Investor Frequently Asked Questions
Who can invest?
Each investment will have its own set of requirements. While most require you to be an accredited investor, we may make exceptions on a case-by-case basis as allowed by the offering.
Accredited investors are individual investors who either have a net worth of at least $1,000,000 (not including the value of one’s primary residence) or have earned income over each of the last two years of at least $200,000 and have the expectation to make the same amount in the current calendar year. You may also qualify by combining your income with your spouse and the new threshold for qualification would be $300,000.
Investing in commercial multifamily apartments is not suitable for every investor. Before investing, we’ll make sure it will be a good match for one another.
What type of funds can be invested?
There are a variety of ways you can participate in this type of investment. Some of the ways you can fund your investment include: cash, trusts, self-directed IRAs, 401Ks, 1031 Exchanges, Coverdell Education Savings Plans, property refinances, and other investment accounts.
What are the tax advantages?
The benefits vary according to your own tax situation, but may include:
- Cash flows may be received without a current tax impact (tax depreciation deductions defer taxation, and depreciation rules are favorable to the investor).
- Distributions from refinancing events provide cash flows with no current tax obligation.
- Section 1031 exchanges from other real estate investments into a multifamily housing can defer capital gains taxes and lever up your potential cash flows and returns.
- When you sell your real estate investments, a significant portion of the gains may be taxed at favorable capital gains tax rates
- Real estate is an ideal estate planning vehicle. Your heirs’ future tax obligations are reduced due to the step up of basis to fair value at the date of death.
- If you qualify as a real estate professional, paper tax losses can reduce current taxation on ordinary income.
Remember to consult with your own tax advisor before investing. The information is provided as a guide and doesn’t constitute tax planning advice.
What is a K-1?
A K-1 is similar to a 1099 and is an accounting of the yearly tax income. An investor will receive a K-1 for each investment made. K-1 forms are often used in partnerships and real estate ownership.
What is the minimum investment?
The minimum investment is $50,000 in a fund. Exceptions may be made on a case-by-case basis. The typical investment is between $100,000 and $400,000.
Can I cash out of my investment at any time?
No. Because real estate investments have a longer term time horizon, they are not as liquid as stocks and bonds.
Where do you invest?
We invest in stable and growing markets with historical population, income, and job growth above average. When looking at employment, we target markets that have multiple industries that demonstrate a diverse economy.
Additionally, we only invest in markets having agreeable landlord/tenant laws and a friendly business environment. Being long-term holders of commercial multifamily apartments, we look for the ability to grow within a market over a long period of time.
What kind of returns can I expect?
Each available investment opportunity meets the following criteria prior to being offered to investors:
- 5% to 7% average annual cash flow (distributed on a quarterly basis).
- 12%-17% annualized cumulative returns from all sources. The return includes both the cash flow and equity growth. Equity growth includes the appreciation and principal pay down (realized at an equity harvesting event).
While our model is proven to perform well, these are not guaranteed returns. Investing in commercial multifamily apartments is not a good fit for everyone and we can help you determine if it is a good fit for you.
How often are distributions made?
Investors can expect to receive quarterly distributions. Other distributions may be made to investors at the end of the year based upon the performance of the properties and when there is a sale or refinance.
Distributions typically begin after the first quarter of operations. Each project will vary depending on what is needed to stabilize an property.
How will I be updated about my investment?
Investors are provided access to updated information online through our investor portal. Each quarter, a detailed investor report for each investment will be emailed. The quarterly report includes information about the management, operations, and performance of the asset.
Will I need to verify my status as an accredited investor?
Yes. Once you decide to invest, we will help you through the process of verifying your accredited investor status as part of becoming an approved investor. This requirement doesn’t apply for projects that allow for non-accredited investors.
How is this different from a REIT?
A Real Estate Investment Trust (REIT) is essentially real estate flavored stock. It is bought and sold like other stock and is tied to the performance of the stock market. Our clients are direct fractional investors and are protected from that volatility.
Direct fractional ownership also provides investors access to tax advantages that aren’t available to REIT investors.
Most importantly, our investors have the ability to choose which projects to invest in while REIT investors rarely have a choice in the projects the REIT decides to purchase.