Distributions are a function of income at a property for a given period. We generally target paying 8%-10% annually and typically distribute on a quarterly basis. Ultimately, if a property performance is strong, distribution levels can be above projections and if property performance is weaker than expected, distributions may be below targets.
Our standard investment will be backed by long term, fixed rate debt which means that rate moves will not have a direct impact on distributions. In the event we use a floating rate or short term loan prior to refinance the following applies: Interest rates would rise likely in the event of 1) inflation or 2) strong economic growth that the Fed is trying to temper for steady/controlled growth; in both cases, we would anticipate our ability to charge higher rates at our properties to help offset some of the interest rate increases. The same would apply in the inverse; weaker economic situations would have implications for occupancy and rent growth, however, lower interest rates would be likely reducing our interest burden.
There is no “direct” impact of public equity markets to our investments; in other words, if the market drops by 5%, that does not imply a similar decline in our assets. This is tough to quantify broadly. On one hand a decline in equities markets increases attraction to our assets given the cash yielding and recession resilient/defensive nature of the assets; on the other hand, a decline results in reduced investor appetite to deploy equity capital which can have implications for value. We monitor our DCR and use long term financing this way we are not forced sellers in poor public market times.
We strive to acquire a property and implement our value add program; this often includes interior/exterior renovations, improved management, reduced expenses, etc…in many cases our goal is to ultimately increase the NOI(net operating income) to refinance and return equity to our investors. We follow a proven framework that in many cases reduces the total dollar interest expense in spite of higher loan amounts post refinancing. This allows us to de-risk investors’ equity exposure and enhance IRRs by returning invested capital. After a refinance we will keep investors in the deal equal to their initial pro rata share of principal and distributions.
This is difficult to answer as each recession is unique and may affect different areas of the economy and geographies differently. We do believe our niche sector within multifamily in the locations we are in should have stable performance in economic downturns and in essence be somewhat resilient. We deliberately focused on this value-add sector within multifamily at the outset due to the anticipated resilience of this sector. Specifically, the volatility of rent and occupancy growth in the 2001 and 2008 recessions were about 2% per year – very modest. People need a safe, affordable place to live in good times and bad. Occupancy and rent growth could be under pressure but we believe in much less severity to other asset classes within real estate and otherwise.
You can get started investing once you have registered for our investor portal. Simply click on the “Invest With Us” button and you will receive an introductory email and you’re all set. You can also set up a introductory call with someone from our team simply by emailing email@example.com.
From here you will begin receiving regular newsletters and deal announcements that’ll give you the materials you need to make a fully informed decision as well as walk you through the next steps to make sure you are prepared to invest.
The SEC defines an accredited investor as an individual with a net worth of at least $1 million or an annual income of $200,000, or $300,000 for married couples, for at least three years.
The SEC defines a sophisticated investor as an individual who has enough knowledge and experience in business matters to evaluate the risks and merits of an investment. In syndications which are offered through the 506b exemption, sophisticated, non-accredited investors are permitted to invest as long as they have a preexisting relationship with the sponsor.
(for all tax related questions, please confirm with your own CPA/tax preparers as individual circumstances vary; we are providing directional guidance)
Cashflows are typically recorded as return on invested capital, where as capital events are recorded as a return of capital. Taxes for properties are driven by the income and expense of a given property over the year. Because these assets are depreciated over a 27.5 year period, there is a non-cash expense that typically reflects in losses shown in a K1 tax document in early years.
As a partner in the LLC that purchases the properties, you will receive a K-1. A K-1 is a 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. Our goal is to finalize all K-1s by March 31st, this way investors have them in hand for tax season.
Everyone receives a K1 for every asset invested in. Typically, investors are passive so your K1 gain/loss will affect one’s passive income/losses. If for example, one has $100,000 in capital gains income and a K1 from us of a $20,000 loss, that loss can offset the capital gains so taxes are paid on $80,000 of passive income.
A 1031 exchange allows an investor to sell a property, reinvest the proceeds in a new property and defer all capital gains taxes from the original sale. We will complete 1031 exchanges for tax efficiency on sales where appropriate and are determined on a case-by-case basis. For such cases, 51% of investors must continue to own the new property purchased.
Yes. We currently support personal investment accounts, joint accounts, and certain entity accounts (Trusts, Limited Liability Companies, Limited Partnerships, C Corporations, and S Corporations). You will need to contact your IRA, QRP, & 401K provider to obtain the required forms if investing with a retirement account. Returns will be issued to the retirement account. Discuss with your CPA & retirement plan custodian to learn more about the tax treatment.
Investors will be emailed Google Docs and/or given access to an investor portal available 24/7. We will upload quarterly performance reports and P&L statements for you to review each quarter in addition to our informative webinars.
Our investments should be considered illiquid but we will make our best effort to accommodate emergencies/unusual circumstances in which we will either find another investor to purchase your existing position or buy it out ourselves.