General Partners, also called Sponsors or Co-Sponsors, are the managers of syndication. This involves roles such as acquisition, financing, asset management, and investor relations.
Limited Partners, also called Passive Investors, invest in a syndication for financial return but do not make day-to-day management / operational decisions.
Simply put, passive investing is allowing professional asset management to put your money to work for you. This allows investors to not worry about the constant ups and downs of the stock market – timing buying and selling within the exact minute. Passive investing allows an “invest and forget” opportunity. MAC Assets will provide you monthly updates on the health of the property. This report will include where we are regarding key metrics of the pro forma such as vacancy, lease-ups, bad debt, rehabs, plus any other updates that you would feel are important.
The suitability of an investor will be determined by the General Partners for each deal, utilizing pre-existing knowledge of the investor and reviewing answers to the financial questionnaire included in the subscription paperwork for each deal. Investors are typically classified as Accredited Investors or Sophisticated Investors, and certain deal structures will only allow Accredited Investors.
Generally speaking, the sponsors may refuse an investor’s participation in a deal if they believe the investor does not have the knowledge to evaluate the risks of an investment or the financial means to handle a potential loss of investment.
An Accredited Investor is someone who:
- Earned $200,000+ per year individually or $300,000+ per year jointly with a spouse for the last two years, and reasonably expects to earn the same in the current year, or
- Has a net worth, or joint net worth with a spouse, over $1,000,000 (not including primary residence).
- Has licensure approved by the SEC? Think Series 6, 7, etc.
For a more extensive definition, see SEC Rule 501 of Regulation D.
Most of our investment offerings are done under SEC Rule 506(b) and thus accept a limited number of Sophisticated Investors. A Sophisticated Investor is someone who does not meet the definition of an Accredited Investor but has sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of a prospective investment.
Don’t fall into this category? Not to worry, there might still be opportunities to invest set up a call, and let’s talk about it.
No, investments in multifamily syndications are not liquid. An investor should expect that the initial investment will not be returned until the property is sold (or in some cases, refinanced), which may be 5 years or more, depending on the details of the particular investment. So, make sure you consider this time frame when determining the viability of your investment.
NOI = Net Income – Expenses (excluding interest, principal, etc.)
The value of a multifamily property is determined by dividing the NOI by the Cap Rate.
NOI = Net Income – Expenses (excluding interest, principal, etc.)
The value of a multifamily property is determined by dividing the NOI by the Cap Rate.
Value-Add multifamily investment is one in which significant opportunities exist to improve the NOI of a property (and thus value) through improvements to the physical condition and / or operational efficiency; it may not be cash flow positive when purchased. A property purchased for Yield is likely already in stable condition, managed efficiently, and cash flowing when purchased. A Hybrid investment is somewhere in the middle – it may also be cash flowing upon purchase but still have some opportunities to increase NOI through rehab and operational efficiency improvements.
Being an originating sponsor of the project, we earn General Partner shares in relationship to our work performed. This is a serious undertaking with legal and financial risks. As such, our ability to receive revenue relies upon performance and attainment of goals. Each project is different and as roles within the General Partnership are allocated, so is revenue.
We get paid just like you, the Limited Partners. In fact, we normally get paid AFTER Limited Partners and the banks. This keeps our interests squarely in line with your interests, not to mention, subordinate to your interests. We don’t get paid a distribution until after you do. We don’t get a return of capital until you have. We make money when you do.
In some cases, we will receive an operating fee for managing the asset and that would be included in the expenses of the pro forma. We are happy to address any concerns about alignment of interests on any deal and be specific to a project being considered.
While the structure of each offering will differ, typically we will be paid in the same type of ways. Real estate syndicators are paid through part ownership in the deal, they receive cash-flow, receive an acquisition fee, receive a small fee for continuing to operate and manage the property and variations of the above.
At MAC Assets, our financial goals WILL ALWAYS BE aligned with you from the beginning. Our mission is to help you, our investors, experience Financial Freedom Through Multifamily.
Part of the appeal of owning real estate is the ongoing cash it generates. As this cash accumulates, the sponsor and/or property management company distributes it to investors. Distributions are typically paid quarterly with some properties cash flowing right away. Other properties that have a larger value add component may take 2-4 quarters for distributions to start. These distributions are included in the calculation of returns and demonstrate operational goals being achieved.
No, passive investors have no legal liability. Passive investors purchase shares in an LLC that owns the property, similar to purchasing stock in a publicly-traded company. Additionally, our loans are non-recourse loans and Limited Partners do not sign on or take on any liabilities.
There is no way to answer every question in advance. MAC Assets strives to be an educator to our investors. Please contact us and ask any questions you have!