Category: Income

You are ready for apartment syndication investing. You have made contact with several multifamily syndicators, like them and trust them based on their transparency and past performance. You are finally invited to invest with them. Two of the sponsors currently have projects they are working on and need to get funded. They each conduct investor presentations on Zoom, and you are able to attend them both. You come away with a difficult decision.

When looking at different multifamily opportunities, you need to be aware of the split, or what’s called the promote. In its simplest form, this is the distribution of profits that go to the syndicator/operator, versus the investor (limited partner). An offering will generally specify the percentage of profits and where they go. It is common for 10% to 30% of profits to go to the operator, with the remaining going to the investors, subject to various conditions. Though each deal may be different, the operator usually tries to find the right balance between their abilities and the needs of their investors.

This is the single-most asked question posed by syndicators to their investors, because it is required by law in the United States. Syndicators have to follow certain regulations set forth by the SEC in order to operate legally. There are 2 main categories of private placements, 506(b) and 506(c). Within these are certain restrictions affecting the kind of investors they can accept. This article will help explain the difference between an accredited versus sophisticated investor.