All Forum Posts by: Jorge Abreu

You are ready to invest, but where do you start? And once you do, what can you expect?

FINDING A SPONSOR

Arguably, the most important tenet of passively investing in multifamily real estate is establishing a high level of trust in your sponsor. Look for a sponsor with a proven track record and ample experience—both are needed to provide accurate market insights, help demystify your investment options, and guide you through the entire process. But beyond that, you also want someone who aligns with your big-picture values, investment philosophy, and comfortability with risk.

The best way to start is by tapping your network for first-hand references. If that’s not an option, you can find many sponsors through reputable podcasts or by attending seminars. When you find a good fit, get ready to do your due diligence. Come into the conversation with a list of questions, including prompts about their worst and best deals and how they recovered. Treat this process like an interview— because it is.

ACCREDITATION STATUS

An accredited investor is any individual or entity that is legally permitted to trade securities without formal registration with large financial authorities (such as the Federal Reserve or FDIC), so long as they meet at least one requirement proving their financial sophistication (including income, net worth, asset size, or governance status). Accredited investors can include (but are not limited to) high‑net-worth individuals, insurance companies, brokers, banks, or trusts.

Accredited investors meet one or more of the following criteria:

👉They earn $200,000 a year as an individual or $300,000 with their spouse for two years prior to investing and anticipate the same (or more) earnings in the current year.

👉They have a net worth of $1 million outside of their primary residence.

👉They hold a Series 7, 65, or 82 license.

There is no formal process for receiving accredited investor status, and the sponsor is responsible for verifying. The passive investor/limited partner may receive a questionnaire that requires the submission of financial statements, tax returns, and other documents that prove their income or net worth. The sponsor may utilize a third-party verification service to request similar documentation. Additionally, a CPA, lawyer, or investment advisor may be able to draft a letter that states they meet the requirements.

REVIEWING THE FINANCIAL DOCUMENTS

As a passive investor in a multifamily real estate syndication, you will need to closely review the financial documents provided by the sponsor to evaluate the deal and decide if you want to proceed. These documents include:

Pitch deck: A document that outlines the investment opportunity and its financial projections, which may be paired with other relevant documents such as the purchase and sale agreement, asset appraisal, and inspection reports.

Private placement memorandum: A disclosure document that details the offering itself, legal documents, subscription terms, potential risks, management plan, fund distributions, and more; it is similar to a prospectus for public offerings of stocks, bonds, and mutual funds.

Partnership agreement (also known as operating agreement or limited partnership agreement): A document that describes the business operations, including voting rights, class of shares or membership, distribution of cash to partners, fee breakdown, legal support, etc.

Subscription agreement: A legally binding agreement between the general partner/sponsor and a limited partner/passive investor that describes the process for committing to and submitting funds for the investment; it may also ask for how investors would like to receive distributions and direct deposit information.

✨Returns

The preferred return is an agreed-upon percentage of income that passive investors receive before the sponsor gets paid.

The cash-on-cash return is the annual return of the investor’s investment that’s calculated by dividing annual cash flow and the amount of capital invested.

The internal rate of return (IRR) is a metric commonly referenced in an offering document. It is a financial calculation that accounts for all of the cash flows related to a project's inflows (rent, sales price, etc.) and outflows (expenses, purchase price, debt payments, etc.) and takes into account the time value of money. IRR is a discount rate that makes the Net Present Value (NPV) of all cash flows equal to zero in a discounted cash flow analysis.

The average annual return accounts for cash flow and profits at sale divided by the lifespan of the investment.

✨Exit Strategies

The exit strategy—or the sponsor’s predetermined strategy for selling the multifamily property at the conclusion of the syndication—is another important component of the investment documentation. The “fix-and-flip” strategy, for example, is when the owner renovates a property throughout the hold period and sells it for a profit. In the case of multifamily rental properties, the exit strategy is usually to stabilize the property by building a steady cash flow from tenants throughout the hold period and, once again, sell at a profit.

No matter which investment strategy you use, make sure you have knowledge of all the basics to understand risks and fees that could eat into your returns. Of course, you should do this before you dole out any money or sign on the dotted line.

👉Stock Market Risks

Compared to real estate, the stock market is much more sensitive to exogenous factors and systematic risk, like interest rate changes by the Federal Reserve. There is also the risk of a bad company earnings call or sudden material news that changes the trajectory of the stock price. Usually, this happens all without warning. And let’s not forget the other variables that can still greatly impact the stock market, like the media or political turmoil. Things like policy changes and war can cause major price swings. And again, they are entirely out of the investor’s control.

👉Multifamily Risks

All investments carry risk, and real estate is no different. While multifamily investments are more protective against market corrections than stock investing, they’re not entirely immune. In a cyclical market, real estate asset values can also correct, but cash flow can offset dips in market value and help you budget for unexpected expenses. It’s also crucial that your property is well managed. Operators can reduce risk by making sure a reputable property manager is running the business effectively and efficiently, otherwise, the investment could see higher vacancy rates and a decline in revenue.

👉Stock Portfolio Management Fees

When you hire someone to actively manage your portfolio, fees will always be higher than if you just park your money in passive index funds. If you’ve entrusted your stock portfolio to a professional manager, it’s likely management and/or performance fees are taking a significant chunk of your returns. While management fees are typically in the ballpark of 1-2% of your assets, performance fees can reach double‑digit percentages. Yikes.

👉Syndication Management Fees

When you invest in a multifamily property through syndication as a limited partner, you will incur fees as well. Again, you’re hiring someone to do the heavy lifting so you can take a backseat while earning income passively. A key difference to note is that general partners will, nine times out of ten, be co-investing in the syndication. With skin in the game, they (should) work tirelessly for the best returns possible. The sponsor/general partner typically charges a transaction fee (typically 1-3% of the transaction value) and an acquisition fee (anywhere from 1-5% of the purchase price). These are standard, but some sponsors may tack on additional fees. Make sure to thoroughly review the financial documents and get a full understanding of where your money is going—and why it’s going there.

👉Market Correlation

Historically, experts haven’t found a clear correlation in price movements between the stock market and real estate prices. But there’s a debatable theory that they’re actually positively correlated, in that when the stock market does well, housing tends to also do well. When indices enter a bear market (a correction that hovers around 20% or more), that’s when we might see sentiment change and housing soften.

Invest in multifamily housing and you’re likely to see a higher rate of return than stock investing with much less volatility and with greater tax benefits.

While the history of stock market returns shows us that the market has been up more than it’s been down, anyone with a sizable chunk of stock market shares would tell you that this investment vehicle is not for everyone. In order to be successful here, you must have the perseverance to hold through stomach-churning drawdowns—without any reassurance that your portfolio will make a full recovery.

Real estate investing, on the other hand, provides a level of safety, stability, and certainty that the stock market can’t offer. Multifamily real estate in particular also has the potential to grow your portfolio faster than the stock market. And given low interest rates and current demographic trends, it’s a safe bet to say that multifamily real estate investing will be experiencing tailwinds well into the future.

Investing in both markets (multifamily and stock) can create a strong, diversified portfolio, but the former has a number of advantages over the latter. Let’s compare and contrast the two investments— both passively and actively— and see why multifamily real estate is the best option for faster growth with the lowest volatility.

👉 Active Stock Market Investing

The goal of active investing is to earn returns that beat the S&P 500 (also known as “beating the market”). This requires deep dives into the finances of various companies, bonds, and individual assets—not to mention staying ahead of macro market trends. Active strategies include day trading, position trading, swing trading, and scalping. Some investors choose to open a brokerage account and trade securities themselves using one or more of the above strategies. This is a full-time job, one that’s highly speculative, notoriously risky, and too often based on luck. Somewhere in between passive and active, there’s also the option to hire a firm to manage your portfolio and employ active strategies.

👉Active Multifamily Investing

If you have the time, expertise, and want to retain decision-making authority on how to run your property(s), you may want to take an active approach multifamily investing as a single player. Here, you have the advantage of retaining all profits and income. But keep in mind, to do this requires being on top of every detail. You, and you alone, are accountable for everything from permits to accounting to repairs. The sheer number of local government agencies you’ll be dealing with is enough to send many would-be active investors running. You can also go the syndication route as a general partner. Still within the active investing umbrella, you would be the one to raise capital from investors, find the property, outsource management, and more. Unless you are able to do this full-time—and have the network to back your endeavors up—it may not be feasible or at all lucrative. And while the downside risk for passive investors is limited to their initial investment, general partners take on unlimited personal liability and open themselves up to potential litigation.

👉Passive Investing in the Stock Market

When people talk about passive investing in the stock market, they’re likely referring to index funds. Instead of betting on individual stocks, passive funds are made up of holdings that track a market index like the S&P 500, Dow Jones Industrial Average, or the Nasdaq. These don’t require active professional management, so investors enjoy some of the lowest fees around.

Passive investing in the stock market also assumes a buy-and-hold strategy. By definition, these passive funds are meant to match the performance of the index, not to beat it. As such, it will average modest returns over time. The upside? You’re also spared a lot of the volatility that comes with aggressive trading.

When it’s all said and done, it’s debatable if active management is much more lucrative than passive indexing. Over a ten-year period, most fund managers’ performance lag indices like the S&P 500, also known as underperforming the market. So, unless you’re Warren Buffett, you might want to stick with a passive strategy when it comes to the stock market.

👉Passive Investing in Multifamily Properties

If you have the capital but lack the knowledge, time, or interest in actively managing a multifamily real estate investment property, the most attractive option is becoming a limited partner, or passive investor, in a syndication. Through this partnership, you would invest your money with trusted experts who shoulder the responsibility of active management. All you do, aside from the funding component, is receive both reports and returns at a predetermined frequency (typically monthly, quarterly, or annually).

Obviously, you’d relinquish a lot of control, but that’s the whole point of passive, right?

In case you haven’t heard, America’s Social Security and retirement planning system is outdated. It was never designed for today’s reality. There are several reasons why this has happened. One of those reasons is that life expectancy has increased dramatically since the 1900’s. Thankfully, men and women are living 30+ years longer today and healthcare costs are rising way faster than inflation. Because of this, it is extremely important that we make adjustments to our investment and retirement portfolios to even come close to living the life of our dreams in our golden years.

My goal with this blog post is to help you to see that you must expand your investment portfolios beyond stocks and bonds. When your true stock market returns are adjusted for inflation, they are just too low for the average investor to get ahead. So what is the answer? As investors, we must understand the magic of compounding returns as well as seek higher yielding investments for our portfolio.

Example:

$100 for 30 years at 2% return = $182

$100 for 30 years at 10% return = $1984

$100 for 30 years at 18% return = $21,270

This math shows an exponential growth curve when you are invested in assets with annualized returns above 10%. Being diligent to find investments with higher returns and tremendous tax benefits will drastically change your quality of life after your working years.

To get these types of returns, many investors have turned to multifamily real estate. The term multifamily means 5+ units. However, to really get the advantage of true economies of scale you want to focus on properties with 150 units or more. One of the reasons multifamily real estate is so attractive to investors is because properties with 5+ units are valued based on Net Operating Income and not based on comparables like residential or single family properties. This is important because the owner of a multifamily asset is able to force appreciation by simply increasing income and decreasing expenses. A simple $25 increase in rent on a 200 unit apartment complex will increase the value of that property by >$850K depending on the exit cap rate for the market.

Another advantage of multifamily real estate is that the loans for these assets are based on the property’s Net Operating Income and occupancy rate and not on the buyer’s income or credit score. This gives many that would not otherwise qualify to purchase a multi-million dollar property the ability to do so. The lenders scrutinize each multifamily property in great detail protecting not only them, but both the buyer and his/her investors in the deal as well.

After the great recession of 2008, investors realized that the values of multifamily were less volatile than single family real estate. Unlike residential, the multifamily asset class did not decline sharply because the value of these assets are based on income. When people lost their homes, they still needed a place to live and therefore turned to apartments. As a result, multifamily rents fluctuated less than home prices.

The returns on multifamily properties correspond with the asset class and the risk level of the investment. There are four different asset classes and risk levels. Class A properties have the most affluent tenants paying above average rents. The buildings are newer and have higher quality finishes, more amenities with little to no deferred maintenance in great locations. Although less risky, these properties have lower cash flow and returns for investors. Class B properties are competing for a wide range of tenants that pay an average monthly rent for the area. They are somewhat older properties and there is some deferred maintenance. These properties have adequate amenities with better cash flow and higher returns. The exit buyers are both institutional and private. Class C properties are much older and located in less than desirable neighborhoods. They are always needing renovations and updating. They have lower rents and are typically mismanaged creating amazing value-add opportunities for the savvy investor. For this reason, there is a higher cash flow and great upside. Class D properties are in very rough areas and something we suggest that you stay away from as an investor.

Another thing that is driving long term demand for Multifamily properties is the increase in the renter pool. Only half of all renters say that they want to become homeowners in the next 5 years even if they qualify for a mortgage. Some of this is driven by the millennial lifestyle choices and the fact that the baby boomer generation is beginning to downsize and looking to urban apartments for convenient services and easy access to amenities.

All of these things suggest that the multifamily market has a good decade of demand. The purchase of these multimillion dollar assets are not as far out of reach as you might think. Group buying through syndication governed by the Security Exchange Commision has made this possible for many sophisticated and accredited investors. Let's discuss how this works.

A syndication team of active investors finds an asset, contracts to purchase, performs all due diligence on the asset, organizes the investment offering, and then offers the opportunity to their pre-screened investors and then proceeds to manage the property until the sale. Passive investors can invest as individuals, using their self-directed retirement plans, family trusts or entities. The investors then invest varying amounts and receive a prorated equity share of the cash flow and value gained over the investment period. The key principles/general partners that found and put together the deal will receive a share of the cash flow and profits and a small management fee.

The syndication team will assign an asset manager and a property management company to run the property so the passive investors have zero involvement in the day to day headaches. Cash flows are disbursed on a monthly or quarterly basis to the investors, who receive their preferred returns before the management team is paid. Double digit annual returns are common in the multifamily syndication space making it very appealing to investors. This is possible because of cash flow and forced appreciation through increasing income and lowering expenses.

If I haven’t convinced you already, some other reasons to invest in multifamily assets include the fact that the professional management’s ability to use sales, cost and profit metrics drastically lowers risk and decreases the role of the passive investors. This is not typically the case with single family investments. Multifamily assets have protection against inflation. The value of multifamily and all other real assets increase with inflation. Real cash, on the other hand, will decrease in value from inflation. With the FED printing trillions of dollars out of thin air, this is something every investor needs to think about.

Lastly, my favorite benefit is the tremendous tax advantages. Multifamily properties are able to take advantage of the depreciation on the building and equipment essentially offsetting some or all of the income taxes from the properties cash flow. Last but not least, multifamily properties have economies of scale on their side. These benefits include vacancy impact, marketing more efficient, repairs and maintenance is more cost effective, etc.

Ultimately, stock investing simply can’t surpass multifamily investments when it comes to cash flow. While there may be a select few companies that pay comparable quarterly or monthly dividends to shareholders, they come with much more risk than a solid multifamily investment.

And with real estate, cash flow can be even more critical during market corrections. Bad timing in a turbulent stock market can set you back for years before breaking even, and if you happen to need to sell some stocks during a market correction to pay bills, that can be very destabilizing…both financially and psychologically. Even during times of turbulence, multifamily real estate has little correlation to the stock market, meaning that it can easily help you weather a temporary recession

RECESSION PERFORMANCE: STOCK MARKET VS. MULTIFAMILY REAL ESTATE

👉 On average, the stock market sees 6–8% in annual growth.

👉 Multifamily is more in the range of 15-20%.

Historically speaking, the real estate sector has outperformed the stock market. To further prove this point, let’s examine two very significant times in history: the 2008 financial crisis and the 2020 global pandemic.

THE STOCK MARKET CRASHES OF 2008 & 2020

The stock market crashed on Sept. 29, 2008, and The Dow Jones Industrial Average fell 777.68 points. Prior to the stock market crash of 2020, it was the largest point drop in history. By March 5, 2009, it had dropped more than 50% to 6,594.44. While it fell 90% during the Great Depression, that was a downward slope that took place over almost four years’ time. The 2008 crash only took 18 months.

Over a single year, the stock market tanked $6.9 trillion of shareholder wealth.

And investors felt those harsh ripple effects for more than four years. The Dow dropped 275 points in June 2012; then the 10-year benchmark Treasury yield dropped to 1.47.36—the lowest rate in more than 200 years. It wasn’t until 2013 that the stock market finally recovered, yet inflation-related fears and higher interest rates sent the Dow into the longest correction since 1961. After 10 full years of volatility, the correction ended in August 2018.

Then, the global COVID-19 pandemic joined the chat, and the stock market magnificently crashed yet again. As government officials around the world shut down economic activity, panic and uncertainty ensued, resulting in a stock market crash that included the three worst point drops in our country’s history.

March 9, 2020:

The Dow fell 2,014 points, a 7.79% drop

March 12, 2020:

The Dow fell 2,352 points to close at 21,200, a 9.99% drop and the sixth-worst percentage drop in history

March 16, 2020:

The Dow plummeted nearly 3,000 points to close at 20,188, losing 12.9%. This price drop was so significant that the New York Stock Exchange suspended trading several times during those days.

However, unlike the 2008 crash, the stock market rebounded back by May of 2020, largely in thanks to an enormous amount of stimulus money and slashed interest rates.

The stock market crash of 2008 was spurred by defaults on consolidated mortgage-backed securities, which were directly tied to the loans banks were handing over to potential homebuyers regardless of their creditworthiness. When the housing market fell, many homeowners came up short on their loans. U.S. homeowners lost a cumulative $3.3 trillion in home equity during 2008, according to a report from Zillow.

As a result, many families were forced to downsize and relocate to single-family rentals and multifamily housing. During this time, stock market–correlated real estate investment trusts (REITs) experienced the same market volatility, but they recovered much faster. Apartment REITs outpaced other commercial real estate sector and the S&P 500 in the subsequent years following the 2008 recession.

2020 was, as we’ve all heard, an unprecedented time. But between stay-at-home orders, the move to remote work, and generous stimulus checks, the multifamily sector was incredibly well-positioned to withstand any market hits. And despite rumors of rent strikes and nonpayments stemming from lay-offs, rent collections remained relatively stable throughout 2020, with razor-thin decreases compared to 2019.

MULTIFAMILY’S UNMATCHED RECESSION RESILIENCY

Discretionary spending is largely cut during recessions; saving cash and budgeting for necessities becomes the priority. So while real estate sectors like retail and hospitality often see adverse effects, multifamily real estate goes largely unscathed. To state the obvious: people will always need a place to live. As the need for apartments increase, rents increase as well— it’s just simple supply and demand. This bodes well for multifamily investors. Additionally, multifamily buildings typically have more renters than retail and office properties, therefore, a handful of vacancies won’t significantly impact the bottom line. And with short-term leases, owners can swiftly react to any economic shifts.

👉A good business partner should have skills that support and complement your own. No single person is a master of all things business. If you have great interpersonal skills but poor business finance skills, consider a partner who understands business accounting. The more skills you and your partner bring to the business together the easier it will be to start, plan and grow.

👉Of all the things to look for in a partner, this is probably the most important. You will need to be able to communicate effectively with your partner to make decisions, set goals, and drive the business forward. If you partner with someone that is reluctant, combative, or unable to consider your viewpoint it will be harder to be successful.

👉If your partner has serious challenges in his/her personal life, it may carry over into the business. It is nice to be willing to give someone a chance, but scaling a business takes focus, time, and tremendous energy. If your partner is dealing with one personal crisis after another, you may find yourself carrying the weight of the business.

👉It is great to have a business partner that has financial resources, but there are other contributions a partner can bring to the business that can be just as valuable. A partner with a secure business network, industry connections, client list, or specific credentials and expertise can also increase the value of your business and improve your chances of achieving long-term success.

👉Only enter into partnerships with someone you can trust. Look for someone who values honesty and practices good personal and business ethics. A poorly chosen business partner may end up, taking your ideas or clients to start their own business, or breaking laws that could get your business into legal trouble.

👉You should never partner with someone that you do not respect. The main purpose of forming a partnership is to achieve success as a team. You also want to partner with someone that will show you respect as a partner, business professional, and as the founder of your business.

There are many challenges that a new real estate investor faces when starting their journey. So many questions go through your head that can often create limiting beliefs and hinder your progress.

1. I don’t have enough experience.
2. I don’t have enough capital.
3. I don’t know any other Multifamily real estate investors.
4. Why would someone give ME $100k to invest in a deal?
5. How am I supposed to find deals, know how to analyze them, take them to closing, bring or raise capital, and operate the property by myself?

There are a lot of different solutions that can help crush these limiting beliefs and solve your challenges, but the biggest one is Partnering With Others.

You don’t have to be good at everything to be successful in Multifamily. In order to bring value to partners, you have to figure out what your “Superpower” is in the Multifamily space. Some “Superpowers” include:

1. Finding Deals (Through Brokers or Off-Market)
2. Raising Capital
3. Marketing
4. Asset/Property Management
5. Networth/Liquidity
6. Construction
7. Previous Multifamily or Real Estate experience (track record)

What’s your “Superpower”? Which one can you bring to the table if you were to find a partner tomorrow?

Next: How to Choose a Partner

How do private real estate syndications compare to real estate crowd funding sites?

In the past few years, real estate crowd funding sites have become quite popular as a way to invest passively in real estate. Sites like RealtyMogul, RealtyShares, and Fundrise have helped millions of people invest passively in real estate.

Real estate crowd funding sites can be a good place to find real estate syndication offerings. However, there are a few things you should keep in mind.

Most of these platforms require that you be an accredited investor in order to invest in their real estate syndication offerings. Some of these platforms do offer REITs (real estate investment trusts) as an alternative for non-accredited investors. Typically, you can invest in these REITs with a low minimum investment (you can invest in Fundrise's eREIT for just $500). If you're investing in a REIT, just be aware that you are not investing in a real estate syndication. Rather, you are investing in a fund. When you invest in a REIT, you're investing in a company that buys real estate; you don't have direct ownership of the underlying asset yourself, like in a real estate syndication. You would likely still get good returns, you would just be investing in a bunch of assets rather than a single one, and you wouldn't get the same tax benefits as with a real estate syndication.

What is the minimum investment?

Most often there is a $50K minimum investment, but this is not always the case.

How long will my money be invested?

Most often 3-7 years, unless it requires a lot of rehab, in that case, 7-10 years.

What kind of return can you expect from one of these deals?

We look for a minimum of 8% yearly COC return. Most deals are better than this! (More on this later) If you invest $50,000, each month you would earn $333. If you invest $100,000, each month you would earn $666. That is not it, however, the bigger return comes on the backside of the deal! When the sponsors sell or disposition the property after they have forced the value up by doing updates, increasing the income, decreasing the expenses, etc.; the big value comes. The profit from sell gets distributed to all the investors and sponsors according to their pro-rata share of ownership. Typically, the passive investors (that's you) will get the lion's share of all cash flow and profits. (EX: 70% investors/30% sponsors split) This often time results in a 18%-20% overall yearly return within 3-7 years!

Can I invest in syndication with my retirement funds?

Yes! In fact, this is one way that many passive investors get started with real estate syndications. To invest in a real estate syndication using retirement funds, you need to first roll over your existing retirement funds (401k's, IRAs, etc.) into a self-directed IRA account. We like Provident Trust Group for their low fees and great customer service, but there are many self-directed IRA companies out there. Once your money is in the self-directed IRA account, you can choose what you want to invest it in, and the self-directed IRA custodian will invest it on your behalf. For a real estate syndication, you will need to provide your self-directed IRA custodian with copies of the legal documents for the syndication (private placement memorandum, operating agreement, and subscription agreement). Then, they will send in the funds on your behalf. Any returns you make on the investment must go directly back into the self-directed IRA account, never into your personal accounts.

Where can I find real estate syndication opportunities?

Many real estate syndication opportunities cannot be publicly advertised. The ones that you do see publicly advertised are foraccredited investors only. You can do a Google search, but how do you know that the opportunities that pop up are legitimate ones, put together by experienced teams with strong track records, who will safeguard your money over a period of several years? It’s extremely hard to find great real estate syndication opportunities just by doing a Google search.

The best way to find real estate syndication opportunities is to get out there and talk to people in the real estate investing space, and particular those in the real estate syndication space. This community is quite small, and once you get connected, you’ll easily be able to find sponsors and real estate syndication opportunities that fit with your investing goals.

We know how hard it can be to find great real estate syndication opportunities. So, that’s exactly what we do. We have dedicated the majority of our time and resources to connecting investors with great real estate syndications. We work hard to find the best real estate markets to invest in and partner with experienced sponsor teams in those markets. We’ve been in this space for a while, so we know most of the larger players and work hard to vet all of the sponsor partners we work with, to make sure they have a strong track record and know what they’re doing.

Once we find a deal with a great sponsor, we partner with the sponsor and open up that real estate syndication opportunity to our investors. Our investors will never pay any direct fee to work with us. We are merely the conduits between our investors and the sponsors. The main benefit we provide our investors is in the investing experience. We provide a lot of resources to our investors and make sure to make ourselves available at all times to answer any questions along the way (sponsors can often be busy with the acquisition of the property and might not have time to answer investor questions). We also invest in these deals right alongside.

our investors. We will not open up a deal to our investors that we wouldn’t consider investing in ourselves. If you’re interested in investing passively in real estate syndications, a great first step is to join our Investor Club. After we get to know you, we’ll help you find real estate syndication opportunities that meet your specific investing goals.

NEXT: Investor's Most Commonly Asked Questions (Part 2)

After you invest in a real estate syndication, you will get regular updates on the progress of the project after the deal closes. At any time, you can ask for more information or clarification, but when a unit floods due to plumbing issues, you will not be the one the tenants call!

Here are the things you should expect from the time a real estate syndication deal closes through the time that the asset is sold:

Upon Closing

As soon as the real estate syndication deal closes, you can expect a note letting you know that the deal actually closed. Included within the notice will also be an Investor Guide, which will give you a high-level overview of what to expect moving forward and answer some frequently asked questions, including questions about the timing and logistics of your cash flow distributions, how to set up your auto draft deposits, tax-related questions, and more.

Monthly

Every month after that, you can expect to receive an update on the progress of the real estate syndication project via email. Depending on the deal, you will also receive either monthly or quarterly cash flow distributions. The update emails include things like the current occupancy, how many units have been renovated that month, whether the renovations are on track with the business plan, and occasionally some photos of the latest progress. This will help you to keep a quick pulse on the project. The progress updates are mostly anecdotal and include a quick high level overview of the different initiatives going on at the property.

Quarterly

Every quarter you can expect to receive a detailed financial report, including the rent roll and the profit and loss statement from the trailing twelve months. Beyond the anecdotal updates you’d get each month, these quarterly reports are much more detailed and give you a line-by-line breakdown of exactly how the asset is doing financially. These quarterly financial reports are not exactly the most fun to read, especially if you’re not a spreadsheet lover, but I highly recommend you at least crack them open to take a look. Even a quick scroll through the pages will give you a decent idea of the overall performance of the asset and the metrics used to assess the ongoing progress.

Annually

Every year, during tax season, you can expect to receive a Schedule K-1, which is a tax document issued for an investment in a partnership, like a real estate syndication. The purpose of the K-1 is to report your share of the income, deductions, and credits. A separate K-1 will be issued for each real estate syndication you’ve invested in. They are typically issued around the same time as 1099s and serve a similar purpose for tax reporting.

Next: Investor's Most Commonly Asked Questions