What is multi-family syndication investments?

Multi-family syndication investments is a real estate investment strategy where several investors pool their money together to purchase and manage large apartment complexes or other multi-family properties. The syndication process typically involves a lead sponsor who identifies a property, prepares a business plan, and raises capital from investors. The lead sponsor (or team of sponsors) manages the property and distributes profits to investors based on the agreed-upon terms of the investment.

How can I get involved in a multi-family syndication investment?

Getting started with Waymark Capital Partners is easy. Reach out to us via our contact page, and we'll guide you through the the discovery process, answering any questions you may have, and determine availability and eligability. Our goal is to make investing in multifamily straightforward, informative, and accessible to our investors.

Do I need to be an accredited investor to participate in a syndication?

While many syndications do require investors to be accredited, it's not always the case. Each investment opportunity has its own specific requirements. It's best to reach out to us directly for detailed information about what current opportunties qualify.

What should I look for in a multi-family syndication investment opportunity?

Some key factors to consider when evaluating a multi-family syndication investment opportunity include aligned interest between sponsor and investor, the experience of the lead sponsor, the property location and condition, projected returns and cash flow, investment structure and terms, and the exit strategy for the investment.

How does Waymark align its interests with it's investors?

At Waymark Capital Partners, we firmly believe in a 'skin-in-the-game' principle. All our managing partners are investors in every deal we take on, often leading the investment. This ensures our interests are firmly aligned with yours, and we share a vested interest in your success.

What risks are associated with multi-family syndication investments?

Like any investment, multifamily syndications come with some degree of risk. However, due to the shared nature of the investment, individual financial risk is often reduced. It's important to consider factors like the location and condition of the property, the track record of the syndication team, and the overall real estate market conditions.

What is a value-add strategy?

A value-add strategy involves a combination of strategic improvements to both the physical property and its management to increase its overall value and profitability. This can entail anything from aesthetic enhancements and significant renovations to the property, to implementing efficiencies in property management.

A critical component of this approach includes the optimization of property management practices. This could involve the incorporation of a Ratio Utility Billing System (RUBS), which can potentially reduce utility costs and increase net operating income. It may also include employing advanced tenant acquisition and retention strategies to decrease vacancies and ensure a steady stream of rental income.

Can I invest with an IRA or 401K?

Yes, you can invest with an IRA or 401(k) through Waymark Capital Partners. We offer self-directed IRA and 401(k) investment options, allowing you to diversify your retirement portfolio with real estate syndication investments. 

Can I do a 1031 exchange through Waymark?

Yes, you can do a 1031 exchange through Waymark Capital Partners. We have experience and expertise in facilitating 1031 exchanges for our investors. Our team can guide you through the process, working with qualified intermediaries to ensure a smooth and compliant exchange. By partnering with Waymark, you can take advantage of the benefits of a 1031 exchange while exploring investment opportunities that align with your investment goals. Contact us to learn more about how we can assist you with your 1031 exchange.

 

TAX BENEFITS AND COMMONLY ASKED QUESTIONS:

• Accelerated Depreciation - Commercial real estate property typically a 39 year life, and shortening this to 5, 7 and 15 year property.  This allows us to expense the cost of acquiring property more quickly for tax purposes. With favorable federal bonus depreciation rates for 5, 7, and 15 year property (80% as of 2023) we often structure to allow 20%-30% of the acquisition cost to be deducted in the first year.

 

• Passive Income & Losses - Real estate syndicate investors are considered “passive” investors, meaning they don’t participate in day to day operations. This creates a special character of income called “passive income.” It’s typical that a real estate property will generate a taxable loss in the first few years of operations due to depreciation. This holds true even when the property is cash flow positive. This unique situation provides the best of both worlds, a taxable loss, with positive (distributable) cash flow on which investors pay $0 tax in that year.

 

• Using Passive Losses - Passive losses can only be used to offset passive income. If you have other passive investments, these losses can create an immediate tax benefit by reducing passive income from other sources. Absent any passive income from other sources, the passive losses earned from a real estate investment are carried forward indefinitely. In this scenario, the accumulated passive losses carried forward are used to reduce the taxable gain upon sale of the property. 

 

• Favorable Tax Rates - When a property is inevitably sold, the gain is considered a long-term capital gain when the investment was held for 1-year or more. Long-term capital gains receive preferential tax treatment, meaning many taxpayers will pay 15% federal tax and higher income taxpayers (married taxpayers  earning over $553,850) pay a maximum of 20%. This can generate a 17% reduction in federal tax compared to the 37% top ordinary income tax rate.

 

• 1031 Exchange - A 1031 Exchange or “like-kind exchange” is a tax deferred exchange or property that allows taxpayers to pay $0 tax when a property is sold by transferring their investment into a new “replacement” property.  Gain from the sale of the original property is deferred until the replacement property is sold, although, an investor looking to build generational wealth may opt to continue exchanging properties and deferring tax for decades. This can be an incredible estate planning opportunity. Upon your death, the property will pass to beneficiaries at the current fair market value and all the deferred taxable gains simply disappear! 

 

• “How and when are my distributions taxed?” Distributions are not in and of themselves taxable. It’s common for real estate investors to receive distributions, either as a return of capital or share of income, and pay $0 tax in the year distributions are received. Although the property is cash flow positive, depreciation (a non-cash expense) will often generate a taxable loss, leaving your distributions tax free. Your share of income or loss will determine your tax liability, not the amount of distribution received.

• “Should I hold my investment in a trust?” Holding property inside a trust can provide a layer of privacy and asset protection when structured properly. It may also be a useful tool for investors interested in tax-efficient estate planning.

How often will I receive cash flow from my investment?

Once the property reaches its stabilization period, investors can typically expect to receive cash flow distributions on a quarterly basis.

How long is the typical holding period for a property before it is disposed of?

The holding period can vary depending on the specific investment opportunity. However, our general approach is to aim for a holding period of approximately 5 to 7 years. This allows sufficient time to implement value-add strategies, optimize cash flow, and capture potential appreciation before considering a property sale.

Will I have visibility into the performance of the investment during the holding period?

Absolutely. As an investor, you will have access to regular performance updates and reports, allowing you to stay informed about the progress of the investment throughout the holding period.

What happens if I need to liquidate my investment before the projected holding period?

While our investment opportunities are typically designed for long-term investment horizons, we understand that individual circumstances may change. In such cases, we can explore potential options for early liquidity, such as a buyout or secondary market opportunities, although they are subject to availability and terms.

What happens to my investment if the property doesn't perform as projected?

Real estate investments inherently carry some level of risk. However, our team diligently conducts thorough due diligence and implements comprehensive strategies to mitigate risks. In the event that a property underperforms, we actively work to address the issues and make necessary adjustments to safeguard investor interests to the best of our abilities.