Why August Is the Perfect Time to Review Your Real Estate Strategy
I remember my first passive real estate investment.
Another real estate developer had a potential project and was raising funds from passive investors.
But before making any investment, I completed the proper due diligence steps. I evaluated the market, researched the company, and investigated their past projects. I also scheduled a call with the developer so I could talk to them and get a sense of their personality.
I knew that after I clicked send and wired in my funds, I was going to be a passive investor and truly rely on the developer’s expertise to execute the business plan.
Admittedly, I was a little nervous (and excited) about making the investment. Investing $50,000 is a lot of money for anyone!
That experience taught me the importance of setting clear expectations for investors. As a developer myself, I strive to provide the transparency and communication that I would expect if I were to invest passively in a project.
So, let me take you through what you can expect after you’ve taken the plunge and invested in one of our projects.
Typically, you can expect the investment process to go like this:
Let’s walk through the post-investment journey together.
Wire in Your Funds
So, you’ve decided to invest in one of our ground-up multifamily development projects. You’ve done your due diligence, signed the paperwork, and wired your funds.
After you wire in your funds…congratulations! You’re officially a passive investor!
But, what happens next?
First, we will email you to confirm your wire has been received and you are officially a partner in the deal.
Depending on where we are in the process, our company may still be raising funds from other investors and working with the bank on some last minute closing items.
The official closing date should have been communicated to you through various emails, during our webinar, and in the investment summary we distributed to you.
Simply put, after you wire in your funds, our company is busy behind the scenes working to get the project officially closed. We always email you any important updates that may arise.
Official Closing
Immediately after we officially close on the project, we send out a confirmation email to all investors letting them know.
Within that email, we will typically include some important information about next steps and what you can expect moving forward.
Monthly Updates
This is where you’ll start to see tangible progress. You can expect monthly updates, including:
Annual Schedule K-1
Every year, you can expect to receive a Schedule K-1, which is a tax document issued for an investment in a partnership, like a multifamily development project. The purpose of the K-1 is to report your share of the income, deductions, and credits.
A separate K-1 is issued for each real estate syndication you’ve invested in. They are typically issued around the same time as 1099s and serve a similar purpose for tax reporting.
You can expect to receive your Schedule K-1 from us in Q1 of every year, starting in the year after the project closes.
The Waiting Game
Ground-up development isn’t a get-rich-quick scheme. The construction will start immediately after closing and can take anywhere from 14 to 24 months.
During this time, you won’t be receiving any distributions since there is no cash flowing asset yet. Your money is hard at work, turning a piece of land into a vibrant apartment community.
The Exit: Realizing Your Returns
The final phase of your investment journey is the exit. This is after project construction is complete and the property gets fully occupied with tenants. At this point, we will look to sell the property (or refinance), depending on market conditions and the project’s performance.
The timing of the sale can vary, but it typically occurs 3-7 years after construction has started. During this time, we will keep you updated every step of the way and what you can expect next.
Continuous Communication: Our Commitment to You
Throughout this entire process, our team is committed to keeping you informed. We understand that as a busy professional, you don’t have time to chase down information about your investments.
That’s why we provide regular updates, promptly address any questions or concerns, and ensure you have a clear picture of your investment’s performance. Remember, you can always call or email us if you have any questions along the way.
Recap
Once you’ve reviewed the investment summary, signed the PPM (private placement memorandum), and sent in your funds for a real estate syndication, your active participation is complete.
Once everyone sends in their funds and the deal closes, then the team can get started on executing the business plan – building the project, managing contractors, leasing up the property with tenants, and working towards a sale.
Typically, you can expect the investment process to go like this:
Investing in a multifamily development project is an exciting journey. It requires patience, but the potential rewards – both financial and in terms of the impact on communities – can be substantial. As you watch your investment grow from an empty plot of land to a thriving residential community, you’ll experience the unique satisfaction of being part of something tangible and meaningful.
So, the next time you wire funds for a multifamily development investment, you can do so with confidence, knowing exactly what lies ahead. Welcome to the world of passive real estate investing – where your money works hard, so you don’t have to.
Are you interested in getting notified when we have our next passive investment opportunity? Apply to join our Investor Club here.
