Frequently Asked Questions (FAQs)
about Real Estate Investing

• CAP rates.
• Potential for actual vs. virtual returns.
• Potential for appreciation and rent appreciation.
• Population growth & inward migration
• Employment growth
• Cost of living
• Political support of business and development

• Track record
• Integrity
• Experience
• Expertise
• Ability to qualify for loans
• Access to deal flow
• Ability to negotiate
• Ability to manage investment

Typically single-family assets lead the market cycle and tend to be most closely aligned with the current economic cycle. When the economy dips, single-family prices tend to dip immediately as well. Commercial assets move slower and tend to lag compared to economic changes. In addition, commercial tenants tend to be of higher credit, be more reputable, and are less likely to move or default on a lease, so commercial markets tend to be more stable than single-family.

Trust in syndicator: As an investor, you are a limited partner in a commercial real estate deal. As such, you are fully passive, with all management decisions being made by the syndicator (sponsor). Therefore, trust in a syndicator, and a successful track record, is very important when evaluating a deal.

Risk tolerance Commercial deals tend to run the gamut of risk/reward. Low-risk investments are typically stabilized assets that have conservative leases and tenants in place close to or at full occupancy. These are usually longer hold periods and are sometimes referred to as “mailbox money”, with a secure dividend check every quarter. Other deals are “value add”, which take on more risk to make substantial improvements to a property, typically increasing both occupancy and rents. Development deals also offer attractive returns at higher risk and can encompass land entitlement, construction, and operation of a new facility.

Desire for passive investments: As a limited partner investors take a passive role in the ownership of real estate commercial investments. Sponsors set up full property management, and handle taxes, finances, accounting, and an investor simply receives predetermined profit splits. It also has the advantage of limiting liability to the amount invested due to its passive nature.

Cash flow vs appreciation: Lower-risk deals tend to have more stabilized values but produce cash flow over long terms that help meet investor cash flow goals. Appreciation and value add deals can generate a large profit but take on more risk to attempt those objectives.

• LLC owns property
• Investors own share in the LLC
• Management is a separate LLC that has all liability
• Investors have no liability beyond their investment
• Managers have all responsibility for managing the asset

Syndications allow one to invest only in products that match their investment objectives Funds generally invest in a portfolio of investments that may or may not meet the investor's objectives.

REITs are public securities with broad investment objectives that have the volatility of typical market securities. “Investors” can get in and out at will but have no long-term commitments.

Leverage, more cash to invest elsewhere, not all eggs in one basket, more passive Benefit from the expertise, experience, and ability of the syndicator to qualify for loans, select from many opportunities, vet the deal, and execute the management of the investment for maximum return on investment.

The syndication establishes a corporation that purchases the asset and the investors own shares of the corporation. An LLC corporation manages the asset for the investors.

Only on the net income after all expenses and depreciation. The annual net income reported on a typical K1 already takes advantage of the depreciation shelter of the investment.