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What is a passive investor? How does it work with real estate syndications?
A syndication is simply a pooling of resources, whether time, money or otherwise.
Think of a White Fire Equity investment as a plane ride. The deal sponsors are the pilots. They’re the ones dealing with the day-to-day operations of the property.
White Fire Equity is the travel agent, helping people find the right flights and determine their destinations.
You are the passenger. You choose a flight, buy the ticket, and enjoy the ride.
As a passive investor, you just invest your money, then sit back and start receiving returns. No need to worry about tenants, termites, or toilets. We take care of all that and provide you regular updates.
What is an accredited investor? Do I need to be one?
An accredited investor is someone who meets certain requirements regarding income and net worth, based on Securities and Exchange Commission (SEC) regulations. This is so that the SEC can ensure proper protection for all investors.
To be an accredited investor, you must satisfy at least one of the following:
- Have an annual income of $200,000, or $300,000 for joint income, for each of the last two years, with expectations of earning the same or higher income this year.
- Have a net worth exceeding $1 million, not counting your primary home
While most of our investments are available to accredited investors only, we do offer a few investments for non-accredited/sophisticated investors.
What is the minimum investment?
While the minimum investment can vary, the typical minimum is $50,000.
How long should I plan to have my money invested?
Most projects plan for a 5-year hold, so you should plan to have your money in the investment for at least 5 years. During this time, you will receive regular cash flow returns, but your initial investment cannot be withdrawn.
That being said, we know that 5 years can be a long time, and life happens. If a major life event happens and you need out, we will do everything in our power to help you get out of the investment, including buying out your shares ourselves if need be.
What returns should I expect on my investment?
While exact returnswill vary from one investment to the next. Cash on cash returns are paid out throughout the lifecycle of each investment. You will also receive a profits from the sale of the asset at the end of the project – capital gains. Our investment criteria is very rigourous and we seek returns in the rages of 7 – 10% cash on cash and 30% – 60% capital gains. Overall we look to investments that have a 15% IRR.
If any of the terms are unclear, here is a glossary with all real estate terms.
What are the risks?
Commercial real estate assets like apartment buildings and self storage operate independently of the stock market. In fact, they tend to fare better in recessions, because more people tend to downsize. They also tend to be safer investments than single family homes because if one tenant moves out, you still have the others to pay down the mortgage.
Can foreigners (non US citizens invest)?
Yes! Even if you are not a US citizen or do not live in the USA, you can invest in US real estate syndications. I have written a post specifically on this.
How are taxes managed in my country?
Taxes differ country to country and tax treaty to tax treaty. If you are non a US resident, read this post about investing in real estate syndications.
You will need to consult with a tax expert in your own country of residence to understand how your country will tax your US real estate earnings. While real estate is a heavily tax favoured asset, I do not personally mind paying a bit of tax on the strong passive cash flow that I get from it.