by Joe Firmin 2 Minute Read
Have you ever heard donated to a charitable organization such as the Golden Harvest Food Bank? Contributions through organizations like this change families’ lives exponentially and you get to participate in the mission and see it happen.
As you may know, when you choose to support these types of charities, you receive updates about the work they’re doing and the real impact your donations are having on real people and the lives being touched.
Investing in a real estate syndication is very similar in this communicative aspect. 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 residents when an issue arises. Another similarity… The beauty of investing in a multifamily real estate investment is you see the impact your investment is having on a community, not only a wealth building and financial benefit. I know an investment and a donation are not the same thing, but let’s talk about the communication – the key similarity.
Typical Real Estate Syndication Communications and Touchpoints
There are 5 key communications you should receive at important intervals once you invest in a real estate syndication. From the closing date, through the hold period, until the asset sale, here’s what to look for:
- Investor Guide – upon closing
- Progress updates – monthly
- Cash flow distributions – either monthly or quarterly
- Financial reports – quarterly
- Schedule K-1 – annually
Upon Closing – Investor Guide
Upon the close of a real estate syndication deal, you should expect an email letting you know that we have closed on the property. Included in that same package should be a short Investor Guide, which will provide an overview of what to expect in the following months/years and answer some frequently asked questions, including questions about cash flow distributions and taxes.
Monthly Updates
Each month thereafter, you should expect an email update on the progress of the project. Depending on the deal’s structure, you may receive monthly or quarterly cash flow distributions.
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:
Example Monthly Progress Update Email
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 preleased 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 is scheduled
- Water conservation project: completed
As you can see, the monthly emails are mostly anecdotal and include a quick, high-level overview of multiple initiatives occurring at the property. More details are provided in quarterly financial reports.
Quarterly – Financial Reports
Each quarter, every 3 months after investing in a real estate syndication, you should expect to receive a detailed financial report. This report is much more detailed than the monthly emails and typically include information on the rent roll, profit and loss statements, and additional metrics on exactly how the asset is doing.
While the quarterly reports might not be the most fun thing to look at, especially if you’re not a spreadsheets nerd, you should review them. Even a quick flip through the pages will provide you great insight as to the ongoing progress and the overall performance of your investment.
Annually – Schedule K-1 Tax Document
Each year during tax season, you should be on the lookout for a Schedule K-1. This tax document gets issued for partnership-type investments, like real estate syndications, and reports your share of the income, deductions, and credits.
A separate K-1 is issued for every investor in the deal and is typically available around the same time as 1099s, serving a similar purpose for tax reporting.
Recap
Your active participation in a real estate syndication is complete once you’ve reviewed the investment summary, signed the PPM (private placement memorandum), and sent in your funds.
Once all investor funds have been submitted and the deal closes, the sponsor team begins executing the business plan through renovations, property improvements, and increasing rent and occupation rates among other things.
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
Like seeing regular charitable organization updates about the impact your donation is having, these key communications help keep you in the loop throughout the lifecycle of your real estate syndication investment.
If you’re interested in learning more about investing in value-add investments and becoming a passive investor in real estate syndications, consider joining the Freedom Network. It’s absolutely free to join with no commitment necessary, seriously. If you don’t join, we won’t be able to send you opportunities (sorry, SEC rules). So join today! Not sure how it will work? Check out this post to understand the logistics.