Martinson Investments does multifamily apartment syndications.
Apartment syndication utilizes the power of pooling investors’ money together to purchase a large, multifamily apartment building. An apartment syndicator (Martinson Investments) is an entrepreneur that puts together a real estate deal from nothing.
Typically, there are two types of investors in an apartment syndication deal. There is a general partner and a limited partner. Martinson Investments is the general partner, and they organize limited partners, or interested investors, together and put all the money together to purchase a large real estate deal.
The Limited Partner (investors) and how they earn money
A limited partner (LP) is someone who wants to earn money each year, but may not have the time or resources to earn what they would like. It’s pretty standard for a LP to earn an 8% preferred return and 10% cash-on-cash return annually on the capital that they invest in the property. Additionally, the LP will earn money at the disposition of the property of around 14%-25% IRR. Not many investors complain about those numbers!
The LP does not have to do anything except collect returns. The LP will receive monthly or quarterly updates on how the property is performing.
EQUITY INVESTOR
-8% preferred return (typically) and usually a 10% cash on cash (COC) return annually
-After the hold period (typically 5 years) then the LP will receive the capital that he/she provided back, plus a portion of the profits at sale which could be anywhere from 14%-25% IRR, depending on the structure of the deal.
DEBT INVESTOR
-This is a fixed return on the money invested and the debt investor receives all the invested money back typically after 1 year- 18 months, or whenever the refinance period is.
-There is less risk in this investment because the debt investor can claim the property if something goes array, but this investor does not collect in any of the profits or preferred returns.
The General Partner (Martinson Investments) and how they earn money
The general partner (GP) is the lead role in the deal. He or she is the one on the front lines finding real estate deals, making offers, performing due diligence on the property, finding and controlling a property management company, and making sure the limited partner gets their preferred returns. The GP continues to control the property throughout the hold period. During that time, any problem that arises, the GP handles it, and continues to manage it. The GP is completely transparent with the limited partners about what is going on with the property, and continuously gives updates about the performance of the property.
How the GP typically makes money. This will vary on a case-to-case basis, and after the limited partners collect their preferred returns.
-1-2% Acquisition fee at the closing of the property, 2% asset management fee each year (considering the property is running as planned), and a profit split with the limited partners after the returns have been met. The LPs usually receive 50-70% of the profit, and the GP receives 30-50% depending on the structure.
Have you ever wondered how people invest in such large assets, like a 210 unit apartment building? More than likely, that investor has either gone in to the deal with other partners, or that investor has syndicated the property. Meaning, they used other people’s money to come up with a larger down payment, and benefited from larger returns on real estate.
Have you ever invested in an apartment syndication? What are your thoughts about them? Comment below..
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