Syndication is the pooling of money from several investors for the purpose of acquiring an asset. In our case, we pool investors' capital to acquire apartments and hotels. When you invest in a syndicated deal, you take on a PASSIVE ROLE as you have no day-to-day property or renovation management responsibilities. You leave the hard work to us and all you do is collect quarterly dividends and receive your money back plus profit when the property is SOLD.
Syndication is NOT for everyone. Syndication is perfect for the high earner but busy individual and wants a totally passive way to invest in real estate. If this describes you, click on the button below and Mike Ealy or one of our Investors Relations people will call you.
Here are the reasons why investors invest in a syndicated deal:
NO. Even non-accredited investors can invest in a syndicated deal depending on how the sponsor or General Partner set it up and what exemptions are filed with the SEC. The way we set up our syndicated deals usually, is that they are open to a limited number of non-accredited investors but only those we already have a pre-existing relationships with.
The profit or return varies deal to deal. and every sponsor is different. What we typically give our investors is a 6-8% preferred return plus 30-50% equity in the deal (profit share). We aim to deliver a 12-18% Internal Rate of Return and for our investors to 2X their investment capital in 5 years (or less).
Think of the Pref as similar to dividends (in stocks). You get a specific percentage of your capital invested. It's called "preferred" because you get paid FIRST before the sponsor gets his/her share of the cashflow (assuming there's cash left over). Also, if there's no cash in the project (example, during renovation), the Pref distribution can be accumulated for the following year's distribution.
You get a portion or ownership interest in the property. Depending on the deal, we give our passive investors (also known as limited partners), 30-50% equity in the deal. That means they get 30-50% share of the cashflow left after deducting the pref and they get 30-50% of the profit when the property is sold.
As 30-50% owner of the property, you get to deduct its depreciation against your passive income from the property (pref + cashflow share). By doing this, in most cases, you get your passive income from the property tax-free*. Also, when the property is refinanced, you get a portion of the refi proceeds and that's tax-free* cash as well.
* DISCLAIMER: Every financial situation is different so consult your CPA or tax professional before investing.
Unfortunately, syndicated deals are by design, ILLIQUID during the time your capital is invested (3-5 years is typical). If you want to cash out early, you can talk to the sponsors of general partners and if possible, they can buy out your share at a fair price for both parties. If that's not possible, the general partners can check with the limited partners as to who wants to buy out your share.
Because your investment in a syndicated deal is not "public" (unlike the stock market), there is ZERO VOLATILITY. Your investment value does not fluctuate daily or hourly.
Our minimum investment is usually $100,000 but we sometimes do make exceptions depending on the deal and other factors. Click the button below and let's have a conversation.
on a project that doubled the equity invested in it after 4 years, factoring in the preferred return - how much is your profit share/returns? See table on the left.
DISCLAIMER: this is just an example and the actual returns will vary depending on the deal.