Commonly Asked Questions When You’re New to Real Estate Syndications
What is Leap’s role in the transaction?
Leap Multifamily started out as a real estate operator back in 2020. Over the first couple of years, it became very clear that there were hundreds of rookies aspiring to be multifamily, “operators”. These beginners didn’t know how to evaluate opportunities or operate the properties once they were closed. They were bringing unsuspecting investors into their deals and many of these deals failed. It quickly became clear that there was a huge void to fill. Somebody needed to be vetting all the various operators and deals!
Leap Multifamily quickly pivoted away from operating properties to performing due diligence on many opportunities and bringing the best ones to our investor database. We network with best-in-class operators and partner with them to underwrite and fund the best opportunities.
What is the investment thesis?
We invest in real estate in Tier 1 metros like Dallas, Houston, Sarasota, Phoenix, etc. The migration trends in these areas are producing more demand for housing, storage, and industrial space than there is supply. Rents and values have increased significantly over the last 20 years.
What kind of property do you invest in?
We invest in high quality commercial real estate property in business friendly states. An investor’s portfolio should include diversification into several types of properties including multifamily, industrial, and self storage.
What does the process look like?
- The process starts with a quick Zoom or phone call. Once we’ve established an S.E.C. compliant relationship, we can present you with investment opportunities.
- We launch 3-5 deals per year, and you can pick and choose the ones you like. There is typically a webinar where you can ask questions, a full investment offering memorandum that contains the details of the investment, and a Private Placement Memorandum that provides even more details and outlines the risks.
- All of the documents will be housed in an investor portal. If you want to make an investment, you will e-sign the documents in the portal and wire your money to the operating bank account. Easy!
- Depending on the deal, you will begin to see distributions as early as 2 months after closing, or in the case of new construction, not until the lease-up occurs, sometimes 18+ months later. The money is deposited directly into your bank account.
What is a “preferred return”?*
Many projects offer investors a, “preferred return”.* The “pref”, as it is commonly called, is typically around 8%. This is different from the projected cash flow. Many projects will average slightly lower cash flow over the hold period and the difference between the actual cash flow and the, “pref” will accrue. This means that when the property sells, the operator pays out the proceeds to investors first until they reach the 8% preferred return on their money. The sponsor team doesn’t take any of the profits until the preferred return is paid. After the preferred return is caught up, there is typically a profit split between investors and the the sponsor. The split ranges from 60/40 to 80/20 with investors receiving the majority of the upside after the preferred return is paid.
Can I get my money out if I need it?
Real estate syndications are considered illiquid investments. If you need your money back in case of an emergency, then a member of the sponsorship team or another investor can likely buy out your shares. You’ll want to read the PPM closely to see what those options look like.
Looking for a deeper dive into these topics?
Check out our comprehensive guide to taking the multifamily syndication, “Leap”!
Investing in real estate syndications is an amazing way to get exposure to real estate without having to get your hands dirty. Leap Multifamily has deep institutional expertise in vetting and managing these types of investments.
If you are an accredited investor and would like to explore passively investing with Leap Multifamily on future deals, fill out our investor application here.
*Preferred returns are part of the deal structure and indicate the sequence of how distributions (from operations or a capital event) are disbursed. They are not guaranteed and should not be considered a financial projection. Actual cash flow projections and distributions from the sponsor may differ from the preferred return.