FAQs
General Partners (GPs) are responsible for identifying the property and acquiring the investment, managing the day-to-day operations, making strategic decisions, and overseeing the overall performance of the acquisition.
Limited Partners (LPs), also called Passive Investors, invest in a syndication for financial return but do not make day-to-day management / operational decisions.
An Accredited Investor is an individual who qualifies to invest in real estate syndications by satisfying one of the following requirements:
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Individuals with a pre-tax income of $200,000 in each of the two most recent years, or joint pre-tax income with a spouse of $300,000.
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Total net worth of $1M, not including primary residence.
A Passive Investor (also known as Limited Partner) places capital into a real estate syndication that is managed for them. The Limited Partner is only responsible for bringing capital. Multifamily syndication is a group investing into multifamily properties.
Investor Distributions often referred as "preferred distributions", are generally scheduled on a quarterly basis throughout the property holding period. Equity distributions, however, are disbursed upon successful exit, which includes either the sale or the refinance of the property.
Investor Funds are allocated to cover the total acquisition cost of the property. This includes the down payment for the actual purchase of the property, acquisition fees, legal and transaction expenditures, capital improvements, and reserves, among other expenses.
Average Rate of Return (ARR) is the average annual return percentage generated over the life of the investment.
Cash-on-Cash Return also known as CoC, measures the annual cashflow investors earn relative to the amount of cash invested on a property.
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CoC calculated on a pre-tax basis by dividing the cashflow or net operating income (NOI) by the initial cash investment. ​
Debt Service Coverage Ratio (DSCR) measures the ability to pay the property's current debt obligations with the available cashflow generated by the property.
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DSCR is calculated by dividing net operating income (NOI) by total debt service (TDS).
A K-1 is a tax form utilized by partnerships to provide investors with comprehensive details regarding their portion of the partnership's taxable income. Partnerships typically do not incur federal or state income tax; instead, they distribute K-1 forms to investors to report their individual share or the partnership's income, gains, losses, deductions, and credits. These K-1 forms are provided annually to investors to facilitate the inclusion of relevant amounts on their tax returns. As a partner in the LLC involved in property acquisitions, you will be issued a K-1.
A multifamily syndication is a type of real estate deal in which active investors raise money from passive investors in order to acquire, purchase, or rehabilitate multifamily properties.
Investor eligibility is evaluated by the General Partners for each deal, drawing on their existing familiarity with the financial questionnaire included in the subscription documents for each deal. Investors are typically categorized as Accredited Investors or Sophisticated Investors, with certain deal structures exclusively open to Accredited Investors.
In essence, sponsors reserve the right to decline an investor's involvement in a deal in they deem the investor lacks the expertise to assess investment risks or the financial capacity to manage potential investment losses.