Frequently Asked Questions

A real estate syndication is an efficient way for investors to pool their money together to purchase larger real estate assets that they typically couldn’t manage or afford to purchase as an individual investor. Generally, by leveraging and raising additional funds from outside investors to purchase it, we force appreciation and then actively manage the asset.

Typically 25%-30% of the funds are pooled together from the syndicator and the passive investors, and the other 70%-75% of the funds come from the lender/bank.

There are many parties involved in a syndication, including, but not limited to, CPAs, lenders, real estate brokers, attorneys, property managers, passive investors (you) and the syndicator who puts the whole deal together and manages the asset (Joint Venture Properties).

There are 5 main reasons investors might consider a real estate syndication over the stock market or other investments:

  • Below-Average Risk: When the housing bubble popped in 2008, the delinquency rates on Freddie Mac single-family loans soared, hitting 4% in 2010. By contrast, delinquency on multifamily loans peaked at 0.4%. So, if you’re looking for a recession-proof way to invest your money, there is no better option than apartment building investing.
  • Above Average Returns: As I describe in the Special Report “What’s the Best Investment: The Stock Market or Real Estate”, the average stock market return over the last 15 years was 7.04% but after fees, inflation, and taxes that return becomes a paltry 2.5%. On the other hand, multifamily syndications routinely return average annual returns of 10% and above. That’s compounded (i.e. without volatility) and after fees, inflation, and yes, even taxes.
  • Passive Income: Unlike stocks and bonds, multifamily syndications generate cash flow for its investors from the income generated by the property.
  • Extraordinary Tax Benefits: Because of the magic of “bonus depreciation”, your investment income is taxed at a much lower rate than any other investment (in fact, you may actually show a taxable loss that can be used to offset other passive income!).
  • Inflation Hedge: As inflation increases, so does the value of the property – the perfect hedge against inflation.

With our current tax laws, investing in U.S.-based real estate syndications – especially multifamily apartment buildings – is the BEST passive investment on the planet.

Through our industry relationships, we go out, locate and underwrite cash-flowing multifamily real estate communities, we then raise cash from investors to acquire the asset, we then force appreciation through physical or operational improvements and we then actively manage the asset.

The General Partners are the individuals who are putting the multifamily syndication opportunity together. They then manage the asset, execute on the business plan and they then offer that investment opportunity to passive investors. They are interchangeably referred to as the syndicator, the sponsor, or the operator.

Limited Partners or passive investors have no active investor duties in a multifamily syndication. The distributions that an LP earns either monthly or quarterly, or any return for that matter is truly passive in nature. The GP or sponsor group is simply providing an opportunity to investors to invest alongside them, into a stable and appreciating asset with no active real estate investing role whatsoever.

We focus on class B & C apartment communities in strong insulated growth markets across the United States. 

The communication protocol varies based on the deal, but we will always communicate effectively via email or phone whenever there is an update. Additionally, we are available for communication Monday through Saturday!

An accredited investor is an individual who meets the guidelines and requirements of income and net worth based on securities and exchange commissions (SEC) regulations. This is so that the SEC can ensure proper protection for all investors.
To be an accredited investor, you must satisfy at least one of the following:
1. Have an annual income of $200,000, or $300,000 for joint income, for each of the last two years, with expectations of earning the same or higher income this year.
2. Have a net worth exceeding $1 million, not counting your primary home.

We solely invest in multifamily housing. We usually buy high-quality B and C class properties as value-adds. The money you put into the deal is used to finance one transaction, not a portfolio of properties.

No. Each deal is different and your investment can be tied up either shorter- or longer-term. The initial liquidity event may take place at the refinancing of the property. This occurrence might happen as early as year three.

The projected refinance for a deal would be somewhere between year 2-3. This would be the first large liquidly event for the deal. Typically we look to hold a property for 5-7 years, although we could sell well before that if we can achieve our desired number.

K-1 form is a tax document that acknowledges revenue for the year. One will be given to each investor in a combination. It’s a standard procedure with real estate partnerships and LLCs to issue one per partner.

The income shown on your Schedule K-1 may relate to one of the following:
-Interest Income
-Rental Income
-Gains from the property sale
To further understand the differentiation between the various categories of income, we strongly recommend contacting your tax advisor or accountant.

The loss shown on your Schedule K-1 should be more than that of which you claim on your tax return. For further information, please contact your tax advisor or accountant.

A preferred return, for example, is as follows: if the preferred return was 8% and you invested $100,000, that means that the first $8,000 of free cash flow distribution would go to the preferred return investor before paying any other general partners.

Individuals, self-directed IRAs, solo 401ks, qualified retirement plans, business entities, or a combination of several accounts may all invest money.

The split is the investment returns that are provided to the investors in the portion of the split. So, if the split is 70% to the investors and 30% to the deal syndicator (Joint Venture Properties LLC), after the preferred return is paid (if there is one), then the partners split all other proceeds from distributions or capital events 70/30. That split can change if a certain hurdle (or waterfall) is achieved. For example, a split could be 70/30, then go to 50/50 once the IRR hits 18%. Any returns higher than 18% will then be split 50/50 (Investors/Syndicator), which is a ‘waterfall’.

Every deal is different. Typically, investors are paid out from the cash flow of the deal either quarterly or monthly.

Typically, the minimum investment into one of our deals is $50,000.

Typically, the funds are held in an escrow account in the name of the newly-created LLC for the deal until the property is officially closed on. Funds can be wired or sent by check.

In this section, I’m going to explain when and how often passive investors get paid and how much you can expect to earn.

You’ll understand the ins and outs of a cash out refinance and learn how passive investors can redeploy that money for infinite returns!

As a passive investor in a multifamily syndication, there are 3 ways you can get paid:

  • Cash flow distributions
  • Cash out refinance
  • Sale of property

Let’s go through each in turn and talk about when and how these payments can occur.

Don’t have money in the bank to invest in multifamily? Don’t count yourself out! There are several ways to access capital for real estate deals.

Every deal is different. Generally, exit strategies for these deals are five years, but original timelines can change based on market conditions. 

The first thing to understand is that any fee is separate from all highlighted returns and projections for a deal. Simply put, that means that any fee collected by Joint Venture Properties (the syndicator) has no impact on projected returns of the deal, no fees are coming out of pocket from investors. We make our money in three ways;

  1. Acquisition fee, which is anywhere from 1-3% of the purchase price and is paid at closing to cover all costs associated with finding and vetting closing on the deal.
  2. Asset management fee, which is anywhere from 1-3% of monthly revenues. This fee covers all of the time and costs we incur associated with managing the asset, overseeing the property management company and executing on the deal’s plan.
  3. Equity split, which is the split of cash distributions we receive as equity partners in the deal. Typically, the equity split is 60/40 or 70/30. 

There are factors that are beyond our control (e.g., market conditions). There is a risk that you can lose your investment just like the stock market or investing into a new business. However, we believe this to be highly unlikely for several reasons. 

Firstly, the approach used to underwrite these deals are very conservative and gives us plenty of room to weather a down market. Secondly, we are buying proven assets that provide a return month-to-month or quarter-to-quarter. We are not purchasing a property to tie up all of our cash and hedging that the asset will appreciate. These are cash-flowing properties that provide frequent returns and the appreciation is a bonus.

We will still hold onto the property. We do our best to diligently vet the asset and the market the asset resides in to ensure that we are acquiring the property with enough room to sustain economic uncertainty. The property classes we purchase (Class B & C) are generally the best classes to be in during tough economic times.

In terms of 1031 Exchanging into a Joint Venture Properties deal, this is not possible because your purchasing shares of our LLC and not the actual property itself. However, you may be able to potentially 1031 from a Joint Venture Properties deal into the next deal granted that the timing meets the 1031 Exchange rules and a few more factors.

Yes, it would simply entail a slight difference in how you sign the subscription agreement and fund the deal. There are some things to consider, however, such as the Unrelated Business Income Tax (UBIT), which Joint Venture Properties recommends seeking the counsel of your CPA and/or financial planner.

Schedule a call to learn about our passive investing opportunities

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This discovery call is an opportunity for you to learn more about what we do at Joint Venture Properties, and it also gives you the chance to share details about your specific investing goals.

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