An accredited investor is an individual or business that is allowed to purchase securities to become a limited partner in a syndication. An example is a group of individuals/LLCs coming together to purchase an apartment complex. An accredited investor must meet one of the of the following requirements, as defined by the IRS.

1. Have a net worth greater than one million dollars (not including personal property).

2. Have an earned income of $200,000 (or $300,000 with spouse) within the past two years with expectation to earn the same the following years.

3. Own a trust/LLC with total assets in excess of $5 million dollars.

Not always, it will depend on the syndication structure. A 506(b) offering allows up to 35 non-accredited investors to participate in a deal, while there can be an unlimited amount of accredited investors. A non-accredited investor would identify as sophisticated investor, meaning they have sufficient knowledge or experience in financial and business to make them capable of evaluating the risks of the prospective investment.

A 506(b) of Regulation D is considered a "safe harbor" under section 4(a)(2) of the securities act. It is a private offering used to capital raise in exchange for shares to its investors. An unlimited number of accredited investors may participate, while 35 non-accredited investors may participate.

One of the advantages of using a 506(b) structure is the ability to fundraise without registering with the Securities and Exchange Commission (SEC). This was created by the IRS to help fund start ups and smaller organizations to participate in larger transactions.

A 506(b) is not allowed to be publicly advertised, hence an existing relationship must exist prior to raising capital. By connecting with us early on, we can build a working relationship and meet this requirement.

A 506(c) of Regulation D is commonly known as investor crowdfunding. Crowdfunding requires all purchasers to be accredited investors where as non-accredited investors are unable participate. An unlimited number of accredited investors may participate in the investment.

One of the advantages of using a 506(c) structure is the ability to fundraise publicly.

Generally it depends on the investment property and structure of the deal. Most investments require a minimum of 50K per investor, a standard throughout the multi-family syndication workspace. In larger deals, 100K minimums may be the requirement within a 506(b) due to limited slots with 35 non-accredited investors.

The frequency is on a deal by deal case and is based off of property performance. Normally cash flow projections are distributed quarterly.

As an investor, you will receive a scheduled K-1 every tax season. This form will include the income, gains, deductions, losses and credits based off of the property partnership.

A subscription agreement describes the cost per share within the private placement. As an example, a 50K investment purchase would provide 50 shares within the limited partnership owning the asset. In the subscription agreement you will also identify if you are investing through an LLC, partnership, or personal name. This document also describes the offering, location of the property, valuation of the property, and anticipated business plan.

The private placement memorandum (PPM) is a lengthy document written by an attorney that discloses everything an investor should know about the offering. It describes investment risk, the structure of the deal, offering terms, fees, conflicts of interest, and other legal matters.

One can think of this as the yellow sheet that is signed before a medical procedure. It is not anticipated that the worst case scenario will occur, but legally that has to be disclosed. The purpose of the PPM is to do exactly that, explain to the investor all the scenarios where a deal can yield zero return.

Normal multi-family syndications typically last between 3-7 years, depending on market trends and the original projected business plan. It is a common goal to perform a level of rehab such that a refinance is performed around year 2. This helps provide most if not all of the initial investment back tax free, while the property continues to cash flow until the sale date. We also plan to perform a cost segregation, which accelerates depreciation. This alleviates any taxable gains realized throughout the investment term.