Looking to invest in real estate but don't know where to start? Have you considered syndication? Real estate syndication is one of the best and most secure ways to get into the market. It enables investors to get the benefits of owning an investment property without dealing with the hassles or stress of being a property owner.Before venturing into real estate syndication, you need to have a business plan to avoid getting lost. This blog post will discuss what syndication is, how it works, and how to create a business plan for 2022. So, whether you're a new investor or already experienced, read on for everything you need to know about real estate syndication!
What Is Real Estate Syndication
The term "real estate syndication" refers to an organization or group of investors pooling funds to invest in real estate. It's simply a mechanism for investors to pool their funds to purchase more significant and stable assets than they could invest in individually.Real estate syndication enables private funds for investment in real estate enterprises when no other financing is feasible or available. It’s long been a popular means of financing, purchasing, and selling higher-priced real estate.
The Key Players Involved in Real Estate Syndications
Because real estate syndications are an investment offering, the Securities and Exchange Commission (SEC) regulates them, and the SEC requires documentation and reports for each offering. Some investment opportunities available through real estate syndication include apartment buildings, mobile home parks, land, self-storage units, and other real estate assets.The syndicators and the passive investors are two crucial players in real estate investments. Let’s have a look at each of their roles below:
1. The Real Estate Syndicator
The real estate syndicators are responsible for finding real estate syndication deals. The organization’s structure dictates the syndicator's responsibility, obligation, and relationship to the investment group and the investors' relationships with each other.Syndicators' primary responsibilities include handling the first deal, finding investors and properties, conducting the transaction, developing a real estate syndication business plan, raising funds, and managing the asset. In essence, the syndicator's job is to execute the business plan and provide substantial returns to the passive real estate investors.
2. The Passive Real Estate Investor
In real estate syndications, the passive investor's job is to provide a fraction of the funds required to purchase the property, otherwise known as the real estate syndicate. Passive investors obtain ownership shares in the property in exchange for their money.These stakeholders also receive monthly passive income distributions from the asset and a return on their investment when they sell it.
The Benefits of Real Estate Syndications
Several benefits come with investing in real estate syndications. Let’s have a look at them below:Passive Income: Investors get passive income payments monthly or weekly.
Hassle-Free: Participants can invest without worrying about managing their assets
Tax Benefits: If you own a piece of real estate, you’ll receive tax benefits via your K-1 tax filings.
Appreciation: Your property's worth should improve steadily over time, increasing the return on investments, as in any other real estate sector.
Control Over Assets: Unlike real estate investment trusts or crowdfunding platforms, you have the option to invest in specific properties, giving you optimum control over your investments.
Diversification: It also gives you the option of spreading your capital across various syndications.The Challenges of Real Estate Syndications Despite the multiple benefits you can derive from investing in real estate syndications, it has risks.When you invest your money, it's essential to know the risks of syndication. You may not receive returns as predicted by a given group, and there is always some risk of losing all or part of your investment!Another risk is losing your legal protection as a passive investor, therefore never take an active position in asset management. Finally, avoid ambiguity by speaking with the syndicator before investing and determining how frequently and in what manner they will keep you informed about your investment.Eliminating these concerns will result in a more profitable investment. Before investing, be sure you're working with a reputable and knowledgeable real estate syndicator. When looking for a real estate syndication company, it's crucial to assess them before finalizing your investment.
Eligibility Requirements for Real Estate Syndication Investing
Passive investors must meet stringent eligibility conditions before venturing into real estate investing. Generally, you must be an accredited or sophisticated investor to participate in real estate syndications.To be considered part of accredited investors, you must have an annual income of at least $200,000, or $300,000 if you have a spouse. On the other hand, sophisticated investors must have at least $1,000,000 to qualify. Likewise, they must have extensive knowledge and expertise to be eligible.
Real Estate Syndication Fees
Real estate syndication fees are often an unavoidable cost of doing business in the real estate market. The individuals managing an investment's finances and legal requirements are compensated with these charges - which is why you need them! Here are the different types of real estate syndications fees:Acquisition Fee: Typically 1-3 percent of the asset's purchase price, it covers the costs of the sponsor's efforts and due diligence in acquiring the asset.
Asset Management Fee: This fee, which ranges from 1-2 percent of predicted gross income or capital invested, covers continuous bookkeeping, coordination, and communication required to manage the asset and execute the business strategy successfully.
Equity Placement Fee: A fee imposed upfront by a real estate broker to cover the costs of finding investors and limited partners, as well as marketing, coordination, and behind-the-scenes communication and documentation. This fee, also known as the equity origination fee, is typically 1-2 percent of the funds contributed.
Loan fee: This fee pays the sponsor for their efforts in getting the required finance. Typically, a loan fee is 1 percent of the total loan amount.
Deposition Fee: Usually imposed to cover marketing expenditures and asset sales after business plan implementation. Typically, this fee is around 1-2 percent of the asset's sale price.How to Invest in Real Estate Syndications
Knowing the eligibility requirements for real estate investing, you should have a basic idea of how to invest wisely in real estate syndication deals.For starters, ensure you’re actively collaborating with other passive investors, preferably those interested in the same asset class. Developing contacts with like-minded investors will assist you in providing suggestions for reputable real estate syndication companies with a proven track record in the sector.Meeting other investors, expanding your expertise, and finally finding your first deal may all be accomplished through attending events, interacting in Facebook groups, and attending real estate conferences.As previously said, a real estate syndicator will handle the majority of the heavy lifting, including sourcing the deal, establishing the syndication, and executing the business strategy. Your primary responsibility as a passive investor is to search for a reputable real estate syndicator for collaboration. Make sure to verify the syndicator's credentials.
The Basic Business Plans Required to Start a Real Estate Syndication Company Having talked about the basics of real estate syndication, let’s dive into an overview of the primary components of the business plans you’d need to start a real estate syndication company below:
1. Define Your Target Market
Understanding your business is the first step to starting a successful syndication company. You need an idea of who you're looking for, their needs, and how they interact with property ownership or rental agreements to put together this vital part of a real estate investment! Every player in the sector is primarily involved in acquiring, building, remodeling, and renovating the interiors and exteriors of residential buildings before selling them.
2. Research the Market and Execute Feasibility Studies
Thorough market research and feasibility studies are significant components of your real estate syndication business plan. The truth is, a broad spectrum of clients are available to acquire, lease, or rent properties. In other words, your target market cannot be limited to only households in your area. Include all businesses in and surrounding the city where you have a presence.
3. Identify the Major Competitors in the Industry
It is crucial to identify the major competitors in your industry so you can see who's ahead and try not to imitate them. Some brands are consistently better than others for a reason, like their long history of success or how smoothly they run things with positive outcomes delivered on time every month!
4. Choose Between Buying a Franchise and Starting From Scratch
If you want to start a real estate syndication company, you might have to start from scratch because a franchise could be challenging to acquire. Besides, launching a real estate syndication firm from scratch is less stressful than starting other small-scale enterprises, which typically require extensive preparation before launch time.
5. Be Aware of the Risks and Challenges You May Face
One of the significant hurdles you’ll likely face if you decide to start your own real estate syndication company is the presence of established companies and other players in the real estate industry. Only by creating your market will you be able to eradicate this challenge.An economic slump is another obstacle that you will almost certainly face. With a terrible economy, businesses and other players in the real estate market often have a hard time keeping their existing clients or even attracting new ones.Unfavorable government policies can also hinder your company's growth. In essence, you have no choice but to be optimistic that things will turn out well for you.
6. Select the Most Appropriate Legal Entity
The legal entity you choose will significantly impact how big your company can become. Some real estate syndication companies tailor their services to the local market, while others use franchising to reach out to the national market.You can choose between a general partnership and a limited liability company when starting a real estate syndication company. A limited liability company (LLC) safeguards you from personal liability. Only the funds you put in the limited liability corporation will be at risk if something goes wrong in the firm. However, for general partnerships, that’s not the case. Generally, limited liability corporations are easier to run and more flexible, as they don't require a board of directors, shareholder meetings, or other managerial formalities.
7. Coin a Catchy Business Name
How would you like your company to be perceived? The right name is half the battle, so think outside the box. Think of it this way: the words you choose for a company are like an identity card that tells people what they'll experience when interacting with YOU and YOUR services!
8. Consult Reputable Real Estate Brokers to Find Out Which Insurance Policies Are Best for You
You can't conduct a business in the United States or other developed countries without having some fundamental insurance coverage required by the industry in which you intend to operate. Therefore, it's imperative to set aside money for insurance and potentially speak with an insurance broker to help you select the best and most appropriate policies for your real estate syndication business.
8. Get the Appropriate Professional Certifications
Professional certification is one of the key reasons most real estate syndication companies stand out, aside from the positive outcomes they generate. If you want to positively impact the real estate sector, strive to get all of the necessary qualifications in your field. Certification verifies your ability and demonstrates that you are highly skilled, dedicated to your profession, and current in this competitive industry.
10. Gather the Legal Documents You Need to Run Your Business
In the United States and other developed countries, you cannot run a profitable business without appropriate documentation. It won't be long before the law catches up with you if you do.
11. Raise the Required Startup Capital
Even if you want to start small, starting a real estate syndication business requires a significant amount of capital. If you're going to establish a bigger firm, you'll need to search for sufficient money to fund it. A regular large-scale real estate syndication business is expensive to start. When looking for startup funds for your real estate syndication business, you may want to consider the following options:Raise money from personal savings, sell stocks or multifamily properties.
Obtain funds through cash flow and equity investment.
Receive funds from passive investors and business associates.
Sell shares to interested investors.
Apply for a bank loan.
Collect low-interest loans from families and friends.12. Select an Appropriate Location for Your Business
Your business’ location is critical to its success. Most entrepreneurs rent or lease a facility in a visible neighborhood with substantial real estate activity and households with the requisite purchasing power and lifestyle.Don’t rent or lease an office property for your real estate syndication company in a less prominent or unknown area because it is less expensive. If you do you can expect to spend more on marketing the company. So, before deciding on a location for your real estate project, make sure you undertake rigorous market research.
13. Hire Employees to Help With Technical and Workforce Issues
Go for the right employees, build good relationships with potential team members, and market your properties using every marketing tool at your disposal, particularly the Internet.The right addition to your team can make all of the difference. Make sure you stay within budget when hiring and take advantage by enlisting financial advisors for their expertise.
14. Establish a Fair Price for Your Services and Products
One crucial component that will assist you in selling/renting/leasing your properties at a premium is to get your initial capital from sources that won't put you under any strain or charge you a high-interest rate. It helps if you also bought your properties directly from property owners rather than third-party vendors.Another method that can help you get the best pricing is to keep your operational expenditures to a bare minimum, focusing your efforts on marketing and boosting your brand name. This method will help you save capital and help you establish the best price for your services.
15. Create a Corporate Identity and Develop Strategies to Increase Brand Awareness
One of the secrets of larger firms is their willingness to spend vast sums of money to increase brand awareness.Marketing and advertising are critical if you want to go beyond the city where your business will be operating and become a global brand. You need money for this investment, of course!To stay on top of the market, you need a solid and consistent brand that will keep your target audience interested.
It’s time to stop dreaming and start doing. You have the power within you, now take it! We hope this ultimate guide has given you some insights into launching your own syndication business in 2022. Now is the perfect time to get started. Holdfolio can help make it easy for anyone with a smartphone to become an entrepreneur. Ready? Let's do this!
Success is not being born with money and opportunity, rather it comes from what you do with them. Not everybody embarking on a real estate investment journey begins the race with a lot of capital, but we all have common opportunities.There are many creative ways to start investing in real estate, and we're going to teach you how to begin today by recognizing and leveraging the options available to you.
Real Estate Crowdfunding
Real estate crowdfunding is a way of raising funds for real estate investments by becoming a part of a group of investors who each contribute a set amount to the acquisition. Simply put, it is a technique of collecting finance that allows small-scale real estate investors to participate in large-scale projects.Due to its high returns and low risk, real estate crowdfunding is one of the best passive revenue sources for investors. Holdofolio has put together a simple, efficient approach for customers to obtain access to lucrative real estate offers. Interested investors can browse active investments and handpick the property they want to invest in after signing up for access to Holdfolio's web portal.Learn more about non-accredited investor crowdfunding with Holdfolio.How Does My Financial Situation Affect My Crowdfunding Opportunities?
Usually, real estate syndicators accrue investors by gauging an individual’s economic status to determine their eligibility for investment. Accredited investors are those who can meet predetermined financial requirements. With a sufficiently high income or net worth, accredited investors have a golden pass into real estate investment opportunities. Most real estate investment companies preclude non-accredited investors from partnering with them.Holdfolio's crowdfunding system is designed for non-accredited investors. Low capital applicants can now profit by passively investing in multifamily properties.Typically, investors are required to deliver a $50k minimum holding upfront. With Holdfolio you can enter the game with as low as a modest $20k in the bank. What’s unique about Holdfolio’s approach is that by slashing the barriers to entry into a multifamily investment, regular people gain access to the same rewarding deals as pro investors.Crowdfunding is the only passive investment option where you can sign up today and grow your capital with our average 18.87% investor return with no stress. You don’t have to be an experienced investor, because Holdfolio handles the hard work for you.Most real estate investments demand site inspections, negotiations, a stack of paperwork, as well as spare time and money for property management allocations. Holdfolio’s investor portal is offered exclusively online, so it’s simple and easy to fast-track a strong portfolio.The three steps to becoming an investor - create an online account, select an investment, and deposit money - are all it takes to produce compounding positive outcomes for your finances. Manage your portfolio online from the comfort of your home, and we'll manage the properties so you have more time for the things you enjoy.For those with plenty of time available, perhaps you'll prefer a more active approach.
House Hacking House hacking is the term used for individuals that sublet a spare room in their home and make money off the rental income. Whether you already own a property or live in a house with an extra guest room, this method will demonstrate how to get into real estate with almost no money.Begin by researching your lease agreement and local laws to ensure you're legally equipped to rent a room to a third party. District housing authorities or local government websites provide this information. Check housing codes to ensure the room is safety compliant. For example, some housing codes require large windows in liveable rooms for emergency escape purposes.Consider whether you want to rent the room furnished. Short-term rental tenants usually expect furnishings, and in many cases, people pay more for large furnished rooms. You can charge more for an independent living space, with private access, kitchenette, and bathroom.
A Long-term lease provides a more steady and stable income stream, but it's not your only option. If you're located in a metropolitan area or tourist hotspot, take advantage of short-term visitors by renting your spare room through accommodation providers like Air B'n'B. Buying a house with extra rooms to rent out is another way to consider this approach.If you feel hesitant about sharing a living space with a tenant, rent the room for storage. Be sure to do your due diligence by ensuring your renters are trustworthy, and clarifying access expectations.House Hacking requires energy and time to organize and manage, but the rental yield will be worth it.
A Sandwich Lease Option
Many people wonder how you can invest in real estate with very little money in the bank. Those people haven't heard of the sandwich lease option. This approach is advantageous for those who want a foothold in the real estate market without going through financial institutions and without hefty down payments.A sandwich lease is a subletting strategy that facilitates entry-level investors with limited capital and experience. Similar to renting rooms, this option positions a real estate investor between the property owner and the tenant-buyer.Here's how it works:First, conduct an online search to find a rent-to-own home. When you discover your desired property, you enter a contract with the property owner. In this example, they are the lessor and you are the lessee.Next, find somebody prepared to enter a parallel agreement with you to move into the home. The catch is that your asking price is greater than what you've agreed to pay in your lease with the property owner.In layman's terms, you agree to lease a property from the owner, but instead of living in it, you find someone else to move into the property who is prepared to pay you more.The dividends you earn from rental income are determined by calculating the difference between what you have agreed to pay the property owner, and what your tenant has agreed to pay you. You can also capitalize on the sale of the property itself.It's worth disclosing your intentions to the homeowner. Some rent-to-own contracts prohibit sublease agreements, so be upfront and make sure the homeowner is on board. Use your savvy communication and negotiation skills to take advantage of this technique.Similar to renting a room, sandwich lease ventures call for time to manage. They can be risky and labor-intensive because they involve business with two parties rather than one. However, as a low-capital investor, this is one of the most efficient ways to leverage your money.
'Perhaps you already know how to invest in real estate with little money and have achieved a basic level of financial leverage or lender support. House flipping could be a well-calculated move. This strategy is more contingent than the alternatives and consumes a significant amount of time and effort. But you stand to gain a desirable return on investment if you play your cards right.Property flips involve buying for renovation, then re-entering the market to sell for profit. An investment property sold for rehab is usually below market value because it requires a laborious undertaking before it is inhabitable.Not only does the buyer fund the purchase of the property, but also the repairs. These can be achieved more cost-effectively if you have the time and skills to commit to the work, though contractors are available for flexible budgets.Before buying, scan the paperwork regarding the construction and condition of the property with a fine-tooth comb and crunch the numbers thoroughly. Hire a professional inspector and ensure you account for these expenses in your breakdown. Certain urban areas have local tax and legal obligations that may affect house flipping projects.Related expenses include:purchase costs
selling costsGet quotes so that you can set realistic expectations about the scope and financial commitments of the work. Researching this stage will be time-consuming, but it's a critical step. By being aware of the profit available from house flipping - including the purchase price and expenses - you're better equipped to land a smart deal.
How Does This Gain Capital?
The money-making potential of house flipping is driven by how much you pay for the property. Strong negotiation skills will be necessary to get a good deal.The second way this makes you money depends on how cost-effective renovations and repairs are. For example, by investing your own time and skills to rehab the interior and landscape you can save the cost of hiring contractors.You may need to hire professionals for tasks like plumbing and electrical, roof repairs, and structural or health and safety compliance issues. For tight budgets, reach out to your network and hustle.Aim to make the process as quick as you realistically can, so you sell in the same market that you bought the property.
Seller FinancingNot every investor can meet the strict lending requirements of mortgages at the beginning of their real estate journey. Seller financing is a practice where property owners also serve as the mortgage lender, eliminating the need for banks, credit unions, or other financing institutions to finance the sale. Instead, the homeowner owns and handles the debt themselves.This generally happens under one of the following two conditions:There is no mortgage on the property
The seller's financing institution has agreed to extend the mortgageThe seller extends credit to the buyer to finance the property purchase, minus any down payment. Both parties sign a promissory note where the buyer agrees to pay in installments over a set period.With seller financing, you can land great flexibility in agreement terms, financing options, and interest rates, which is ideal for low-income, or first-time buyers. Additionally, this strategy reduces closing costs which can offset standard credit checks and legal expenses.Some risks include fewer regulations to protect home buyers, and the possibility of early foreclosure because the seller has defaulted on their payments to senior financiers. Sellers can use this arrangement as an opportunity to sell a home "as is," which could lead to unexpected maintenance expenses later on. Both buyers and sellers are advised to do due diligence by conducting thorough research. Consider employing an experienced real estate lawyer to draw up the contract so that the agreement is watertight.
You don't need a lot of capital or industry experience to get involved in real estate investment.With a little savvy, these opportunities will help get a foothold in active investment to begin your real estate journey. House hacking and sandwich leases are an easy way to start with minimal capital and require an ongoing property management commitment. Through preparation and smark risk management decision-making, house flipping and seller financing can improve your finances significantly. The drawback of these strategies is that they consume greater amounts of time and stamina than crowdfunding, and at least a baseline of financial leverage.Holdfolio crowdfunding is the only approach that saves you hassle while you receive a passive income, and watch your investment grow. Register with Holdfolio crowdfunding to start your investment journey (with or without little money) today.
Real estate syndication has been exclusive to only the wealthiest investors for many years, but with recent changes, they have now become more mainstream. Regardless of your background and experience, joining a real estate syndication deal can help you grow your wealth enormously while diversifying your portfolio.Read on to learn more about real estate syndication, its benefits and how you can get started today!
What Is Real Estate Syndication?
Simply put, real estate syndication is created when a group of passive investors pool their money to buy income-producing real estate. There is a lead investor, who identifies and actively manages the property or portfolio of properties that make up the syndicate’s portfolio. Then, there’s the passive investor. Their role here is more narrow: invest money in a real estate venture that has been solicited for a specific return.The syndicate is principally a joint investment vehicle for investors to pool their funds in order to make a high-value investment. They are a special investment with legal regulations that closely define the financial relationship between the sponsoring investor and the participating parties. The SEC will require you to organize a syndicate if you are putting together a deal with passive investors. The management is known as a syndicator, and he or she has a fiduciary responsibility to investors to define the returns and risks, as well as to protect their investment. What is a Syndicator?
General partners (GPs), often known as real estate syndicators, are in charge of organizing and running the real estate syndication. The general partner(s)' primary responsibilities are: Underwriting the contract.Conducting a comprehensive investigation of the property.
Putting together a financial plan.
Dealing with the vendor.
Managing the asset.
Taking care of investor relations.
Creating a company strategy.
Obtaining funding for the deal
Collaborating with the property management company.A real estate syndicator is in charge of finding the property, negotiating the sale, and overseeing the asset after the deal has been closed. The purpose of the syndicator in real estate syndication is to carry out the bu
Real Estate Syndication Vs Crowdfunding
The distinction between real estate syndication and crowdfunding is often misunderstood. The names are similar and both refer to investment in institutional real estate deals, but they are not interchangeable. As the name suggests, syndication in real estate refers to a financial framework between the investors and the project sponsor. Crowdfunding, on the other hand, is another more informal way for sponsors to solicit and collect funding from investors. You can think of crowdfunding as an umbrella term: every real estate syndication project falls under the crowdfunding category but not every crowdfunding project is syndicated. Getting involved in real estate syndication via Holdfolio will allow you to make thousands of dollars in profit annually with an investment of as little as $20,000! You can access commercial real estate investment deals that are exclusive and enjoy the benefits of tax deductions of up to 80%! Our investors make high returns on their investment with an average of 19.50% per deal.Learn more about syndicating multifamily real estate with Holdfolio. Let your money provide the lifestyle you deserve.Not all crowdfunding real estate deals are through syndicates. The latter are more narrowly defined, special investment vehicles with specific legal requirements that the lead investor is beholden to.
Expected Return From Syndicates
For real estate investors, there are two main ways to get paid are through what are known as preferred returns and through profit sharing.
The preferred return is a percentage of the total money invested paid to syndicate investors, either immediately from continuous cash flow or stockpiled until the project has enough cash to make the payment. It works like bank interest payments, except there is no assurance it will be paid because the project must produce money in order to have enough funds to make the payment.For example, if you want to join a real estate syndication project that includes a property of $100,000 and you invest 10% you will own 10% of that property and the profit made from the property. Let’s say the property is being sold for $200,000, after reducing all the expenses such as realtor fees, closing costs, etcetera the net profit is $180,000. Since you invested 10%, you will be getting $18,000 from that $180,000. Removing the $10,000 you’ve invested, you are making $8,000 profit.
Profits and appreciation are also given to investors for their participation in the transaction. The share of profits for real estate syndication investors is paid in proportion to the amount invested.For example, if you want to invest $100,000 in a deal and receive a 10% preferred return, you may potentially make $10,000 per year if the property generates sufficient revenue.Once each investor has received their preferred return, the balance is divided between the sponsor and the investors based on a predetermined profit structure. If there is $1 million left over after the preferred returns are paid out, the investors will receive $800,000, while the sponsor or syndicator will receive $200,000.Real estate syndicates are legally required to maintain accurate and transparent accounting practices for their investors. They also customarily pay out around 90% of their earnings.Benefits of Real Estate Syndication
Syndications, as any real estate investment, offer a variety of advantages that few other investments can match.
A real estate syndication structure offers investors a passive income while the sponsor manages the property and takes care of the day-to-day operations of the project.Not all investors have the time or expertise to meaningfully evaluate a variety of properties to identify the finest investment opportunities. But there are real estate investment companies like Holdfolio that can do this for you.Holdfolio's team of professionals is in charge of things like proper research, identifying lucrative investment properties, appointing a property manager, and managing investor relations, among other things.The only thing the real estate investor has to do after providing funds is to sit back and enjoy their passive incomes. Anyone can grow their wealth by joining real estate syndication, you don't have to be an expert!
Various Investment Opportunities
Investors in estate syndicates receive access to various investment options that they might not have been able to access individually. Commercial properties, for example, are some of the best investment opportunities. However, property values in this asset type are often high.Investors can acquire access to this asset class through real estate syndications, which allow them to pool their funds. They can do so without putting too much of their own money in danger or subjecting themselves to credit risk. A lot of commercial real estate has been acquired through the use of a syndicated arrangement.
Just as any investment, real estate can be risky. Investing in a real estate syndication, on the other hand, will allow you to share these risks with other real estate investors rather than carrying them alone.
Diversification is an excellent method to prevent yourself from major financial loss and risks. A real estate syndication can buy more investment properties and diversify their portfolio more easily than an individual investor. As a result, even when funds are restricted, this method allows real estate investors to benefit from variety.
Trustworthy Partnerships with Holdfolio
Strong collaborations and expertise are the foundations of real estate investing success, and investors continue to pick us above the competition because of our knowledge and consistent asset development.Such strong partnerships will enable you to receive the highest level of aligned interest and build money. We aim to gain a significant return on your investment without guessing, regardless of market circumstances or the real estate cycle.Here at Holdfolio, our clients enjoy exclusive benefits such as:low minimum required investment
significant tax deductions that can result in a tax shield of 80% or more
above-average returns for our investors, our track record is currently at 19.50%
accessibility for both accredited and non-accredited investors Besides all of these benefits, here's another exclusive perk; we invest alongside our clients. Yes, we are so confident that you will make high returns on the deal we provide that we put our own money into the project with you!While most investors fail to generate a predictable cash flow our investors, both accredited and non-accredited, enjoy their worry-free passive incomes. You can learn about Holdfolio's real estate syndication process here!How To Syndicate Your First Real Estate Deal
Syndicating your first real estate deal will require days - if not weeks - of research. The real estate syndication sector is strictly regulated, with many rules, regulations, and laws in place to preserve investors and the sector's overall stability. Before taking a step into real estate syndication, you should know all these regulations and rules by heart otherwise you might end up in a disastrous situation.
Find the right property
Searching for the right property will take a lot of your time unless you join an investment company, like Holdfolio. Real estate syndications can include all types of properties such as multifamily, retail, self-storage, office space, and more. As the syndicator, you will be the one to seek profitable properties to fit your investment strategy whether it's to flip a property, add value, hold it for long-term cash flow, or to produce a return on investment in any way that you and your investors want.Thinking of forming a syndicate? As the lead investor, you’re responsible for doing the homework and collecting the investment needed to purchase high value real property.
Finding investors can be tricky especially if you are relatively new to real estate investing. Instead of finding investors on your own, you can join a real estate crowdfunding site like Holdfolio, where you can be introduced to like-minded investors who are looking for similar opportunities.
Decide on a payment structure
Once you find your investors and decide on a property to invest in, you and your investors will have to decide how the payments will be made along with how the investors will be paid after the deal is done.
Hire a property manager
If you are not willing to make this your full-time occupation and manage your investment properties day-to-day then hiring a property manager is a must. This will save you so much time and you won’t have to worry about daily management chores and responsibilities.
In summary, real estate syndication can be a highly beneficial deal for both the sponsor and the investors. But as we've mentioned earlier in this article, it can also be difficult and extremely time-consuming to do everything on your own. That said, you don't have to be the one to do it all alone. Join Holdfolio today to save yourself from all that trouble. As a Holdfolio customer, all you need to do is sign up to our online platform and pick a property to invest in along with the investment amount. Then you can sit back and watch your wealth grow!Holdfolio connects you with like-minded investors who are looking for investment opportunities. Our team of professionals will take care of every single detail and you won't have to worry about anything! Start investing today!
Real estate crowdfunding is a popular way for multiple investors to pool capital together online and finance large property acquisitions.In this article we will explain everything you need to know about crowdfunding, starting from what it is explaining step by step, Holdfolio is here to help you.Read on to learn more about real estate crowdfunding and how you can start your journey to make a passive income!
What Is Real Estate Crowdfunding?
Real estate crowdfunding (also known as property crowdfunding) is a method of obtaining funds for real estate investments by acting with a group of investors who contribute an amount of their choice to purchase the holding.Simply described, it is a method of obtaining cash that allows real estate investors with limited capital to participate in large-scale projects.Real estate peer-to-peer lending, or fiduciary lending, is another term for real estate crowdfunding.How Does Real Estate Crowdfunding work?
Real estate crowdfunding is one of the best passive income sources for investors, due to its high returns and little risk.Here at Holdfolio, we’ve put together a simple, fast way for people to access lucrative real estate deals. Let's get started.After signing up to our online portal you can look through active investments and handpick the property you want to invest in.All you need to do is invest as much as you want — while meeting the minimum requirement — then sit back and enjoy as the passive income you’ll receive grows your wealth!The crowdfunding opportunities found on Holdfolio’s online portal are found, vetted, and listed exclusively by Holdfolio. You can’t find the same high-calibre investments anywhere else.View more information on Crowdfunding with Holdfolio.Pros of Real Estate Crowdfunding
There are multiple benefits to joining a real estate crowdfunding project.
Crowdfunding sites are now open to everyone, not just accredited investors, as of May 16, 2016.This means that regular people can invest in start-up companies that were previously available to just angel and venture capital investors.While the current Title III laws make it possible for non-accredited investors to participate in crowdfunded initiatives, it is not free for everyone. The Securities and Exchange Commission has limited the amount of money non-accredited investors can invest in a 12-month period. Your personal limit is determined by your net worth and annual income.With Holdfolio’s online investment platform, non-accredited investors can easily join real estate crowdfunding projects.
Handpick Which Properties To Invest In
Being able to handpick the properties you want to invest in is a great advantage. But it is not available in every investing company.With Holdfolio’s exclusive online portal, investors can browse through the multiple active real estate investment projects and choose freely whichever project they want to invest in.
High Return On Investment With Little Risk
When you invest in debt, you are purchasing a mortgage note backed by commercial real estate. As the loan is repaid, you will receive a portion of the interest. This sort of investment is regarded as less risky than stock, but it has a disadvantage in that returns are restricted by the interest rate on the note.The average annual investor return that Holdfolio has produced is 19.5%. Tax Benefits
Long-term capital gains are taxed at a lower rate.
Because real estate appreciates in value over time, it's usual for real estate investors to sell their properties for more than they purchased for them. Long-term capital gains are taxed at a lower rate than short-term capital gains if you keep the property for more than a year.
Depreciation can be claimed.
You can depreciate — or write off — the cost of real estate over time if you utilize it for business or rent it out, which lowers your tax payment. Depreciation periods for real estate have been established by the IRS: 27.5 years for residential assets and 39 years for commercial properties. For instance, if you spend $100,000 on a single-family rental property, you can deduct $3,363 in depreciation each year. Certain renovations, such as repairing the roof or installing a new HVAC system, can also be depreciated.
Real estate investors can use a 1031 exchange.
You can use a 1031 exchange to swap out an investment property for a like-kind property while postponing capital gains. While a 1031 exchange can save you thousands of dollars in taxes, it is a complex operation with many tax rules. As a result, you should always hire a professional to ensure everything is done correctly.
Rental income is not a form of employment.
Rental income is exempt from Social Security and Medicare taxes, unlike wages from a job or self-employment income (FICA). While this isn't a huge advantage over other sorts of investment income, it can save you a lot of money when compared to regular earned income. Let's imagine you find a part-time job that pays you $20,000 each year. Your wages would owe you $1,530 in FICA taxes. A rental property that brought in $20,000 in revenue per year, on the other hand, would not be subject to FICA or self-employment taxes.
No day-to-day property management
Crowdfunding is a passive income source that you are a shareholder of, along with other investors. If you join a crowdfunding project along with a crowdfunding company that also manages properties, like Holdfolio, you will be saved from the day-to-day management duties that a sole owner would suffer from.
One of the most prominent advantages of real estate crowdfunding is that it allows you to diversify your portfolio. By diversifying your portfolio, you are essentially spreading the risk associated with a single investment across a number of different investments.Your investment portfolio will be split among other investments if one of your assets fails. To demonstrate the benefit, you might put $100,000 in investment A all at once, or you could invest the same amount in $20,000 increments among investments A, B, C, D, and E. You would lose $100,000 if you just invested in investment A and it failed completely.However, if you had spread that money among five investments and one of them failed, you would only have lost $20,000 in total.Cons of Real Estate Crowdfunding
The biggest disadvantages of real estate crowdfunding usually stem from going at it alone. Without joining an established company, like Holdfolio, you will have to deal with every single detail alone and this is definitely a very time-consuming process.
Finding Investors And Collecting Their Money
Persuading like-minded investors to join your crowdfund is often a hard sell. Smart investors prefer joining established investment companies due to their track record of success and to avoid the risks associated with sponsoring an unknown venture.Not to mention, it's much easier to secure a loan from a single person than to assemble a group of investors.Increasing the number of participants may also reduce your profit margin. You should also remember to legally structure your transactions so that investors do not have an undue influence over the decision-making process. Making them limited partners is the simplest way to achieve this, but even that takes a lot of legal paperwork.
Crowdsourcing is deemed an illiquid investment, i.e. these are investments that are difficult to sell for cash if the need arises.A buyer will need to be found for the property you've invested in, which can take time and in some rare instances lead to a decline in the holding value.Real estate is also considered an illiquid asset, which implies that withdrawing money from the investment for whatever reason is more difficult than withdrawing money from a brokerage account invested in stocks.Who Can Invest In Real Estate Crowdfunding?
Real estate crowdfunding is currently open to both accredited and non-accredited investors.
Crowdfunding was previously open to accredited investors only — those who either have logged $200,000 in annual income for the past two years or currently have $1 million in net worth not counting their home — until former president Barack Obama’s securities deregulation law opened real estate crowdfunding to all investors.The 2012 Jumpstart Our Business Startup (JOBS) Act has been phased in overtime; in 2016, a provision opening real estate crowdfunding to virtually anyone went into effect.However, there are limits.The non-accredited investor is restricted to investing no more than 5% of their annual income if they earn less than $100,000 per year.Given the capital restrictions, it’s important for a non-accredited investor who wants to find a real estate crowdfunding platform that can meet them at a contribution that makes both legal and financial sense for them. The industry norm in real estate crowdfunding is a $50,000+ minimum capital requirement for investors to get started.This is a powerful investment and needs to be made available to more investors to broaden access to wealth creation and financial security. Holdfolio is proud to work with non-accredited investors who can contribute $20,000 of capital or more in our real estate crowdfunding.How You Can Get Involved
Now that you know what crowdfunding is and how it works, you probably want to know how you can get involved. Holdfolio’s online platform and small minimum investment amount have made real estate investing a real and easy possibility for everyone.Holdfolio connects like-minded investors to raise capital for lucrative multifamily properties and helps them make the same high return as experienced real estate developers.Real estate ventures were inaccessible for regular investors for a long time because they could not afford the high figures required by the development companies or they simply did not have the right connections.Holdfolio is changing all of that by making real estate investing accessible to everyone. We believe that everyone should be able to access the same opportunities; so we are here to help regular investors to grow their wealth as much as experienced investors.Holdfolio allows you to choose from various high-quality and resilient assets with just a $20,000 investment!Sign up to our investor platform today to partner with other investors and start making institutional quality returns, regularly and completely passively.
In this article, we have listed the 10 best investments that accredited investors should look into. Read on to learn more about the alternative investment opportunities that will help you make more money!
Crowdfunding Real Estate
Real estate crowdfunding is the process of gathering a group of investors to raise funds for a real estate project. Through crowdfunding, investors have been able to take part in lucrative investments that they previously would not be able to finance.It’s an excellent way to generate passive income with little risk, as you benefit from acquiring high-value properties by sharing the cost with other like minded investors.Holdfolio specializes in helping accredited investors diversify their portfolios with multifamily holdings that generate considerable returns. On average, across 3,020 units, the cash return for Holdfolio investors was 19.53%! That’s around double the average return from the stock market over the last century.Investing with Holdfolio provides all the benefits of crowdfunding your own deals with none of the negatives.Spearheading your own multifamily crowdfund is a headache as you need to worry about:Finding and convincing investors
Chasing those investors for payments
Buying and negotiating properties for sale
Day-to-day management of the property
Finding tenants to rent the spaceSave yourself all these headaches and get the same high-returns by signing up for Holdfolio’s investor portal today. The process couldn’t be simpler. Visit our accredited investor crowdfunding page, sign up to our online investor portal for free, choose one of Holdfolio’s exclusive listings to invest in, deposit your money and that’s it! Venture Capital for Startups
Venture capital (VC) is a type of private equity and a type of financing provided by investors to startups and small enterprises with the potential for long-term growth. Investment banks, wealthy investors, and other financial institutions provide venture funding. It does not always have to be in the form of money; it can be in the form of technical or management skills. Small businesses with outstanding development potential, or businesses that have expanded swiftly and are poised to expand, are frequently given venture capital.While putting money up can be dangerous, the possibility for above-average profits is enticing. Venture capital funding is gradually becoming a popular source of money for new companies or projects with a short working history (under two years), especially if they lack access to capital markets, bank loans, or other debt instruments. Investors typically receive shares in the company and consequently a say in company decisions.Both accredited and less affluent investors have the opportunity to invest in venture capital. Funds, stocks, venture capital debt, and direct investments are all examples of these types of investments.
Hedge funds, like ETFs and mutual funds, are professionally managed funds, but they are subject to far less regulation in terms of how they invest their money. In comparison to other funds, this permits them to invest in more intricate projects or asset types. When compared to more popular ETFs and mutual funds, the ability to invest in these alternative investments and apply advanced investment strategies (shorts, options, derivatives, etc.) modifies the risk and reward profiles of these funds.Hedge funds can be highly expensive in terms of fees, but they are comparable to other products available to accredited investors. Hedge funds allow you to invest in a certain money manager or a fund that follows a specific investing concept that appeals to you. This could enable you to participate in an investment strategy that you don't have the time or competence to implement on your own.After researching the fund managers and investment objectives of those funds using Form ADV, you'll need to call a hedge fund and inquire about minimum investment requirements. You'll also need to prove that you're a qualified investor. There is no centralized accreditation authority or defined system in place. Each fund uses its own methods to determine your eligibility. You may be required to give proof of your income, assets, debts, and experience through licensed third parties, such as a financial institution with which you have accounts, an investment advisor, or an attorney.Artwork
This alternative investment can be appropriate for you if you are an art collector or an investor who enjoys art. The worth and value of each piece are determined by its individuality. Costs can be very large and illiquid. These types of investments are deeply sensitive to the age of the artwork and other particularities. Exclusivity brings greater pricing, but also larger profits. The artist's celebrity is also a significant factor. There are platforms and tools available that can assist you in making a well-informed investment decision. Thanks to sites like Masterworks, investing in fine art has become easier in recent years.
Merchant Cash Advances
A merchant cash advance provides a business with a lump sum of operating capital for a specific and immediate requirement. In exchange for the security of an immediate financial input, the company pays a portion of future sales. This is a short-term loan, usually ranging from three to twelve months. Unlike traditional loans, financing is not regulated, which means that business owners can utilize the funds any way they see right.There is the potential for large profits in addition to the inherent value that is supplied. Returns can be substantially greater than those available in standard high yield investments in the public markets.Adding alternative assets like merchant cash advances to your investment portfolio can help you reduce risk and protect your portfolio from instability. The stock market and merchant cash advances have little in common. A mix of traditional and merchant cash advance investing would produce a healthy, well-balanced return.Platforms for merchant cash advances, such as Supervest, connect investors with merchant funding organizations that pool their funds for specific businesses.Unlike past methods of investing in MCAs, this platform greatly reduces risk. A maximum of 5% of an investment can be made in a single business at a time. Hundreds of companies can be invested in at the same time by investors.
Non-fungible tokens (NFTs)
NFTs are digital assets that are kept on the blockchain and represent unique ownership of that item. The industry grows in popularity. OpenSea, an NFT trading platform, experienced more than $1 billion in trading volume during August 2021. According to a Wave spokeswoman, more than $2 billion in NFTs were traded in the first quarter of 2021, 131 times the volume in the first quarter of 2020.As a financial professional, investing in NFTs during a sideways drifting market appears to be profitable thus far. Since they have only been an emerging crypto asset class for a few years, the non-fungible token market has experienced spectacular volume gains year after year. From the first half of 2020 to the first half of 2021, the total market volume increased from $13.7 million to $2.5 billion.It could be a good idea to consider NFTs as a means to diversify your portfolio by potentially investing in these investable assets to add or subtract risk to your holdings. NFTs have limitless applications and tokenization possibilities for both tangible and intangible things. From combating avatars to creating eternal works of art, the future of NFTs is dependent on the free market's limitless ingenuity.
Though lacking the allure and media darling status of NFTs or cryptocurrency, the $20 trillion commodities market—a financial sector where raw materials are transacted—continues to be a preferred investment vehicle for accredited investors who favor strong returns and need an investment that will weather high inflation or a weakening dollar.The term “commodity” may be new, but its goods are found throughout daily life. The gas powering automobiles was one oil traded on a commodities market. The gold found in cell phones was once traded as a commodity. Rubber, wheat, electricity—these are all traded as commodities before they get to consumers.Because of persistent demands for these goods which rise in times of high inflation, commodities are a class of investment that does well against weakening currencies. When the dollar or another form of currency loses buying power, prices rise and so too do the price of commodities.One should not mistake these for uniquely stable investments, however. Individual commodities are notoriously volatile and should be part of a diversified portfolio that includes other commodity types and investments.A good way to get started in this investment type is through a commodity fund, which is a collection of commodities. Similar to the way a hedge fund invests in a range of securities, a commodity fund like BlackRock offers investors a share of a basket of commodities to minimize the risk of their fluctuating price for investors who want to enjoy the strong returns they offer. Commodities have an annual gross exceeding 20 percent, double that of the average stock.Cryptocurrency
Cryptocurrencies have exploded into the spotlight as their own asset class in the previous five years. Cryptocurrency data demonstrates that in the last ten years, they've grown from nothing to a market valuation of about $2 trillion. Without a doubt, it's been a phenomenal rise. In terms of the magnitude of returns investors have made, this is the quickest rise of any asset class in history. Unlike conventional currencies, cryptocurrency is supposed to be a store of value that is immune to depreciation and inflation. In times of economic distress, governments print money to compensate for the imbalance, which leads to inflation, which can swiftly spiral out of control. Cryptocurrency prices, on the other hand, are unaffected by the influx of cash that would otherwise depreciate government-issued fiat currencies. So, how do you get started with cryptocurrency investing? Many trading apps allow you to buy popular cryptocurrencies such as Bitcoin, Ethereum, XRP, and others. eToro, a social investment software that allows users to replicate the trades performed by expert crypto traders on the site, is the finest tool we’ve found for investing in cryptocurrencies.
Buying and selling online businesses is one of the up-and-coming alternative investments for accredited investors. Websites are the virtual world's real estate. Many see buying and selling websites as business investments in the same way that some individuals choose to invest in properties.To acquire ownership of a website that generates a reasonable monthly income, one needs to be willing to spend at least 10 months of earnings. Because the labor involved in running most websites can usually be outsourced fairly cheaply, sellers frequently sell because they desire a huge lump amount to spend in other ventures.There are a number of online investment platforms, such as Empire Flippers, that connect accredited investors with well-established online entrepreneurs. Investors get to choose which firm to invest in based on the track record, acquisition criteria, and strategy of the business operator. Until the business is sold in 2-4 years, investors will get quarterly payments and reports.
Collectibles are goods that are worth significantly more than their initial purchase price and are classified as alternative investments—vehicles that do not fit into any of the other categories, such as stocks, bonds, cash, or real estate. Investing in this asset class can be both rewarding and beneficial to your financial goals. There are various collectibles that one can choose to focus on. Here are some of the most common and profitable collective items:Wine: It’s widely understood that wine improves in quality and value as it ages. Some wines, on the other hand, are better suited to collecting than others. For example, Sotheby's auction house in 2017 sold five bottles of a 1945 Romanee-Conti burgundy for $1.98 million. Before the vines were destroyed, only 600 bottles were created.Fine Art: Paintings by great painters from the past are almost priceless, which is why acquiring fine art can be a financially rewarding investment. For example, in 2018, a painting by living artist David Hockney titled "Portrait of an Artist (Pool with Two Figures)" sold for $90.3 million at a Christie's auction.Celebrity Items: Celebrity-related products can be considered valuable, and some individuals are willing to pay a high price for them. Russell Crowe sold personal belongings to fund his divorce in April 2018. The armor he wore in the movie "Gladiator" sold for $117,000 at a Sotheby's auction titled "The Art of Divorce," and his leather jockstrap from "Cinderella Man" sold for $6,500.There are more items that can be collected by those who are interested such as coins, classic automobiles, stamps, vintage jewelry, antique furniture, and more. Such items can be found and auctioned over online platforms such as Collectable, one of the best auction websites.
Alternative Investments: A Smart Compliment to a Solid Investment Foundation
We’ve listed some of the best alternative investment opportunities for accredited investors. We highly suggest that any investor who's interested in these alternative investments study the risks and benefits before diving in. Here at Holdfolio, we have a team of professionals who can help you on how to diversify your portfolio and your investments to get the best out of passive income investments. Holdfolio combines knowledge, strong partnerships, and innovative technology to deliver high-yield, professionally managed real estate opportunities to passive investors. So visit our accredited investors page today to begin growing your wealth.
Real estate crowdfunding is a great way for new investors to begin their path to developing a passive income. It allows investors to earn rental income and profits from the sale of owned properties. With modern-day technology and easy access to the web, real estate crowdfunding is something that anyone can take advantage of if they are interested in increasing their income.
What is real estate crowdfunding?
Real estate crowdfunding uses social media and the internet to connect investors who may have a mutual interest in investing in a common project. It is very similar to equity crowdfunding in the sense that investors can buy a property and become shareholders. Investors don't have to buy the entire property but instead can earn a portion of the profits generated from the investment. Real estate crowdfunding was originally created by JOBS (Jumpstart Our Business Startups Act), which allowed crowdfunding to aid small businesses. The SEC (Securities and Exchange Commission) has since taken off the restrictions so that non-accredited investors can invest in crowdfunding projects. This has widened the pool of investors in the real estate industry.
Who is real estate crowdfunding for?
Investors of all ages can begin their path to a passive income. Whether a seasoned or first-time investor, the playing field is level. One of the most important components of successful investing is taking the time to research potential investments, giving each investor an equal opportunity for success. Conducting the appropriate amount of research determines the success that can come from each project. With easy access to the internet, research is something that any investor can perform within a matter of minutes. This makes real estate crowdfunding an easy market to dive into.
What are the benefits of real estate crowdfunding?
There are many benefits to crowdfunding. Due to the COVID-19 pandemic, lenders have been slower to supply funding because of sensitive financial stability. However, real estate crowdfunding gives investors a low-risk, high-reward opportunity. Platforms such as Holdfolio give both accredited and non-accredited shareholders the resources to gain more knowledge on investments. One advantage of crowdfunding is the ability to earn extra money from the dividends that are generated by the investment. Depending on the platform and the package that is selected, investors can choose to have dividends paid out quarterly or monthly. From there, investors are given the option to either reinvest their dividends back into projects or pull out the earnings as they go.Another attractive aspect of real estate crowdfunding is that many platforms allow individuals opportunities to invest as low as $500 to $1,000. This makes it relatively easy for new, young investors to enter the market. Finally, real estate crowdfunding platforms provide users with resources to learn about real estate and also browse multiple investment opportunities online. They provide a secure dashboard that allows investors to be able to manage their investments in a secure manner.
What are the cons of real estate crowdfunding?
Although real estate crowdfunding can be a great source of income, there are also factors to consider in making this decision. One of the cons of crowdfunding is investor risk. There are many circumstances that are out of the investor’s control. Market volatility is likely the biggest downfall for this type of investment. Real estate crowdfunding may not be the right choice for you if you prefer to have more control over investments. Crowdfunding can also be an illiquid investment, meaning that the investments cannot be easily sold for cash if necessary. In most cases, even if an emergency situation comes up, it is almost impossible to pull out the funds from that investment. This could be a problem for inexperienced investors who might need the flexibility to access their funds more quickly.It is important each investor evaluates the pros and cons before entering a new deal. However, crowdfunding is an opportunity for investors with any level of experience to try a new line of investing. With crowdfunding, the opportunities and benefits are endless, especially if paired with the appropriate due diligence.
Investing in multifamily real estate is a smart way to diversify your portfolio. Investors find multifamily real estate attractive because it lends itself to a slow and steady return on investment. Between Covid-19 and rapid changes in politics, today’s economic outlook is uncertain and rookie and seasoned investors alike are looking for investments that will grow their capital. Multifamily real estate is less complicated than other commercial real estate opportunities and can generate a strong cash flow. Keep reading to explore the key pros and cons of multifamily investing.
What is multifamily real estate?
A multifamily property contains more than one rentable unit - like an apartment complex or high-rise. Investing in rental properties, like multifamily units, is a preferred strategy for investors who want to generate an additional monthly income at a relatively low cost.
What are the pros of investing in multifamily real estate?
Investing in a multifamily property holds its fair share of advantages. Large demand = lower risk. Multifamily investing is considered a safer investment than other real estate assets. Even in the face of economic uncertainty and poor job markets, people need a place to live. During an economic downturn, rental properties may see a boom as people sell their homes, relocate, or move into a rental.
Grow your portfolio faster. Investing in multifamily real estate is a unique opportunity to expand your portfolio in a short period of time. It’s a lot easier and timelier to acquire 30 apartment units than to acquire 30 single-family homes. Avoid the headache of multiple loans, sellers, and inspections by investing in a multifamily property.
Streamline your property management. Investing in a multifamily property improves daily efficiencies in your property management. By managing one property with multiple units, you save time and money traveling between properties to perform maintenance duties. Also, it makes more financial sense to hire a property manager for a multifamily property rather than a string of single-family homes.
Increase your cash flow. One of the biggest advantages to investing in multifamily real estate is the ability to significantly increase your cash flow. Investors are attracted to multifamily properties because of the predictability of income each month. In both bull and bear markets, rents are collected each month, and units are easily turned over for new leases leading to a steady cash flow. From lower risk to higher rewards and increased efficiencies in your property management, put your investment capital to work with multifamily real estate. View open investments with Holdfolio.
What are the cons of investing in multifamily real estate?
Despite the strong advantages of investing in multifamily properties, we wouldn’t be doing our due diligence if we didn’t share some of the drawbacks of this investment strategy. Increased competition. The advantages of multifamily real estate draw attention from new and experienced investors alike, creating strong competition in the market. This can pave the way for more experienced investors to crowd out the market because they may be more likely to pay in cash or appeal to sellers. Newbie investors may find luck partnering with experienced investors or joining a real estate crowdfunding platform like Holdfolio.
Higher upfront cost. Depending on where you’re investing, multifamily properties can be extremely expensive, much more expensive than a single-family home. Cost tends to be the biggest barrier to new investors, even for seasoned investors. Most banks look for investors to put down at least 20% as a down payment. However, banks are more likely to grant loans for a multifamily property than a single-family because there is less risk involved. Despite the higher upfront costs and competition, avenues like real estate crowdfunding platforms have become attractive to multifamily investors. Crowdfunding platforms allow investors to put a small amount of capital into a property to become a shareholder. Diversify your portfolio and increase your cash flow with multifamily real estate in 2021. Assess the pros and cons and seek the best investment for your wallet. Start investing with Holdfolio today.
It’s been more than six months since COVID-19 hit the country, and ever since then millions of Americans have been affected by the financial, economic, and social implications of the pandemic. From national lockdowns to financial insecurity, the real estate industry has been dramatically impacted. But, what does real estate investing look like in 2021 as we begin to gain more certainty on the path forward? Keep reading to learn about investing in real estate in 2021.
The Impact Of Coronavirus On Real Estate
When the coronavirus shut down businesses and schools across the country in March, the effects of the pandemic on real estate and investing were felt almost immediately. Tenants fell behind on rent, mortgages went into forbearance, vacation rentals were canceled, and property sales decreased. Despite the effects of a national lockdown, the real estate market has seen a rebound in the second half of 2020. In fact, home prices were up 15% year over year at the start of November and Zillow predicts that home values will increase 4.1% in 2021 due to renewed market optimism and spikes in sales this summer and fall. While the long-term effects of the coronavirus on real estate are still uncertain, rebounds in the market this fall have given investors and buyers hope for 2021.
Real Estate Investing Opportunities In 2021
New and experienced real estate investors may be unsure where their best investing bet lies in 2021. While there are housing booms in cities across the country, many Americans still find themselves in precarious financial situations and may not be in a position to buy a home. This poses a unique opportunity for house flippers. With lower demand in some areas, prices are driven down and the opportunity to flip houses is valuable and lucrative. Access to capital and loans may be an issue for some investors with lenders slower to give out loans at a time when many people’s finances are in a sensitive position. This positions real estate crowdfunding platforms at the forefront of real estate investing in 2021. Crowdfunding platforms allow investors to invest in real estate in a low-risk high-reward model. The initial investment is low, it’s mainly passive, and is a simple way to diversify your real estate portfolio. Learn more about real estate crowdfunding platforms for accredited and non-accredited shareholders like Holdfolio. Vacation rentals also provide a way to make some extra cash on the side. With people in between jobs or considering relocation, the demand for short-term living arrangements is on the rise. Rental platforms like Airbnb and VRBO can also be more lucrative as you charge guests more for a short-term stay versus traditional renting. Lastly, the value of apartment complexes continues to rise. With cities converting office spaces into apartments and young people looking to rent instead of buy due to job insecurity, expect multi-family investing to be on the rise in 2021. Real estate investing in 2021 may seem uncertain. But, there are many unique opportunities to diversify your portfolio with real estate in the new year. Assess your options and seek the best investment for your wallet.
Who are the essential professionals you need in your camp before you start investing in real estate? It is important to keep up your momentum when getting started in real estate investing. Yet, you also want to make sure you are investing wisely and can enjoy a smooth process which delivers the best possible real estate success.Here are the first five professionals you need to connect with before you invest: CPA Your actual investment returns will depend a lot on taxes. There can easily be a double digit difference in what you get to keep, depending on how you set yourself up, and how you file taxes. A good tax professional can help you strategize and get it right before you wind up with a big income tax bill. Attorney Sooner or later you will want or need an attorney. It is just smart to have one already pre-screened and on call for when that time comes. You may want a specialist real estate attorney who can help negotiate contracts, and aid you in defending against lawsuits. It might also be helpful to have a family law or asset protection lawyer who can help you personally set up the right structures to grow and pass on your legacy. Insurance Agent Part of real estate success is the reduction of risk. Even if you don’t need direct property insurance to cover individual real estate assets, you will probably need an umbrella policy, life insurance, and other types of insurance to cover your assets in various areas. Capital Partners Even if you don’t plan on needing credit or extra cash to invest, it can be wise to have relationships with these sources in advance. It will help you avoid any cash crunches or missing out on any great opportunities. This may be private lenders, mortgage brokers, or angel investors. You will also want to build relationships with bankers to make your transactions go more smoothly. Experienced Mentor Having someone you can pick up the phone and call or shoot an email to for urgent help or an experienced second opinion can make all the difference in your business decision making. Find someone who is experienced in what you are doing and who shares your values. If you plan to be an active real estate investor, make this a full-time thing, or to start a real estate business, you will also want these five people in your camp before you get going. Contractor Having a trusted contractor on call can be invaluable for fast property inspections, repair estimates, timely turnovers and getting work done quickly. Real Estate Agent Whether or not you actually use a Realtor to help buy, sell, and rent real estate, investors can find them very useful for making sense of the market, and keeping on top of evolving trends. Marketing Expert You simply can’t do it all as an investor. Even if you have a strong marketing background, the most profitable use of your time is probably inking new deals. Still, with 90% of your success relying on your marketing to secure deals, fill them with renters, and resell them, make sure you have an expert on your team. Virtual Assistant An assistant can be used to protect and free up your time so that you are getting the best ROI on every hour of the day. A good assistant can handle a wide variety of time-consuming tasks, including finding the other people on this list. Project Manager As you grow your real estate business, taking on a big multifamily property, or are building new homes to rent out, a project manager can save you time, and help things go smoothly. This could be a true project manager for a specific mission, a property manager, or a general manager for your organization. Putting some thought into what and who you need to have in your camp to be savvy and efficient will help direct you towards the path of success!
THE PURCHASE OF LLC INTERESTS IS SPECULATIVE AND INVOLVES SIGNIFICANT RISK, INCLUDING THE RISK THAT YOU COULD LOSE YOUR ENTIRE INVESTMENT. THE PURCHASE OF LLC INTERESTS IS SUITABLE ONLY FOR INVESTORS WHO FULLY UNDERSTAND AND ARE CAPABLE OF BEARING THE RISKS. SOME OF THE RISKS ARE DESCRIBED BELOW. THE ORDER IN WHICH THESE RISKS ARE DISCUSSED IS NOT INTENDED TO SUGGEST THAT SOME RISKS ARE MORE IMPORTANT THAN OTHERS.
SPECULATIVE NATURE OF REAL ESTATE INVESTING:
Real estate can be risky and unpredictable. For example, many experienced, informed people lost money when the real estate market declined in 2007- 2008. Time has shown that the real estate market goes down without warning, sometimes resulting in significant losses. Some of the risks of investing in real estate include changing laws, including environmental laws; floods, fires, and other acts of God, some of which may not be insurable; changes in national or local economic conditions; changes in government policies, including changes in interest rates established by the Federal Reserve; and international crises. You should invest in real estate in general, and in the Company in particular, only if you can afford to lose your investment and are willing to live with the ups and downs of the real estate industry.
NO GUARANTY OF DISTRIBUTIONS:
When you buy a certificate of deposit from a bank, the Federal government (through the FDIC) guarantees you will get your money back. Buying an LLC Interest from the Company is not like that at all. The ability of the Company to make the distributions you expect, and ultimately to give you your money back, depends on a number of factors, including some beyond the control of the Company. Nobody guarantees that you will receive distributions.
INABILITY TO ATTRACT AND/OR RETAIN TENANTS:
Our success depends on our ability to attract and retain tenants in our Rental Properties. The risks we face include the following:
Competition from other landlords could keep us from raising rents.
Changes in economic conditions generally, or in the Indianapolis, IN and Dayton, OH areas in particular.
Existing tenants might not renew their leases.
Our Rental Properties could remain vacant for extended periods.
A tenant could default on its obligations, or go bankrupt.
Certain of our properties may be specifically suited to the needs of a certain type of tenant and we may have difficulty leasing such properties in the event of a vacancy.
Any of these circumstances would hurt the Company financially. If a vacancy continues for a long period of time, we may suffer reduced revenues resulting in less cash available to be distributed to shareholders. In addition, the resale value of a property with vacancies could be decreased because the value of a property may depend on the value of the leases of such property.
NEED TO RENOVATE PROPERTIES:
We might need to renovate our Rental Properties to make them competitive in the market. The more we have to spend to renovate our Rental Properties (assuming we can find the capital to do so), the lower the returns to our investors.
PROPERTY VALUES COULD DECREASE:
The value of the Rental Properties we own could decline, perhaps significantly. Factors that could cause the value of our Properties to decline include, but are not limited to:
Changes in interest rates
Competition from new construction
Changes in national or local economic conditions
Changes in zoning
Environmental contamination or liabilities
Changes in local market conditions
Fires, floods, and other casualties
Undisclosed defects in property
Incomplete or inaccurate due diligence
ILLIQUIDITY OF REAL ESTATE:
The Company might not be able to sell Rental Properties as quickly as or on the terms that it would like. For one thing, we cannot predict how long it will take to find a willing and able buyer. For another thing, we might be required to expend significant amounts of money to correct defects or make improvements before a property can be sold. The overall economic conditions that might cause the Company to want to sell Rental Properties are generally the same as those in which it would be most difficult to sell.
The costs of operating real estate – including taxes, insurance, utilities, and maintenance – tend to move up over time. We have limited control over some of our operating costs, and if our costs increase it may reduce the amount available for distribution to investors.
REGULATION AND ZONING:
Like all real estate, our Rental Properties are subject to extensive building and zoning ordinances and codes, which can change at any time. Changes in these laws and regulations could affect the Company adversely.
A fire, hurricane, mold infestation, or other casualty could materially and adversely affect the operation of the Company, even if the Company carries adequate insurance.
The Company will maintain insurance against certain kinds of losses, such as losses from fires. However, there are certain types of losses which either cannot be insured at all or cannot be insured for a reasonable cost.
LIMITED WARRANTIES FROM SELLERS:
In most cases, the Company will be required to purchase a property in “as is” condition, with few if any representations or warranties by Seller. If we learn that a property has defects after closing, we may not be able to look to the seller for reimbursement.
LIABILITY FOR PERSONAL INJURY:
As a landlord, we might be sued for injuries that occur in or outside our Properties, e.g., “slip and fall” injuries. Although we expect to carry insurance against potential liability in amounts we believe are adequate, it is possible that we could suffer a liability in excess of our insurance coverage.
We will conduct typical environmental testing on the properties we acquire to determine the existence of significant environmental hazards. However, it is impossible to be certain of all the ways that the properties have been used, raising the possibility that environmental hazards could exist despite our environmental investigations. Under Federal and State laws, moreover, a current or previous owner or operator of real estate may be required to remediate any hazardous conditions without regard to whether the owner knew about or caused the contamination. Similarly, the owner of real estate may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination. The cost of investigating and remediating environmental contamination can be substantial, even catastrophic.
The Americans with Disabilities Act of 1990 (the “ADA”) requires certain buildings to meet certain standards for accessibility by disabled persons, and we may be required to comply with its terms. If our Rental Properties are not compliant with all requirements of the ADA or if additional requirements are imposed in the future, whether pursuant to the ADA or otherwise, we would need to make modifications to those Properties, potentially at significant expense.
THE COMPANY IS A NEW BUSINESS WITH A LIMITED TRACK RECORD:
The Company is a new business with a limited track record, making it difficult for Investors to gauge our investment strategy. Like any new business, we face challenges on a number of fronts, including:
Developing a reputation and brand identity
Attracting, retaining, and motivating qualified executives and personnel
Implementing business systems, including technology systems
Responding effectively to the offerings of existing and future competitors
Managing growth and expansion
Implementing adequate accounting and financial systems and controls
There is no assurance that we will be successful on all (or any) of these fronts.
INCOMPLETE DUE DILIGENCE:
We intend to perform “due diligence” on each Rental Property we buy, meaning we will seek out and review information about the property. However, due diligence is as much an art as a science. As a practical matter, it is simply impossible to review all of the information about a given piece of real estate and there is no assurance that all of the information we will review will be accurate or complete in all respects. For example, sometimes important information is hidden or simply unavailable, or a third party might have an incentive to conceal information or provide inaccurate information, and we cannot verify all the information we receive independently. It is also possible that we will reach inaccurate conclusions about the information we review.
LACK OF DIVERSIFICATION:
We will own a limited number of Rental Properties in a select market and in a concentrated geographic location, or to put it another way, our portfolio of real estate will not be “diversified.” The diversification of a portfolio reduces both volatility and risk, which means that our portfolio is likely to be more volatile and more risky than if we had purchased a greater number of properties, purchased properties in geographic locations outside of Indianapolis, IN and Dayton, OH, or invested in properties outside of residential market (e.g.,commercial properties).
UNRELIABLE FINANCIAL PROJECTIONS:
We have prepared financial projections reflecting what we believe are reasonable assumptions concerning the conduct of our business. However, the nature of real estate development and investment is such that at least some of our assumptions are likely to be mistaken, either for better or for worse, so that the actual results of investing in the Rental Properties are likely to be different than the results reflected in the projections, possibly by a wide amount. Investors should be skeptical of financial projections in the real estate industry, not because developers intend to be misleading but because the industry is so volatile and difficult to predict.
PRICING OF ASSETS:
The success of the Company and its ability to make distributions to Investors depends on its ability to gauge the value of real estate assets. Although the Manager will rely on various objective criteria to select properties for investment, ultimately the value of these assets is as much an art as a science, and there is no guaranty that the Company and its advisors will be successful.
RISKS ASSOCIATED WITH DEVELOPMENT AND CONSTRUCTION:
We might renovate or repair our Rental Properties from time to time, as needed and if consistent with our overall investment strategy. Development and construction can be time-consuming and are fraught with risk, including the risk that projects will be delayed or cost more than budgeted.
RELIANCE ON MANAGEMENT
: You will not have a right to vote or otherwise participate in managing the Company, except on very limited matters. Instead, the Manager, along with its affiliate Sonder Homes (our property manager), will have full control over the business and management of the Company. As a result, the success of the Company – and its ability to make payments with respect to your LLC Interests – will depend almost exclusively on the skills of our Manager and its principals. Therefore, you should purchase an LLC Interest only if you are willing to rely on the ability and judgment of management and these third-party operators. If the principals of our Manager resign, die, or become ill, the Company and its Investors could suffer.
RISKS ASSOCIATED WITH LEVERAGE:
The Company may borrow money from banks or other lenders to refinance Rental Properties, purchase assets, or to finance development costs or other expenses. Borrowing money to purchase assets is sometimes referred to as “leverage.” While using leverage can increase the total return on the borrower’s equity, it also increases risk because the amount borrowed has to be repaid in accordance with a schedule. To repay its loans, the Company might have to sell assets at a time when values are low, for example.
BREACHES OF SECURITY: It is possible that our systems would be “hacked,” leading to the theft or disclosure of confidential information you have provided to us. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and our vendors may be unable to anticipate these techniques or to implement adequate preventive measures.
NO MARKET FOR THE LLC INTERESTS; LIMITS ON TRANSFERABILITY:
There are at least three obstacles to selling or otherwise transferring your LLC Interest:
There will be no public market for your LLC Interest, meaning you could have a hard time finding a buyer.
The Operating Agreement prohibits you from transferring your LLC Interest without the consent of the Manager.
By law, you may not sell your LLC Interest unless it is registered under applicable securities laws or the transfer is eligible for an exemption from registration.
Taking all that into account, you should plan to own your LLC Interest indefinitely.
NEED FOR ADDITIONAL CAPITAL:
The Company might need more capital, whether to renovate one or more Rental Properties, to acquire additional properties, to carry the Company through periods when our rental income is insufficient to cover our operating expenses, to pay for uninsured losses, or otherwise. We might seek to raise additional capital through debt (borrowing money) or through equity (selling interests in the Company) or both. However, there is no assurance that additional capital will be available at the time it is needed, and if the Company needs but cannot obtain additional capital it is possible that the Company could fail. Even if additional capital is available, it could be on terms that are adverse to the interests of the Investors. A loan, for example, could bear a high interest rate or other onerous terms, while raising additional capital in the form of equity could dilute the interests of the Investors.
SUBORDINATION TO RIGHTS OF LENDERS:
The right of Investors to receive distributions from the Company is subordinate to the rights of the Company’s lender(s). In the event the Company were to default in its obligations to the lender(s), the Company might be prohibited from making further distributions to the Investors until the default had been cured.
LACK OF CASH TO PAY TAX LIABILITY:
The Company will be treated as a partnership for tax purposes. Consequently, your share of the taxable income from the Company (if any) will be reported on your personal income tax return. We will try to distribute enough money for you to pay your personal tax liability on your share of the income, but we might not have enough money to do so. In that case, you could have a net cash deficit from owning an LLC Interest.
NO REGISTRATION UNDER SECURITIES LAWS:
The Company and the LLC Interests will not be registered with the Securities and Exchange Commission (“SEC”) or the securities regulator of any State. Hence, neither the Company nor your LLC Interest is subject to the same degree of regulation, scrutiny and disclosure as if this offering were registered.
INCOMPLETE OFFERING INFORMATION:
The LLC Interests are being offered pursuant to Rule 506(b) issued by the SEC. Rule 506 does not require us to provide you with all the information that would be required in some other kinds of securities offerings, such as a public offering of shares. Although we have tried to provide all the information we believe is necessary for you to make an informed decision and we are ready to answer any questions you might have, it is possible that you would make a different decision if you had more information.
LACK OF ONGOING INFORMATION:
The Company will provide you with periodic statements concerning the Company, but it will not provide audited financial statements or other detailed information that you might receive in a securities offering registered with the SEC.
CONFLICTS OF INTEREST:
Your interests as an Investor could conflict with our interests in a number of important ways, including these:
Your interests might be better served if our management devoted its full attention to the Company. Instead, the principals of our Manager will be managing a number of different projects concurrently with the Company.
The principals of our Manager are also the principals of Sonder Homes, our property manager, which will receive fees from the Company. Although we will always seek to establish terms that are fair to the Company, the terms of any compensation or other agreements with Sonder Homes were negotiated between related parties, and therefore may not be as favorable to us as if they had been negotiated at arm’s length.
The principals of our Manager may be involved from time to time in other real estate ventures outside of the Company, and may be involved in purchasing and managing residential real estate projects in the vicinity of the Company. Therefore, they may be competing directly with the Company.
The lawyers who prepared this Confidential Investor Disclosure Document, the Operating Agreement, the Purchase and Investment Agreement, and the other documents related to your investment in the Company represent JB Holding Company LLC – our Manager – not Investors or even the Company. You must hire your own lawyer (at your own cost) if you want your interests to be separately represented.
DETERMINATION OF FEES:
The Manager and its affiliates may receive significant fees and distributions from the Company. Although we believe that the fees are consistent with the types and amounts of fees for other real estate development funds, the fees were not determined through arm’s-length negotiations with the Investors, but were established by our Manager.
LIMITATION ON RIGHTS UNDER OPERATING AGREEMENT:
The Operating Agreement limits your rights in several important respects, including these:
With a few exceptions, the Operating Agreement may be amended without your consent.
The Operating Agreement significantly curtails the right of Investors to bring legal claims against the Manager and its principals. Among other things, the Operating Agreement eliminates (to the extent allowed by law) the fiduciary obligations that the Manager would otherwise have to the Members.
The Operating Agreement limits your right to obtain information about the Company and to inspect its books and records.
The Operating Agreement restricts your right to sell or otherwise transfer your LLC Interest.
LIMITATIONS ON RIGHTS ON INVESTMENT AGREEMENT:
To purchase an LLC Interest, you are required to sign our Investment Agreement. The Investment Agreement would limit your rights in several important ways if you believe you have claims against us arising from the purchase of your LLC Interest:
In general, any legal claims brought against the Company or its principals must be brought in State or Federal Court in Indiana, which might not be convenient for you.
You would not be entitled to a jury trial on your claims.
THE FOREGOING ARE NOT NECESSARILY THE ONLY RISKS OF INVESTING.
PLEASE CONSULT WITH YOUR PROFESSIONAL ADVISORS.
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