What is Real Estate Syndication?
How are Creative Realty Partners’ Syndications Structured?
How are Profits Split in a Real Estate Syndication?
What is an “IRR” and how is it calculated?
What are the Functions and Duties of the Sponsor?
Do I Need to Be an Accredited Investor to Invest with CRP?
If I am Not a United States Citizen, Can I Invest with CRP?
Does CRP Offer Any Guarantees?
Do I Need to Qualify for a Loan?
How Do I Receive CRP’s New Offerings?
What is Real Estate Syndication?
Real estate syndication offers a unique opportunity for passive investors to diversify their portfolio by participating in the acquisition and ownership of multiple real properties. By pooling financial resources with others, investors are able to participate in large scale projects with high returns that would otherwise be impractical, either financially or strategically.
In addition, syndication offers investors the opportunity to partner with a Sponsor who is a seasoned, professional real estate expert and benefit from their knowledge, expertise, and track record.
By investing in a real estate syndicate, investors are able to realize all the benefits of property ownership without being directly involved in the acquisitions process, arrangement of financing, and day to day management usually involved in property ownership. This simplifies complex real estate investing strategies and affords the investor a truly passive real estate investment.
How are Creative Realty Partners’ Syndications Structured?
Creative Realty Partners’ real estate syndications are structured as Limited Liability Companies and come with built-in protections for all parties. CRP (the Sponsor) acts as the Manager while the investors are passive members. The rights of the Sponsor and Investors are detailed in the LLC Operating Regulations which highlight information such as timing of distributions, voting rights, Manager duties, etc.
How are Profits Split in a Real Estate Syndication?
Our investors make money in two ways; rental income and property appreciation.
In CRP deals, Investors receive monthly distributions based on their investment amount and the cash-flow of the property. Upon resale, in addition to their original equity, the investors also receive a lump sum based on the resale profit. All profits above a pre-determined return are split based on previously agreed upon percentages which are tied to performance benchmarks, called hurdles.
In essence, the greater the overall performance of the investment, the more the investors profit and the greater the Sponsor is compensated. This structure is a win/win for Sponsor and Investor as it incentivizes the Sponsor to ensure the maximum performance of the investment.
What is an “IRR” and how is it calculated?
IRR (Internal Rate of Return) is a versatile investment metric used across many different investment types. The benefit of IRR (vs Equity Multiple for example) is that it’s a function of time, as well as returns. For example, an investment might have a 2x equity multiple (aka 200% ROI). But having a 2x equity multiple over 10 years vs a 2x multiple over 3 years is very different, with 2x over 3 years being much more attractive. A good way to think of it is like a compounding interest rate. Let’s say you put $1,000,000 into a bank account that had 8% annual interest, compounded yearly. After 5 years your balance would look like this:
Year 0: $ 1,000,000.00
Year 1: $ 1,080,000.00
Year 2: $ 1,166,400.00
Year 3: $ 1,259,712.00
Year 4: $ 1,360,488.96
Year 5: $ 1,469,328.08
This would equal an 8% IRR. Now let’s say that you found an investment that gave the same ROI ($469,328 profit) in only 3 years (instead of 5). The IRR solves for what compound interest rate you would need to achieve to get that same return in 3 years instead of 5, which in this case would be 13.6858%. At that interest rate your balance would grow as follows:
Year 0 $ 1,000,000.00
Year 1 $ 1,136,858.10
Year 2 $ 1,292,446.34
Year 3 $ 1,469,328.09
Of course things get a little bit more complicated in non-fixed-rate investments because it’s not an interest rate that stays the same each year. Additionally, in cash-flowing investments you’re getting money back over time (as opposed to a bank account where the money is staying in the account and growing). In a real estate investment every year, or even every month your cash flows might be different, therefore IRR is a great metric to use when comparing investments of different types because of the fact that it takes time into account and lets you compare different investment types with different return structures on even footing.
Do I Need to Be an Accredited Investor to Invest with CRP?
If you are a U.S. Citizen, yes.
The Securities and Exchange Commission has set forth certain investing guidelines in order to protect investors in the U.S. In the United States, to be considered an accredited investor, one must meet at least one of the following criteria;
- have a net worth of at least one million US dollars, excluding the value of one’s primary residence
- have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year
- demonstrate sufficient education or job experience showing their professional knowledge of unregistered securities
If I am Not a United States Citizen, Can I Invest with CRP?
In most cases, yes, though it depends on the specific laws of your country.
Does CRP Offer Any Guarantees?
No. All investments carry some amount of risk. It is up to you, the investor, to decide if an investment is suitable for your needs and to choose an investment company that you trust and that you believe can and will perform.
Do I Need to Qualify for a Loan?
No. Creative Realty Partners qualifies and signs for any property financing.
How Do I Receive CRP’s New Offerings?
Simply create an account on this page to be added to our mailing list and automatically receive all new offerings.