by Cypress Ventures Group
Apartments can be good investments because they can provide strong cash flow, appreciation that you can control, diverse income sources, scalability, centralized maintenance and significant tax benefits.
So, how do I get into apartment investing?
The answer: Apartment syndication.
Most apartments are purchased by syndicators with money from regular people like you and me. Here are the roles of the Syndicator / General Partner and the Investors / Limited Partner.
The Syndicator/General Partner:
* Finds the apartment deal.
* Underwrites the property for profitability.
* Negotiates the real estate purchase contract.
* Hires an attorney to prepare the paperwork.
* Hires the commercial mortgage broker to find the best financing.
* Qualifies for the loan.
* Creates the business plan.
* Performs the inspections.
* Puts down the earnest money.
* Raises money for the down payment and rehabilitation cost from the Limited Partners.
* Hires the management company to manage the tenants and the property upkeep.
* Manages the general contractor.
* Manages the project to increase its market value.
* Executes the business plan with the apartment manager.
* Refinances the property after value has been increased OR sells the property & splits the profits with all the partners (GP’s-LP’s).
The Limited Partners / Investors:
* Invests their money and receives returns.
* LP’s receive Preferred Returns (6%-10%) on their investment.
* LP’s share in the equity and the cash flows (rents – expenses) on most deals.
* LP’s share in the appreciation (future sale price – purchase price).
* LP’s share in the tax-deductible depreciation on the property.
Where does the money for the down payments and construction come from?
* Savings.
* Self-directed IRA’s – See our post on Self-Directed IRAs.*
* Self-Directed 401K.
* 1031 Exchange – A sale of investment real estate and rolling the tax deferred profits into another real estate investment, ie: a real estate syndication.
If you fit any of the profiles above, you may qualify to get involved in an apartment syndication.
Please feel free to schedule some time with us to explore if being a passive investor in the apartment sector is right for you. You can schedule using this Calendly link.
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*See our post on SDIRAs for a link to the I-plan Group.
Want to invest with your IRA? See more about Self-Directed IRAs on Investopia SDIRA