Frequently Asked Questions

What is the definition of an accredited investor?

An Accredited Investor, in the context of a natural person, includes anyone who:
  • 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).  This excerpt definition is taken from the SEC.gov site.

What is the definition of a sophisticated investor?

A Sophisticated investor is considered to have sufficient financial knowledge to understand the benefits as well as the risks of an investment opportunity. 

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.

Who is an equity partner?

An equity partner is someone who is investing in a property in exchange for a property ownership percentage.

Will I as an equity partner be involved in managing the investment property?

As an equity partner you are relieved of any management responsibilities. It is the duty of the general partner(s) to manage the asset.

How will I as an equity partner know what is going on with the property?

As an equity partner you will be receiving periodic updates about the property. Most syndicators send them out on a quarterly basis.

What is a passive real estate investment?

A passive real estate investment is one where the funds  are invested in exchange for a potential profit in a property. There're various ways to invest in real estate passively. Syndication is one of them. The main theme of passive investing is that someone else is in charge of management decisions.

What is a definition of passive real estate investor?

A passive real estate investor is  a person that invests their funds into a property in exchange for a potential profit in a property. There are various ways to invest in real estate passively. Syndication is one of them. The main idea is to be a passive investor is  to invest for a potential profit and not be involved management decisions.

What does Syndication entail?

A Syndication (aka Apartment Building Syndication) involves raising money from private investors to purchase apartment buildings or complexes.

What is a Private Equity?

Private equity is a high-net-worth individual or a group of individuals that raise and manage shareholders' funds, and typically invest their capital in private investments.

What is the definition of Apartment Building Syndicator?

An Apartment Building Syndicator (aka General Partner or Deal Sponsor) is a person who creates the multifamily deal and manages all aspects of the created apartment building syndication.

What is Private Placement Memorandum?

Please review my article for the details on syndication documents.

What sort of return can I expect from a multifamily syndication investment?

Each investment is different. A lot depends on the location, property class, property size, opportunity type and a number of investors in the deal. As far as the opportunity type, I tend to concentrate on value adds; these are the properties that allow to increase property's value by increasing income or decreasing expenses, or both.  The Private Placement Memorandum discusses the return in details.

What is a Self-Directed IRA?

A Self-Directed IRA (SDIRA) is an IRA account type where funds may be invested anywhere allowed by US Laws, including and not limited to real estate, notes, private placements, tax lien certificates.

What is a Checkbook Control IRA?

A Checkbook Control IRA (aka LLC IRA) is a SDIRA that allows the investor to write checks using the IRA's funds. A buffer must exist between the IRA holder and the IRA's assets, which is accomplished by a self-directed IRA provider.  A Checkbook Control IRA investor has faster access to his/her own IRA account funds.

What is a Solo 401K?

A Solo 401(k) (aka Self Employed 401(k) or Individual 401(k)) is a retirement account designed for self-employed individuals, such as employers without full-time employees other than the business owner(s) and their spouse(s). Such a retirement account has approximately tenfold higher maximum contribution limit threshold than an IRA.