An accredited investor, in the context of a natural person, includes anyone who:

• 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
• Has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

On the income test, the person must satisfy the thresholds for the three years consistently either alone or with a spouse, and cannot, for example, satisfy one year based on individual income and the next two years based on joint income with a spouse. The only exception is if a person is married within this period, in which case the person may satisfy the threshold on the basis of joint income for the years during which the person was married and on the basis of individual income for the other years. In addition, entities such as banks, partnerships, corporations, nonprofits and trusts may be accredited investors. Of the entities that would be considered accredited investors and depending on your circumstances, the following may be relevant to you:

• Any trust, with total assets in excess of $5 million, not formed to specifically purchase the subject securities, whose purchase is directed by a sophisticated person, OR
• Any entity in which all of the equity owners are accredited investors.

In this context, a sophisticated person means the person must have, or the company or private fund offering the securities reasonably believes that this person has, sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.

Synergy REI offers 506(b) and 506(c) offerings. You do not need to be an accredited investor for our 506(b) offerings. Our 506(c) offerings require us to only accept accredited investors. Accreditation is simple and easy through our 3rd party service. Typically your CPA or investment advisor can assist and it’s just a matter of confirming that you have $1MM of net worth (exclusive of personal residence) or meet income requirements of $200k/year (single) or $300k/year (married).

A Limited Partnership is an older term that was used for many years to delineate between passive partners and management partners in an entity. These days we use a Limited Liability Company (LLC) to house all of our legal entities. The LLCs have Members and Classes. The LP/GP delineation is still used today because of its ease of translation from the past. Today we are technically all Members and there are Class A members (investors) and Class B members (management). The General Partner (i.e. Class B member) is responsible for making all decisions and retains the liability for the LLC. The Limited Partners (i.e. Class A members) are passive investors but receive liability protection. In our deals, we are on both sides of the deal – as investors and as management. We operate with a mindset that stresses the importance for us to believe in the deal and put our capital into it along with our limited partners.

We currently support personal investment accounts, joint accounts, self directed IRAs and certain entity accounts (Trusts, Limited Liability Companies, Limited Partnerships, C Corporations, and S Corporations). Investing with your personal holding company is typically a wise strategy for extra protection and tax planning. We recommend you consult with your CPA to discuss what options make the most sense for you.

Yes, you can invest through your IRA. If you currently have a self-directed IRA, please check with your current custodian to ensure that they will allow you to place your investment with Synergy REI. We also accept self-directed and solo 401(k) as well as any other retirement type structure. It’s a great way to achieve capital appreciation inside of a tax advantaged structure. Contact us with questions on self directed IRAs.

As a member in the LLC that purchases the property, you will receive a K-1. The K-1 is a tax form used by LLCs to provide investors with detailed information on their share of a partnership’s taxable income. LLCs are generally not subject to federal or state income tax, but instead issue a K-1 to each investor to report his or her share of the partnership’s income, gains, losses, deductions and credits. The K-1s are provided to investors on an annual basis so that each investor can include K-1 amounts on his or her tax return. In general there are significant tax benefits of investing in a real estate syndication like ours because of accelerated depreciation that allows for “tax losses” passed through to the investor.

This can vary depending on the offering. Typically, distributions are sent out via ACH quarterly. Distributions may be lower in the first year of the project as we implement our business plan to improve operational efficiency and complete property upgrades/capital expenditures to achieve our projected rent increases. Distributions are sent out via ACH by the end of the full quarter following closing once all of the financials are finalized. Investors can track their progress on our investor portal.

Limited Partner funds are used for the total acquisition cost of the property. This includes but is not limited to the actual purchase price of the property, acquisition fees, legal and transaction costs, capital projects, and reserves. We set aside 6-12 months of expense reserves as part of our conservative underwriting process. We also typically raise the capital to cover our improvement projects so that we’re not taking unnecessary risk to complete the intended value-add component of the deal. Our strategy is to ensure that capital preservation is paramount. We want to maximize our return while minimizing our risk to capital.

Similar to most passive investments including mutual funds, stocks, bonds, and REITs, there are managers (general partners) required for managing the asset, and improving the performance of the asset. Real estate syndications are no different. The general partners are responsible for sourcing the deal, negotiating the deal, raising the equity, arranging the debt, executing the business plan, and monitoring the asset performance through evaluation of KPIs.

The common fees you might expect with syndication offerings are; acquisition fees, financing fees, refinancing fees, asset management fees, and disposition fees. (Not all fees will apply to every offering) More information on fees outlined below.

• Acquisition fee: Compensation for the efforts of the general partners organizing the company, sourcing the property, conducting due diligence on the property and making the offering available to investors. Typically ranges between 1%-3% of the purchase price of the asset.
• Financing fee: Compensation for the efforts of the general partners in procuring and signing on the acquisition loan. Typically 1%-2%.
• Refinancing fee: Compensation for the efforts of the general partners in procuring and signing on a refinance loan on the property. Typically 1%-2%.
• Asset Management fee: Compensation to the general partners for the management of the property. Typically 1%-2%
• Disposition fee: Compensation to the general partners for the preparation and execution of the sale of the property. Typically 1%-2%

We form an LLC as a special purpose entity to hold title to the property we’re investing in. Then we create another LLC that wholly owns the Special Purpose Entity. This is where the Class A (Limited partners/passive investors) and Class B (General Partners/management) members have their ownership. Synergy REI serves as the Class B member (General Partner), while investors are Class A members (Limited Partners). The LLC structure provides investors with both liability protection as well as pass-through tax benefits.

We aim to achieve a range of 7%-10% cash on cash (COC) return. Our desired Internal Rate of Return (IRR) target ranges between 14%-20%.

Real estate syndication deals are often waterfall structured to provide the limited partners with a preferred return or hurdle rate, typically between 6%-8%. After the preferred return is met, there is a split, normally; 70/30, 60/40, 50/50 between the limited partners/general partners.

The preferred return favors the limited partners. The first 6-8% return on any investment is allocated entirely to the limited partners. Once the preferred return is achieved, all other proceeds from distributions or capital events are split in a distribution waterfall.

The split might change if a certain hurdle rate is achieved. For example, a PPM (private placement memorandum) might state an 7% preferred return, followed by a 70/30 split and returns over 17% are to be split 50/50. This type of distribution waterfall scenario incentivizes the general partners to meet or exceed expectations.

The preferred return and splits are determined on a per deal basis and clearly stated in the investment summary and PPM.

Investment windows will vary depending on the project. Most of our projects are generally 3-7 years. This window provides enough time to improve and stabilize the property, benefit from market changes, and exit for a healthy return. This time frame is reviewed on an annual basis in relation to the property financials and the local/regional economic conditions. It’s important to stay on top of what is happening in the market and while we prefer long-term buy and hold because of the higher overall returns, there may be times where we can get a projected 5-7 year return in less time. Selling the property early in these cases may make sense but it will depend on many factors such as replacement costs, opportunity cost, tax laws, etc.

Our typical investment minimum is $50,000 on most projects. We try to keep the total number of investors on each project to a reasonable number so that it doesn’t feel like crowd-funding. Our goal is to give you the time and attention that we feel you should have to keep up with your investment to make it a personal experience. Our investor program includes monthly updates, and access to our team for questions, feedback, etc. We value long term relationships with our investor partners.

Investors receive pass-through tax benefits, which means that all distributions flow to each limited partner. The Limited Partnership pays no taxes. Investors also benefit from the depreciation deduction for real estate, which reduces taxable income. Investors receive a Schedule K-1 by March 15th each year which includes a report of each investor’s share of profits, losses, deductions, and credits to include in their tax returns. Typically the first year includes a roughly 50% tax write-off due to accelerated depreciation via our cost segregation study strategy.

Our goal is to under-promise and over-deliver. Every deal we present is stress tested to meet our strict investment criteria. This includes the determination of a break even occupancy level for the property in case of an unforeseen event. We use conservative projections on rent growth calculations and expense escalations in our pro forma. The exit cap rate is increased by a maximum of 10 basis points for every year in the pro forma projection. These are just a few strategies we employ to solidify our projections on each opportunity we analyze.

We’ve made investing in our offerings an easy process. Prospective investors receive an Investment Summary which details the property type, market metrics, sponsor business plan, and projected returns of the deal. Investors complete the investment documents and contribute capital. Distributions are paid via ACH on a quarterly basis on most projects. Investment updates are delivered to our investors monthly (in the beginning) and eventually quarterly (once we’ve completed our value-add component).