Have you ever invested in a stock tip and then thought, why don’t I continue to get updates about when to sell the stock and was the tip really a good tip? Did it feel like you could not see the road in front of you? It is a bit like driving through the fog. Seems a lot of advisors love to make recommendations, but then they never follow up on past recommendations to tell you if there were any good or how their recommendations are performing.
I always found that frustrating. Same goes for buying a share of Apple. It is not like Apple will give you frequent updates on how they are performing versus the business plan. You get the same information everyone else does, despite being an owner and investor.
Investing in a real estate syndication is very different in this regard. As a passive investor, you will receive regular updates on the progress of the project after the deal closes, but you don’t have to field phone calls from tenants when an issue arises.
Typical Real Estate Syndication Communications and Touchpoints
There are 5 key communications and touch points you will receive once you have invested in a real estate syndication with us:
- Investor Communication – upon closing
- Progress updates – monthly
- Cash flow distributions – either monthly or quarterly
- Financial reports – quarterly
- Schedule K-1 – annually
Upon Closing
Once we have closed on the deal, you will receive email notification letting you know that we now own the property. Included in that same mail is typically a summary of what to expect in the following months/years. Additionally, we include a FAQ related to the deal and key points about cash flow distributions and taxes.
Monthly
Each month thereafter, you should expect an email update on the progress of the real estate syndication project. The monthly email will likely contain current occupancy rates, the number of renovated units, whether progress is in line with the business plan, and, occasionally, some photos of the latest progress.
Here’s an example:
On-site, things continue to go well at XYZ Apartments as we execute our business plan.
Here are some specific property updates:
Current occupancy is 90.8% and pre-leased occupancy is 92.6%
We’ve renovated a total of 11 units since acquiring XYZ Apartments and another 28 units are in the process of being renovated
We’re continuing to achieve our projected rents on all renovated units
Capital improvement projects:
Building repairs: the carpentry, siding, and trim repair projects are completed
Exterior paint: the prep for 8 buildings is in progress
Dumpster enclosures: in progress
Parking lot: repairs are completed and restriping will be scheduled
Water conservation project: completed
As you can see, the monthly emails are informal updates outlining progress against the business plan and giving some key metrics. More details are provided in quarterly financial reports.
Quarterly
Each quarter, you should expect to receive a detailed financial report. This report is much more detailed than the monthly emails and typically includes information on the rent roll, profit and loss statements, and additional metrics which detail exactly how the investment is doing.
While the quarterly reports might be a bit detailed if you are not a finance to spreadsheet type, a quick flip through the pages will give insight to the progress and the overall performance of your investment.
Annually
Each year during tax season, you will receive a Schedule K-1. This tax document is something to give to your tax preparation expert. It will detail your income, tax deductions and credits.
A separate K-1 is issued for every investor in the deal and is typically available around March – April time frame.
Recap
As a passive investor, your active contribution in a real estate syndication is complete once you have reviewed the investment summary, signed the PPM (private placement memorandum), and sent in your funds. After this, you can sit back, collect your monthly / quarterly income and enjoy.
Once all investor funds have been received and the deal closes, the sponsor team will begin to execute the business plan. This will include renovations, property improvements, and increasing rent and occupation rates along with managing costs and optimizing operations.
From closing through sale, you can expect the following:
- Investor Guide – upon closing
- Progress updates – monthly
- Cash flow distributions – either monthly or quarterly
- Financial reports – quarterly
- Schedule K-1 – annually
As you can see, compared to owning shares in a company, you will have more insight into how your investment is performing with Real Estate Syndications.