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We currently market our deals under SEC regulations 506 (b) meaning we can only share our deals with investor who are accredited and we have a relationship with. The definition in the U.S. is a person earning $200K per year or a couple earning $300K per year over the past two years and expected to do so in the current year; or a net worth of $1m (excluding your primary residence). Since we don’t advertise our deals the accreditation determination is by self-disclosure of the investor by a checkbox. If the deal is advertised to the public, then verification by an outside third party is required.

We set it at $50K and increments of $5K.

Once we have a property under contract, due diligence is about 60 days. We start the equity raise process with investors which runs about 5-6 weeks end to end. Marketing deck goes out, investor conference call takes place, investors reserve a spot, review the PPM / sign and fund. About 2-3 weeks later we close on the property. About 60 days later first investor distribution.

They are outlined in the PPM (Private Placement Memorandum). That said, I like to provide a few data points. In 2009, at the bottom of the financial crisis, delinquency rates on single family homes was 5% vs 1% on MF apartments. Additionally, in Houston when oil went from $100 barrel to $50 barrel Class A (new apt buildings) had to offer concessions and vacancies rose to 15% while Class B (older MF where value add syndicators play) remained steady at 8%. Lastly, we buy proven. Our typical apartment acquisition will have occupancy greater than 90% and usually higher than that and the previous owner was making good money (T12 – trailing 12-month audit will prove this out). We want to improve proven properties not buy on hope.

Depending upon the type of deal, distributions can be paid monthly, quarterly, or annually.  New build syndications typically have an upfront period of no or low cashflow during the build phase and then accelerate after lease up.  The distributions can be direct deposited into the investors account.

Typical cash on cash returns are in the 8-10% range and an internal rate of return (IRR) of 16 – 20% range.  You may also see 2x multiple which means if you invest $50K into the deal the target is a double or grow your money to $100K in 5 years through distributions and profit at sale.  You may also see an average rate of return which is simply the total return over 5 years divided by 5. In value add syndication, the average annual return may be deceiving (higher) than the IRR (Internal Rate of Return) as a large part of the investor returns come in the year of sale (modeled as year 5). IRR typically is a better measure for varying cash flows over a set time horizon.

Typically, at time of sale or liquidity event. We target year 5 as an average. It could happen in year 3 or year 7 or longer if we have a long downturn but 5 is typically what value add syndicators have as a target.

Investors can login to our investor portal to check on the investment’s progress. Updates on the property, some photos and how many units were renovated, rents we are getting, etc. Quarterly property management financials can be reviewed. Following March of each year you will receive a K-1 statement from us for your tax filings.