FAQ

What is a syndication?

Syndication in real estate is a partnership where multiple investors pool their capital to purchase and manage larger properties, such as multifamily apartment buildings, collectively. The sponsor (General Partner) manages the property, while the investors (Limited Partners) provide the capital and share in the profits. This approach allows investors to access larger investments, benefit from professional management, and share the rewards.

What are the investor funds used for?

Investor funds in a syndication are primarily used for the acquisition of the property, covering the purchase price and associated closing costs. Additionally, funds are allocated for renovations and improvements to increase the property's value and profitability. They also cover ongoing operating expenses, such as property management, maintenance, and utilities.

How often are distributions made?

Distributions to investors are typically made on a quarterly basis, though the exact frequency can vary depending on the specific syndication and its performance. Once the property has been stabilized and begins generating cash flow, it usually takes until the third quarter to start making distributions. The schedule and amount of distributions are outlined in the investment agreement.

Do you invest in your own deals?

Yes, we invest alongside our clients in every deal.

How long is the investment period in a multifamily syndication?

The investment period in a multifamily syndication usually lasts between 5 to 7 years. This period allows for property improvements, market appreciation, and achieving target returns. We may continue to cash flow until year 7 depending on market conditions, or sell before the 5-year mark if target metrics are met.

Can I sell my shares in a multifamily syndication?

Shares in a multifamily syndication are generally illiquid and cannot be sold or transferred before the end of the investment period. Only under very rare and specific circumstances may early exits be considered. It's important to review the syndication agreement for details on any exceptional provisions.

Who can invest in a multifamily syndication?

Typically, accredited investors can participate in multifamily syndications. An accredited investor is someone who meets specific income or net worth criteria set by the SEC, such as having a net worth of over $1 million (excluding their primary residence) or an annual income over $200,000 ($300,000 for joint income). Some syndications may also allow sophisticated investors who have sufficient knowledge and experience in financial and business matters to understand the risks involved.

Terms

  • A method of pooling funds from multiple investors to purchase large multifamily properties.

  • An individual meeting SEC criteria for income and net worth, eligible to invest in certain private placements.

  • An investor with enough knowledge and experience to understand the risks and merits of an investment.

  • The sponsor or manager of the syndication responsible for its operations and performance.

  • Investors in the syndication who provide capital but have limited liability and involvement in management.

  • Funds used to improve or maintain a property to increase its value.

  • Costs associated with running the property, such as maintenance, utilities, and management fees.

  • Payments made to cover the interest and principal on a property's mortgage.

  • Total income from a property after operating expenses are deducted, but before debt service and taxes.

  • The net amount of cash generated by the property after all expenses and debt service are paid.

  • Fees and expenses incurred during the purchase of a property, including legal fees, title insurance, and loan origination fees.

  • Costs associated with obtaining a mortgage, such as origination fees and appraisal fees.

  • A fee paid to a third-party company for the day-to-day management of the property.

  • A legal document outlining the investment opportunity, risks, and terms.

  • Funds set aside for future capital expenditures and unexpected expenses.

  • The amount of money invested by the syndication participants.

  • The profits earned from selling the property, distributed to investors based on their ownership shares.

  • A rate of return measuring the annual cash flow generated relative to the total cash invested.

  • A ratio indicating how much an investor's equity has grown, calculated by dividing the total cash distributions by the initial investment.

  • The estimated rental income a property could generate if leased at current market rates.

  • The total rental income if all units are leased at market rent.

  • The difference between market rent and actual rent collected, often due to concessions or vacancies.

  • Uncollected rent due to tenant defaults.

  • Discounts or incentives offered to tenants, such as free rent for a month.

  • A fully furnished unit shown to prospective tenants.

  • The percentage of unoccupied units in a property.

  • A fee paid to the sponsor for managing the property and executing the business plan.

  • A document that investors sign to commit funds to the syndication.

  • The rental income lost due to vacant units.

  • The total amount of rent lost due to vacant units, concessions, and bad debt.

  • The total income generated by a property after accounting for vacancy loss and other deductions.

  • The percentage of units that are physically occupied by tenants.

  • A ratio used to assess a property's value by comparing its price to its gross rental income.

  • A ratio measuring the property's ability to cover its debt obligations with its NOI.

  • The cost of borrowing money, expressed as a percentage of the loan amount.

  • A loan payment that only covers the interest, not the principal.

  • A fee charged for paying off a loan early.

  • Replacing an existing loan with a new one, often to secure better terms.

  • A fee paid to the sponsor for identifying and acquiring the property.

  • Payments made to investors from the property's income or sale proceeds.

  • The process of evaluating a property's financial performance and potential risks.

  • A fee charged for arranging a new loan to replace an existing one.