APARTMENT INVESTING FAQS
Common Apartment Investing Questions
We speak with investors often and have compiled some of the more common questions we receive on passive apartment investing. If you have specific questions, please shoot us a message on our contact form and we will get back to you promptly.
What is an Accredited Investor?
The benchmark for being an accredited or sophisticated investor is set by the SEC. An accredited investor is someone who meets one of the three criteria: a) earned an income of $200,000 in the last two years and expect to make the same this year, b) earned an income of $300,000 filing jointly in the last two years, or c) have a net worth of $1,000,000, not including their primary residence. If someone does not meet the accredited investor criteria, they are considered non-accredited.
Sophisticated investors must “have enough knowledge and experience in business matters to evaluate the risks and merits of an investment.”
Do You Accept Non-Accredited, Sophisticated Investors?
We do generally accept sophisticated investors, but each deal is different. Some deals are reserved for accredited investors only. We will clearly communicate if a deal is open to sophisticated investors.
When we acquire a new property, we will create a new LLC with share classes for Limited Partners (investors) and General Partners (us).
We structure the deal with a split of equity, after a preferred return. Typically, the preferred return is 7-8%. After the preferred return is met, the equity split is 70-75% to investors and 25-30% to general partners. The specific split will be laid out in the deal.
What is a Preferred Return?
A preferred return is a hurdle that must be met before the General Partners receive their share of profits. For example, if a deal has a 7% preferred return hurdle, investors must receive a 7% return on their investment, before General Partners receive any shares of profits.
Is the Preferred Return a Guaranteed Return?
No, there are no guarantees. A preferred return is simply the hurdle we must meet before we participate in the profits. If for some unforeseen reason we do not meet this hurdle, we do not receive any of the profits. Therefore, we are clearly incentivized to meet the preferred return hurdle at a minimum.
What is the Minimum Investment?
The minimum investment ranges from $25,000 to $100,000, but $50,000 is the norm for most deals.
What is the Typical Hold Period?
We plan to hold most assets between 5-7 years. We will explore selling as early as Year 2, but investors should plan on being in a deal a minimum of 5 years.
What if I Want/Need to Exit a Deal Early?
These are illiquid assets, meaning the investors should plan on staying in the deal through the hold period. In the case that an investor faces an extraneous circumstance and needs to exit a deal, we will typically work with them to buy out their shares. This is on a case by case basis.
Will I Receive Tax Benefits?
Yes, the profits and losses will be passed through to investors. Commercial real estate can be depreciated at a faster pace than residential and this depreciation often creates a “paper loss” for investors. This “loss” can be used against other qualifying gains, but please consult with your CPA.
Where Are Your Focus Markets?
We focus on stable and growing markets in Southwest Ohio, Northern Kentucky, and Southeast Indiana. In addition, we partner with select operators to share opportunities in markets like Texas, Florida, South Carolina, and Georgia.
How Often Will You Send Updates?
When we have an investment opportunity, we will send an email with key info on the deal and the next steps. From there, we will set up a webinar to discuss and seek soft commitments from investors.
When you invest in a deal, expect to receive monthly updates and quarterly financial statements.
How Often Do You Make Distributions?
Profit distributions will vary by deal, but we seek to make distributions quarterly. Some deals will have monthly distributions.