We currently support personal investment accounts, joint accounts, and certain entity accounts (Trusts, Limited Liability Companies, Limited Partnerships, C Corporations, and S Corporations). Investing with your personal holding company is usually a wise idea for extra protection and tax planning. Consult with your CPA to discuss what options make the most sense for you.
As a member in the LLC that purchases the property, you will receive a K-1. A K-1 is a tax form used by LLCs to provide investors with detailed information on their share of a partnership’s taxable income. LLCs are generally not subject to federal or state income tax, but instead issue a K-1 to each investor to report his or her share of the partnership’s income, gains, losses, deductions and credits. The K-1s are provided to investors on an annual basis so that each investor can include K-1 amounts on his or her tax return. In general there are significant tax benefits of investing in a real estate syndication like ours because of accelerated depreciation that allows for “tax losses” passed through to the investor.
An accredited investor, in the context of a natural person, includes anyone who:
On the income test, the person must satisfy the thresholds for the three years consistently either alone or with a spouse, and cannot, for example, satisfy one year based on individual income and the next two years based on joint income with a spouse. The only exception is if a person is married within this period, in which case the person may satisfy the threshold on the basis of joint income for the years during which the person was married and on the basis of individual income for the other years.
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:
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.
Yes, you can invest through your IRA. If you currently have a self-directed IRA, please check with your current custodian to ensure that they will allow you to place your investment with REM Capital. We also accept self-directed and solo 401(k) as well as any other retirement type structure. It’s a great way to achieve capital appreciation inside of a tax advantaged structure.
Yes, our particular structure being a 506(c) offering requires us to only accept accredited investors. Accreditation is simple and easy with our Docusign process. Typically your CPA or investment advisor can assist and it’s just a matter of confirming that you have $1MM of net worth (exclusive of personal residence) or meet income requirements of $200k/year (single) or $300k/year (married). If you are not an accredited investor please reach out to us and we’re happy to point you in the direction of other opportunities that may fit your needs.
Distributions are sent out via ACH each month. Distributions are usually lower in the beginning of the project (5-7% per year cash-on-cash in year 1 and 2) and higher towards the latter part of the value add (10-12% cash-on-cash in year 3+).
Investor funds are used for the total acquisition cost of the property. This includes but is not limited to the actual purchase price of the property, acquisition fees, legal and transaction costs, capital projects, and reserves. We set aside 6-12 months of expense reserves as part of our conservative underwriting process. We also typically raise the capital to cover our improvement projects so that we’re not taking unnecessary risk to complete the intended value-add. Capital preservation comes first. We want to maximize our return while minimizing our risk to capital.
Yes. Investors are encouraged to visit the property before investing and during the life of the project. We typically visit each site on a quarterly basis and will notify you via email ahead of time when those visits are taking place. We love to see our investors and show them around. It’s a part of our mentorship program and we believe investor education is a critical component of helping you become a better investor.
REM Capital handles all of the decisions related to acquiring, managing, and selling the properties. Our role is to deploy our expertise to improve investor returns. We have our in-house professional property management arm, REM Living, to handle the day-to-day activities and CAPEX work. It’s a seamless process to ensure that investor returns are maximized.
We form an LLC as a special purpose entity to hold title to the property we’re investing in. Then we create another LLC that wholly owns the SPE. This is where the Class A (investors) and Class B (management) members have their ownership. REM Capital serves as the Class B member (General Partner), while investors are Class A members (Limited Partners). The LLC structure provides investors with both liability protection as well as pass-through tax benefits.
A Limited Partnership is an older term that was used for many years to delineate between passive partners and management partners in an entity. These days we use a Limited Liability Company (LLC) to house all of our legal entities. LLCs have Members and Classes. The LP/GP delineation is still used today because of it’s ease of translation from the past. Today we are technically all Members and there are Class A members (investors) and Class B members (management). The General Partner (i.e. Class B member) is responsible for making all decisions and retains the liability for the LLC. The Limited Partners (i.e. Class A members) are passive investors but receive liability protection. In our deals, we are on both sides of the deal – as investors and as management. It’s important to “put your money where your mouth is”.
Investment windows are generally 5-10 years. This window provides enough time to improve and stabilize the property, benefit from market changes, and exit for a healthy return. This time frame is reviewed on an annual basis in relation to the property financials and the local/regional economic conditions. It’s important to stay on top of what happening in the market and while we prefer long-term buy and hold because of the higher overall returns, there may be times where we can get a 5-10 year return in less time. Selling the property early in these cases may make sense but it will depend on many factors such as replacement costs, opportunity cost, tax laws, etc.
Our typical investment minimum is $100,000 on each project. We try to keep the number of investors on each project to a reasonable number so that it doesn’t feel like crowd funding. Our goal is to give you the time and attention that we feel you should have to keep up with your investment and make it a personal experience. Our investor mentorship program includes site visits, monthly updates, and access to our leadership team for questions, feedback, etc. We also have a VIP Investor program for those who invest a cumulative amount of $1MM or more. We value long term relationships and want to say “thank you” to our dedicated investors by giving them up to an additional 20% on their return.
Investors receive profit distributions on a monthly basis. These are sent out via ACH by the end of the following month once all of the financials are finalized. Investors can track their progress on our investor portal.
Investors receive pass-through tax benefits, which means that all distributions flow to each limited partner. The Limited Partnership pays no taxes. Investors also benefit from the depreciation deduction for real estate, which reduces taxable income. Investors receive a Schedule K-1 by March 15th each year which includes a report of each investor’s share of profits, losses, deductions, and credits to include in their tax returns. Typically the first year includes a roughly 50-70% tax write-off due to accelerated depreciation. In general, investors will not have to pay taxes on distributions for the first 5-7 years due to these tax benefits and the structure of our deals.
Investing is simple. Prospective investors receive an Offering Memorandum which details the deal’s property type, market details, and projected returns. Investors complete the investment documents and contribute capital. Distributions are paid via ACH on a monthly basis. Investment updates are delivered to investors monthly (in the beginning as we get rolling) and eventually quarterly (once we achieved the completion of our value-add component).