FREQUENTLY ASKED QUESTIONS
Your Questions, Answered.
WHAT IS A REAL ESTATE SYNDICATION?
A real estate syndicate is a group of investors who pool their capital to acquire a property. Together, investors have more buying power than they could manage on their own.
HOW DOES A REAL ESTATE SYNDICATION WORK?
Sponsors reposition and increase the operational efficiency of the property.
Passive investors receive periodic distributions, pass-through tax benefits & more.*
Upon the sale/disposition of the asset, investors receive their initial investment (to the extent not previously returned) & share of the sales profit.
Sponsors (AKA “GPs”) identify an asset and perform extensive due diligence.
Sponsors present the investment opportunity to passive investors.
Investors pool funds to purchase the asset.
WHO IS ELIGIBLE TO INVEST?
While certain investment opportunities are limited to only accredited investors, there are other opportunities that accept a limited number of non-accredited investors; provided that such investors qualify as sophisticated investors.
HOW DO I KNOW IF I AM AN ACCREDITED INVESTOR?
Under Rule 501 of Regulation D of the Securities and Exchange Commission (SEC), an accredited investor is defined as: A natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; and/orA natural person who has an individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person.
HOW DO I KNOW IF I AM A SOPHISTICATED INVESTOR?
A sophisticated investor is defined as an individual or institution that has sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.
HOW MUCH WOULD I NEED TO INVEST?
Minimum investment amounts typically range from $50,000 – $100,000; however, each deal is different.
HOW FREQUENTLY ARE DISTRIBUTIONS MADE?
The frequency depends on the specific investment, as each deal is different-- some are monthly, some are quarterly. Typically, there is a ramp-up period before distributions are made to investors in order to give the new property management company time to build up additional cash reserves and stabilize the property post-acquisition.
FOR HOW LONG IS MY MONEY INVESTED?
The investment strategy for most acquisitions requires the property to be held for a minimum of 5 years. Please keep in mind that real estate investments are generally illiquid until the property is sold or refinanced.
WHAT IS A SPONSOR?
A sponsor is the person (or persons) that identifies the target property, negotiates the purchase, obtains financing, raises capital, and manages the asset post-acquisition. The sponsor team has the experience to analyze and manage the deal on behalf of the investors. They generally have skin in the game too, often putting up between 5-20% of the total equity.
HOW ARE SPONSORS COMPENSATED?
Sponsors generally are compensated through a "promote" (or "carry") of 20-30%, as well as certain fees, including an acquisition fee (typical 1-2%) and an asset management fee (typically 1-3%). Fees vary based on each deal. All sponsor compensation is detailed in the private placement memorandum and LP/LLC agreement for each investment.
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*By Starlight, LLC and its affiliates do not provide tax, legal accounting, or financial advice. The material on this site has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, accounting and financial advisors before engaging in any transaction.