How are multifamily investments structured?
Description: A breakdown of how we structure our multi-family syndication investments
That’s a great question and there’s not just one answer to it. This is one of the places that newer multifamily investors can really get tripped up.
In general, though, what happens is a professional investor – we’ll call him or her the “head honcho” – the head honcho finds a great deal and does a lot of due diligence to make sure it’s a great deal. Then the head honcho goes out and finds other investors who will put money into a pot, so to speak, which the head honcho then uses to acquire, renovate and manage the property. As income is generated in the project, the head honcho divides up the money among him or herself and all of the other investors according to a written agreement that’s set out in advance.
Now obviously that’s a casual definition, with a more technical definition involving phrases like “Limited Partnerships”, “Private Placement Memoranda”, and “General Partners” and so on. And if you’re considering investing in such a project, you should consider it to be centrally important to understand all of those details for your specific project before putting even one penny of your money into the project.