as possible, so for some of our investments, we open the investments to a select few non-accredited investors. However, you do need to be a sophisticated investor. This is a person who is deemed to have sufficient investing experience and knowledge to weigh the risks and merits of an investment opportunity. For a more detailed explanation visit investor.gov

Q. Can I invest with a self-directed IRA or solo 401k

A. Yes! If you have an IRA it is possible to roll it over into a self-directed IRA or solo 401k custodian, which allows you to invest your tax-advantaged retirement dollars into alternative investments that a standard IRA will not.

Q. What is my capital being used for?

A. Investor funds are used for the total acquisition cost of the property. This includes but is not limited to the actual purchase price of the property, acquisition fees, legal and transaction costs, capital projects, and reserves. Investors invest directly into the real property.

Q. How frequently are distributions?

A. We typically provide distributions every month or quarter. The anticipated distribution schedule for a particular investment is explained on the offering page for that investment. All distributions are dependent on the receipt of corresponding payments from the underlying asset and are not guaranteed.

Q. What tax documents do I receive?

A. As a partner in the LLC that purchases the properties, you will receive a K-1 tax form used by partnerships to provide investors with detailed information on their share of a partnership’s taxable income. Partnerships are generally not subject to federal or state income tax, but instead issue a K-1 to each investor to report his or her share of the partnership’s income, gains, losses, deductions, and credits. The K-1s are provided to investors on an annual basis so that each investor can include K-1 amounts on his or her tax return.

Q. What is cash on cash return (CoC)?

A. A rate of return often used in real estate transactions. The calculation determines the cash income on the cash invested.
Calculation: Annual Dollar Income Return / Total Equity Invested = CoCR

Q. What is a capitalization rate (Cap Rate)?

A. A rate of return on a real estate investment property based on the expected income that the property will generate. The capitalization rate is used to estimate the investor’s potential return on his or her investment. This is done by dividing the income the property will generate (after fixed costs and variable costs) by the total value of the property.

When acquiring income property, the higher the capitalization rate (“Cap Rate”), the better. When selling an income property, the lower the Cap Rate the better. A higher cap rate implies a lower price, a lower cap rate implies a higher price.

Q. What is a Limited Partner (LP)?

A. The limited partner (LP) is a partner whose liability is limited to the extent of the partner’s share of ownership. In apartment syndications, the LP is the passive investor and funds a portion of the equity investment.

Q. What is a preferred return?

A. The preferred return is the threshold return that limited partners are offered prior to the general partners receiving payment.

Q. What is an acquisition fee?

A. The acquisition fee is the upfront fee paid by the new buying partnership entity to the general partner for finding, analyzing, evaluating, financing, and closing the investment. Fees range from 2% to 5% of the purchase price, depending on the size of the deal.

Q. What is the Private Placement Memorandum (PPM)?

A. The PPM (Private Placement Memorandum) is a document that outlines the terms of the investment and the primary risk factors involved with making the investment. The four main sections are the introduction, which is a brief summary of the offering, the basic disclosures, which includes general partner information, asset description and risk factors, the legal agreement, and the subscription agreement.