Answers to Your Questions
Investing in multifamily assets is a complex decision. Below are some of the common questions people ask before investing. If you do not find your question answered in here, please feel free to reach us any time.
What are the benefits of investing passively than buying a multifamily property myself?
Complicated asset class property operators can bring great value to the property than a single-family residence since investments with large number of units work more efficiently using systems, processes, relationships, and professionalism. Because of this, they reap very high returns, and even after sharing the profits with the operator, they equate to almost the same returns that an active investor would have earned after all the sweat in managing their assets. Diversifying your capital in multiple geography, markets, tenant types, and asset types is always a good idea for an investor. There is no personal guarantee on big multi family loans and experience & track record of the sponsor helps in owning the share of such a large asset. In syndication you are relying on an operator who has the best interest in making the property perform as his income is based on the performance of the asset, than being an employee like a Property Manager.
What kind of returns should I expect?
Please note that, like any other investment, nothing is guaranteed, so please invest wisely and invest with the mindset of calculated risk. That being said, we target to provide preferred returns of 7-9% on your investments and total equity multiple of 1.75x to 2.25x. In other words, if you would have invested $100,000 we target to achieve at least $7,000 to $9,000 annual cash-flow and when the property is sold, we expect a total return of $175,000 to $225,000 (including the cash flow you got in the operating years of the asset). Please note that properties with high value add, may not get you cash flow in first 6 months or a year. But such scenarios will be disclosed to you upfront.
Why do you invest in multi family assets?
Multifamily asset, if selected appropriately, provides a great hedge to various risk in real estate investments. It helps in getting the cash flow from day one, spreads the risk of vacancy through multiple units, creates appreciation based on the income of the asset, provides great tax benefits through cost segregation and depreciation, leverages lending instruments available in the market, and adds ease of management and maintenance at one location than speading out the assets at various locations.
When do I start getting my cash flow?
Once the property is closed, it will take a little more than a quarter to get things settled. Then cash flow will get started coming in your account. Please note that your projected cash flow is accrued for all the time you waited after the date of close.
What are the tax implication of this investment?
We are not giving any tax or legal advice and only your attorney or CPA is the best source to understand the tax implication of this transaction. Keeping that aside the biggest benefit you get is depreciation; which can offset your PASSIVE GAINS, if any. Cost segregation can immensely increase this depreciation on the first year, which you can carry forward if they don't get used this year. You will get K1 to file every year with gain or losses, based on the performance of the asset and also the gains from the sale of final year. Please note that all depreciations are recaptured at the time of liquidation. So benefit of these investments is not to avoid tax but to defer tax.
Is there a minimum limit to invest?
If you want to contribute more than 20% of needed funds to close, please talk to us. You will be on the loan. For all others (Limited Partners), we suggest you to never put all your investment money into one bucket. Even if you invest with us, we suggest you to diversify your funds by investing in different assets, different locations, and in different markets. You should never invest more than you can afford to lose. We generally open funds for accredited investors only. Every property can have its minimum and maximum limits. Generally minimum is at least $50,000.
Can I get my investment back in case of emergency during the hold period?
No, because all the money is tied in the project for the proposed period of time (usually 5 years), and we cannot liquidate it until the sale of the asset. Still, only in diring circumstances with enough proofs, we can try finding someone in other investors who want to buy your share out on discount. This may lead to loss in the value of your funds. You will also lose all the future cash flow and future returns. This may be reported to IRS because of short term loss or gain, and there could be Attorney or CPA fee to execute such transaction. Because of above reasons, we suggest you to invest what you can hold for the holding period of the property.
Are there any risks while investing with you?
Like any type of investment, multifamily investments do have their own risks too. First one is illiquidity - Which means your funds are locked for the life of the investment (generally for 5 years). So you should not invest the money that you want to get before the holding period. Second is Lack of Control - As a limited partner, you do not call the shots. So, if you are a micro manager, then these investment are not for you. You need to accept the fact that asset is managed by General Partners and you do not have the right to interfere or suggest when to fix the roof, what paint to chose, which contractor to select for landscaping etc. etc. Third is 1031 Exchange - Our syndication structures and time lines cannot give you 1031 exchange benefits because there are too many nuts and bolts which cannot go based on your personal 1031 requirements. And last but not the least is, because of various unknown situations, natural-disasters, government policies, financial environment, real estate markets can shift and projections may have to face some challenges.
Can I become a Sponsor than being a Limited Partner?
For sure, if you are an accredited investor, have a good net-worth, you are fine to be a guarantor on the loan, and you are aligned with our investment strategies; let's talk today!
Does it matter which state I live in?
No. You can invest from any state and you will get K1 from us at the end of the calendar year. We do not suggest investing out of USA since it will be difficult to understand or reap all the tax-benefits. Since we are not giving you any investment or tax advise, please make sure to consult with your own real estate attorney, CPA, or tax consultant to discuss the tax implication of your investments in your state.
Is this a ponzi scheme? Returns are too good to be true?
Your concerns are valid. Let's have a chat and we can answer all the questions with practical scenarios. Most of the people don't think about these assets which are easy to manage, lucrative, and are a great vehicles for investing your money in. The passive income they provide with all the other benefits attached to them, can grow your nesteg way quicker than you can imagine.
I am ready to invest. What are the next steps?
Please fill up this form to let us know about you interest. Please schedule a call with us or send us an email by looking at the detials on the footer of this page. Looking forward to talking to you soon.
Have you ever lost money for investors?
Yes we have, in the state of Georgia. Sudden interest rate increases, lenders getting reluctant to refinance easily, management lapses, insurance claims because of hurricane were main causes of the failure in the investment. We learned a lot from it though.
My question is not listed here.
Please schedule a call with us or send us an email by looking at the detials on the footer of this page. Looking forward to talking to you soon.