“Apartments are still the most compelling product type in commercial real estate. The key reason for this is simple, if trite: People always need a place to live.” – Forbes
Throughout modern history, research shows that multifamily assets as long-term investment vehicles have offered greater returns with less risk than traditional investments. Based on this substantial data, we believe that multifamily is the most compelling commercial real estate asset class.
Multi-family properties provide economies of scale unavailable to owners of single-family homes. Properties with multiple tenants living under one roof and sharing expenses almost always have the potential to generate superior cash flow over other buy/hold investment opportunities. In addition, apartment owners can implement many strategies to dramatically increase the property’s income. The possibilities of lower expenses and higher income are the characteristics that make apartments great for cash flow and forced appreciation.
What happens if there is a downturn in the market?
Commercial real estate assets like apartment buildings operate independently of the stock market. In fact, they tend to fare better in recessions, because more people tend to downsize. They also tend to be safer investments than single family homes because if one tenant moves out, you still have the others to pay down the mortgage.
We take significant measures to mitigate risk in every project, and when something unexpected happens, we let you know immediately and work closely with our team to resolve the issues as quickly as possible.
Our #1 priority is always to protect your investment, first and foremost.
What type of security is there for my investment?
You will own shares or percent of ownership in the company that owns the property. Prior to closing on the property and at investment, the investor will sign legal documentation stating ownership and terms of the project. An “Operating Agreement” will be established for the company owning the property dictating profit distribution terms, how an investor might exit or sell shares, etc.
How safe is my investment?
Although multi-family properties are among the safest commercial real estate investments you can make, there is always a risk in any investment. To mitigate risk, our strategy is to buy apartments “below market” and hire the very best property management team available to increase income and reduce expenses. Since strategies are pretty straightforward, success is often determined by the competence of the team executing the plan. Our team manages the property manager, making sure execution is being performed as we intended.
How long do I need to make commitment for?
Holding time varies from one deal to the next, but typically ranges between 3-7 years. Changing economic circumstances can affect the original hold time, so passive investors do need to place a certain level of trust in the management team to make decisions that will maximize all investor’s returns. Original timelines will be adhered to as much as is possible to protect everybody’s investment.
Do I have to be an Accredited investor to invest?
No. We work with accredited and non-accredited investors.
Am I a Sophisticated or an Accredited investor?
Generally speaking, sophisticated investors have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. To qualify as an accredited investor, at a minimum you must have earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year or has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence). Reference the SEC guidelines at https://www.sec.gov/answers/rule506.htm for a more detailed description. To find out if you are qualified under this definition, contact us.
What is the ramification to my personal taxes?
Consult with your CPA for specifics on how this type of investment can impact you. There are typically significant tax advantages from investing in the real estate sector through depreciation. You will receive a K-1 from the partnership.
After the initial investment, am I expected to put in any more money to keep the property going?
No. We look for properties that are generating enough cash flow to run themselves, and we will do everything we can to keep it that way.
What is the typical return on investment and when do I get it?
There are three main types of returns from real estate; cash flow, principal pay-down, and appreciation. Cash on cash returns are paid out throughout the life cycle of each investment every quarter. You will also receive a portion of the profits from the sale of the asset at the end of the project. On a typical 3-5 year hold we target no less than a 14% Internal Rate of Return and an 8% preferred return to our investors.
Do the deal sponsors invest fund into the deal with other investors?
Yes. We believe in of our offerings and invest along side you.
What is the typical investment amount?
The minimum investment amount ranges from $25,000 to $50,000+ for each syndication.
Can I use my IRA or 401(k) to invest?
Yes, you can use your self-directed IRA (SDIRA) or you can convert an existing IRA or old 401(k) to a SDIRA to invest in our syndications. Contact your CPA to learn the details. Be sure to shop around to find the best service and fees for their custodial services.
What if anything, could go wrong with apartment building?
Any type of investment always contains an element of risk. When it comes to real estate investments, there could be such risks as an interest rate increase, an unqualified property management, a high tenant turnover, unpaid rent, a faltering economy, political changes that may have some implications on multifamily market, or an unforeseen natural disaster (e.g. flooding). These and other factors may have an impact on the asset performance as well as on the real estate market overall.
Am I guaranteed a full return of my investment plus a profit?
There are risks associated with any investment, and an experienced operator mitigates risks to enable a positive return. Risks are minimized by building a strong team, hiring an experienced property management, selecting a market where there’s population and job growth, and selecting an asset that allows for value add; all of these activities will allow increasing property revenue. However, the bottom line is that an investment is never guaranteed, and the investor should be vary of operators that say otherwise.
Will I be involved in managing the investment property?
No. You are relieved of any management responsibilities. It is the duty of the general partner(s) to manage the asset.
How will I know what is going on with the properties?
You will be receiving periodic updates about the property. We typically send out monthly financial statement along with brief summary of what is happening with the properties.