Frequently Asked Questions
What is a syndication?
Syndication is the pooling of investor money where the investor is typically a limited partner and the general partner, or active partner, puts the deal together and manages the business plan to provide a return for the benefit of all investors.
Where can I see the different investment opportunities?
We follow all SEC guidelines and cannot always advertise our investment opportunities due to regulation. That is why it is important to reach out to us and talk about what you may be looking for. After we have had a few interactions we can then send you the opportunities as they become available in compliance with the SEC guidelines.
Do you invest in your own deals?
We operate on a core value of treating investors’ money as its own and we invest right alongside our clients in every deal.
How safe is investing in Real Estate?
Risks are outlined in the Private Placement Memorandum. That said, I would like to provide a few data points. In 2009, at the bottom of the financial crisis, delinquency rates on single family homes was 5% vs 1% on MF apartments. Additionally, vacancies in Class C and B (older properties where value-add syndicators play) remained steady at 8%. We further mitigate risk by targeting proven assets where current owner is generating good cash flow (our due diligence includes auditing the trailing 12-month financials, bank records and tax returns). Additionally, lenders will not loan millions of dollars unless we are experienced, have a good business plan, conservative underwriting (bank’s will underwrite the deal as well), have adequate insurance, and have an inspection completed by outside experts.
What ways can I invest with Welkin Equity?
We find that most people have under performing or non-performing investments and money. Did you know that you can invest with us through your IRA and solo 401k? While a lot of our investors have funds in the bank, it is quite often that investors can use their retirement funds and realize a higher and safer return than the stock market.
When will I get my initial investment back and how long is the investment?
We target a 5 year hold on our deals. This provides ample time to execute our value-add plan and then cash flow for a few years while looking for an opportunistic sale. Some investor principal could be returned as early as year 2 from a refinancing event or we may want to continue to cash flow till year 7 if the market is down in year 5.
How do I know how my investment is performing?
One of our highest concerns is to keep you informed of how your investment is performing. This includes profit and loss statements along with emails and webinars going into detail about the successes and upcoming events. We always enjoy our investors staying up to date on how well the investment is performing.
How often do you distribute profits and when should I expect a check?
Each investment is unique and the distributions can vary throughout the year. Remember that you are investing in a business. The investment packet you receive will describe in more detail the distribution specifics.
What kind of returns can I expect?
These can vary based on the different opportunities. Returns come from a variety of sources including; cashflow, appreciation, principle-paydown, and tax benefits. Contact us to discuss this further.
What are the general partner's fees?
The returns forecasted to you are post fees. The most common fee is an acquisition fee based on purchase price and is paid at closing. This covers the general partner’s costs to find the deal and get it under contract. The second most common fee is the asset management fee which is compensation for holding the property manager accountable, to ensure execution of the business plan, bookkeeping, and distribution of checks and K1s. The asset management fee is aligned with the investor’s interest as it is based on the property’s revenues. Industry averages are 1-3 % for both fees.
You mentioned taxes. How will this affect my taxes?
Great question. Tax benefits are one of the great features of investing in real estate. You would need to speak with your tax professional as different investors will have different tax benefits based on the individual's situation. Two different investors on the same deal can have different tax benefits for this reason. Many investors realize tax-free profits from real estate because of these benefits.
What is the process and timeline?
We’ll let you know we have an investment available when we get a property under contract. We start the equity raise process with investors immediately and it runs concurrent to due diligence and the bank’s underwriting which takes about 5 weeks. Typically investors reserve their spot in the 1st week. In the 5th week, investors review and sign the PPM and transfer funds to the escrow account. Then we close on the property 2-3 weeks later.
Can I invest using a retirement account (IRA or solo 401K)?
Yes, you can invest in real estate with certain retirement accounts. I’m happy to discuss how I boosted my own IRA investing returns with real estate investing.
What is a PPM?
The Private Placement Memorandum is required by the SEC and describes the offering, risks, includes the partnership agreement, investment summary and subscription agreement. It is a lengthy legal document (approx. 100 pages) prepared by a syndication attorney. The subscription agreement section includes basic information as to amounts being purchased and percent ownership. The risk section highlights just about every possible risk that could happen.
What are sophisticated and accredited investors?
We currently market our investments under SEC regulation 506(b) which allows us to include investors who are either sophisticated or accredited, and with whom we have a relationship. A sophisticated investor is one who has sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. To be accredited you must have:
Earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
Net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
Accreditation is simply determination by self-disclosure of the investor via a checkbox in the subscription agreement.