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Frequently Asked Questions

You can invest through various types of accounts, including:

  • Individual Accounts: Accounts held by a single person.

  • Joint Accounts: Accounts shared by two or more individuals.

  • Tenancy in Common: Accounts where multiple individuals own a share of the property.

  • Entity Accounts: Accounts held by entities such as Trusts, Limited Liability Companies (LLCs), Limited Partnerships (LPs), C Corporations, and S Corporations.

  • Retirement Accounts: Individual Retirement Accounts (IRAs) and 401(k) plans designed for retirement savings.

For more information on IRAs and 401(k)s, please see the details below.

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Yes, you can invest through your IRA. If you currently have a self-directed IRA, please verify with your custodian that they permit investments with Phoenix Equity Investment Group. If you have not yet converted from a traditional IRA to a self-directed IRA, you will need to contact a custodian to assist with the conversion. Should you require a referral, we can connect you with the group we personally use.

As a partner in the LLC that purchases the properties, you will receive a K-1 form. A K-1 is a tax document used by partnerships to provide investors with detailed information on their share of the partnership’s taxable income. Partnerships are generally not subject to federal or state income tax; instead, they issue a K-1 to each investor to report their share of the partnership’s income, gains, losses, deductions, and credits. These K-1 forms are provided to investors annually, allowing each investor to include the K-1 amounts on their tax return.

An accredited investor, in the context of a natural person, includes anyone who:

  • Earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR

  • Has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

In addition, entities such as banks, partnerships, corporations, nonprofits, and trusts may be accredited investors. Of the entities that would be considered accredited investors and depending on your circumstances, the following may be relevant to you:

  • Any trust, with total assets in excess of $5 million, not formed to specifically purchase the subject securities, whose purchase is directed by a sophisticated person, or

  • Any entity in which all of the equity owners are accredited investors.

In this context, a sophisticated person means the person must have, or the company or private fund offering the securities reasonably believes that this person has, sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.

A Sophisticated Investor does not meet the requirements of an Accredited Investor but possesses investor experience. This means the individual believes they have sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.

No. We currently have investment opportunities that are open to accredited and sophisticated investors. You will need to register to view our current offerings.

Distributions are planned quarterly.

Investor funds are used for the total acquisition cost of the property. This includes, but is not limited to, the down payment for the actual purchase of the property, acquisition fees, legal and transaction costs, capital improvements, and reserves.

Absolutely! Investors are welcome to visit the property both before investing and throughout the life of the project. If you provide us with advance notice, we can ensure that someone is available to show you around and answer any questions.

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KEY TERMS

 A method where multiple investors pool their resources to purchase and manage apartment complexes. Example: A group of investors collaborates to buy a 100-unit apartment building, sharing the costs and profits.

An individual or entity meeting specific financial criteria set by the SEC, allowing them to invest in certain securities not registered with financial authorities. Example: An individual with a net worth of over $1 million, excluding their primary residence, qualifies as an accredited investor.

An investor with sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of an investment, but who may not meet the criteria of an accredited investor. Example: A business owner with extensive experience in real estate investments, but who does not meet the financial thresholds of an accredited investor.

The individual or entity responsible for managing the investment. For instance, a real estate firm acting as the GP in an apartment syndication.

An investor who provides capital but has limited involvement in management. For example, an individual investing $50,000 in a real estate syndication.

Funds used to improve or maintain a property. For instance, spending $20,000 to renovate an apartment building’s roof.

Costs associated with running a property. For example, paying $5,000 a month for property management and maintenance.

The amount required to cover loan payments. For instance, a monthly mortgage payment of $3,000.

Income generated from a property after operating expenses. For example, a property with $10,000 in monthly rent and $4,000 in expenses has an NOI of $6,000.

The rate of return on a real estate investment. For instance, a property with an NOI of $60,000 and a purchase price of $1 million has a cap rate of 6%.

The cost of each individual unit in a property. For example, a 10-unit apartment building purchased for $1 million has a price per unit of $100,000.

The net income from a property after all expenses. For instance, a property generating $8,000 in monthly rent with $5,000 in expenses has a cash flow of $3,000.

Fees associated with purchasing a property. For example, paying $10,000 in legal and administrative fees during a property purchase.

Costs related to obtaining a loan. For instance, paying $2,000 in loan origination fees.

Funds set aside for future expenses. For example, maintaining a $50,000 reserve for unexpected repairs.

The amount of money invested in a property. For instance, contributing $100,000 to purchase a share in an apartment complex.

The money received from selling a property. For example, selling a property for $1.5 million and receiving $1.4 million after closing costs.

The annualized rate of return on an investment. For instance, an investment with an IRR of 12% over five years.

The return on cash invested in a property. For example, earning $10,000 in annual cash flow on a $100,000 investment results in a COC of 10%.

The ratio of total cash received to total cash invested. For instance, receiving $300,000 from a $100,000 investment results in an EM of 3.

The rental rate that a property can command in the open market. For example, charging $1,200 per month for a two-bedroom apartment.

The hypothetical maximum rent if all units are leased at market rates. For instance, a 10-unit building with market rents of $1,000 per unit has a GPR of $10,000.

The total possible income from a property, including rent and other income. For example, a property with a GPR of $10,000 and $2,000 in additional income has a gross potential income of $12,000.

The difference between market rent and actual rent collected. For instance, a unit rented for $900 instead of the market rate of $1,000 has an LtL of $100.

Uncollected rent or other income. For example, a tenant who owes $1,000 in unpaid rent.

Discounts or incentives offered to tenants. For instance, offering one month of free rent to attract new tenants.

A furnished unit used to show prospective tenants. For example, a decorated apartment used for tours.

A unit provided to an employee as part of their compensation. For instance, offering a free apartment to the property manager.

The percentage of unoccupied units in a property. For example, a 10% vacancy rate in a 100-unit building means 10 units are vacant.

The income lost due to vacant units. For instance, losing $1,000 in rent from a vacant unit.

The total income from a property after accounting for vacancy and other losses. For example, a property with a gross potential income of $12,000 and $2,000 in vacancy loss has an EGI of $10,000.

The financial impact of vacant units. For instance, a property with a 10% economic vacancy loses $1,000 in potential income.

The occupancy rate needed to cover all expenses. For example, needing 85% occupancy to break even on a property.

The percentage of occupied units in a property. For instance, a property with 90 out of 100 units occupied has a physical occupancy rate of 90%.

The ratio of a property’s price to its gross rental income. For example, a property priced at $1 million with $100,000 in annual rent has a GRM of 10.

The additional rent charged for upgraded units. For instance, charging $100 more per month for a renovated apartment.

The ratio of NOI to debt service. For example, a property with an NOI of $120,000 and debt service of $100,000 has a DSCR of 1.2.

The cost of borrowing money. For instance, a loan with an interest rate of 4%.

A loan payment that only covers interest. For example, paying $500 per month in interest on a $100,000 loan.

A benchmark interest rate used in financial markets. For instance, a loan with an interest rate of LIBOR + 2%.

A short-term loan used until permanent financing is secured. For example, using a bridge loan to purchase a property before refinancing.

Long-term financing provided by government-sponsored entities. For instance, obtaining a 30-year loan from Fannie Mae.

A fee for paying off a loan early. For example, paying a 2% penalty for early repayment.

Replacing an existing loan with a new one. For instance, refinancing a mortgage to obtain a lower interest rate.

The increase in a property’s value over time. For example, a property purchased for $500,000 that is now worth $600,000.

A method of allocating utility costs to tenants. For example, billing tenants for their share of water and electricity usage.

Categories used to describe the quality of properties and neighborhoods. For instance, a Class A property in a high-end neighborhood.

The minimum return paid to investors before the GP receives any profits. For example, a preferred return of 8% on an investment.

Payments made to investors from a property’s income. For instance, quarterly distributions of $2,000 to investors.

The property being analyzed or discussed. For example, a 50-unit apartment building under consideration for purchase.

The process of evaluating a property’s financial performance. For instance, analyzing a property’s income and expenses to determine its value.

A financial projection of a property’s future performance. For example, a pro-forma showing expected income and expenses for the next five years.

A list of tenants and their rental payments. For instance, a rent roll showing 50 tenants paying $1,000 per month each.

A financial report showing income and expenses. For example, a profit and loss statement for a property showing $100,000 in income and $60,000 in expenses

The plan for selling or exiting an investment. For example, selling a property after five years to realize a profit.

Comparing rental rates of similar properties. For instance, analyzing rents of nearby apartments to determine competitive pricing.

A smaller, distinct part of a larger market. For example, the downtown area within a city’s real estate market.

A region with a high population density and economic ties. For instance, the Los Angeles-Long Beach-Anaheim MSA.

A fee paid to the GP for acquiring a property. For example, paying a 2% acquisition fee on a $1 million property purchase.

A fee paid to the GP for managing the investment. For instance, paying a 1% annual fee based on the property’s value.

A fee paid to a property management company. For example, paying a 5% fee on collected rents for property management services.

A fee paid for refinancing a loan. For instance, paying a 1% fee on the new loan amount during refinancing.

A fee paid to a guarantor for securing a loan. For example, paying a 0.5% fee to a guarantor for a $500,000 loan.

A legal document outlining investment details. For instance, a PPM provided to potential investors in a real estate syndication.

A document for investors to commit funds. For example, signing a subscription agreement to invest $50,000 in a property.

Investments in apartment buildings or complexes. For instance, purchasing a 50-unit apartment building as a multi-family investment.

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