What kind of real estate are we looking for?
Primarily apartment complexes that have some value-add (something needs to be fixed) component to them. Maybe the units are dated and need to be refreshed. Maybe it's poorly run by an 80-year-old mom-n-pop couple who just wants to retire.
What markets are you investing in?
We normally target secondary and tertiary markets (not big cities) that cashflow well and have favorable landlord-tenant laws. High appreciation markets don’t offer the return I’m looking for and I don’t want to battle it out with 50 other investors for a property in a big city.
How much are we looking to raise from investors?
It depends on the deal. The most favorable deals from a financing standpoint would start at 1.4 million and need about 400-500k in capital from investors.
What would the returns be?
We are shooting for quarterly dividends with a yearly cash return of 8%+. A total yearly return of 13%+ is desired.
When do I get my money back?
Investors should be ready to keep their money locked up for 5 years. A value-add investment would include a refinance around year 2-3 which would mean a partial or full return of capital at that point.
What are the terms of the investment?
The full terms and criteria would be outlined in the Private Placement Memorandum. Basically, your investment would either be a percentage of equity in the property or a guaranteed preferred return.
What control do I have as an investor in the deal?
You'll be a limited partner or passive investor in the deal. Your money gets you a quarterly payout and a large payout at the end of the investment. The management of the LLC would have control of the day-to-day operations of the property.
What's the minimum investment?
It depends on the size of the deal. But I would estimate we would want at least a $25k minimum investment for the properties we're looking for.
I don’t have any cash right now. But can I invest with my IRA or 401k?
Yes, you can. Ask and we can point in the right direction to move your money into a self directed IRA or solo401k.
What are the risks? What if 2008 happens again?
Risks will be specifically outlined in the PPM. But overall, you'll be much safer than in the stock market. Banks love lending on multifamily properties because they’re such a stable investment. In 2008 less than 1% of multifamily properties defaulted on their mortgages.
What fees are involved?
The managers would charge a small fee (1-2%) when we buy and sell the property. If we were to refinance the property and return all investor capital, we would charge a 1-2% fee as well. Other than that, the managers would retain a 15-30% equity stake in the property. The remainder is divided up among investors based on the amount they invest.
What if someone sues?
If a tenant slips and falls, we carry liability insurance for that. Otherwise, we have a sophisticated asset protection structure in place. However, since you’re a limited and passive investor, you assume no liability.
What are the taxes involved?
It depends on the investment, but remember there are many tax deductions owning an interest in real estate qualify for that lower the amount of tax you'll pay. It's very likely you'll owe very little to no taxes on your quarterly cash distributions. If you have an accountant, talk to them. You’ll be issued a K1 at the end of the year for each interest in a property.
I can’t invest right now but I have a friend who can. Can I refer them to you?
Sure. However, SEC rules dictate that I must have a prior relationship with an unaccredited investor before I can market actual opportunities to them.
What’s an accredited investor?
I’m not an accredited investor. Can I still invest?
Yes, as long as we have a pre-existing relationship and are sophisticated enough to know the risks of the potential investment. If you've never invested in anything before or want to invest every last dollar you have you probably won't qualify.
How do I move forward with investing?
Fill out the Contact form and let's chat. Then, once I have an active deal under contract I’ll notify everyone and send out a deal package much like the sample one I’ve included. I’ll include specifics of the property and due-diligence items as I get them. I will need soft commitments from investors at that point. As the deal moves forward, I’ll have an operating agreement for the LLC, Private Placement Memorandum, and Subscription Agreement for you to review. Before closing, you’ll wire your money into the escrow account set up for the property. After the property closes you’ll own a chunk of the LLC that controls the property and generate returns on your investment.