Have you been on LinkedIn, Facebook or even IG and seen someone post about a syndication offering open for subscription?
Maybe you have and you felt a little like "woah" that's a whole' lot of numbers in one post and not much of it makes sense.
Well a couple of weeks back, I shared a post about a 57 unit we closed in Charlotte, NC. And for all of my investors who asked...don't worry, this one was not open for subscription with our investor network. In fact, a fund decided they wanted the entire deal and wrote the check.
But fear not, as we will have more deals on the horizon and those will be open to our network of investors whom we cherish dearly and will continue to help them all achieve financial independence.
So why am I here today?
I'd like to share these multifamily returns as I did have some responses on LinkedIn to dive into the numbers.
To share that I coach. Some of you may know but if you do not, I mentor aspiring passive investors on their journey into syndication. These deals are FULL of background information and I'm here to help break syndication down into bite sized pieces for you.
So first, let's dive into the numbers on our most recently closed deal.
I shared that this property was performing with the below investment returns:
- 8% preferred return
- 19% + IRR
- 2.1x Equity Multiple
- 18% Average Annual Return
Breaking it down...
A pref return means your payment takes priority. If you have a pref, you are being paid first, including before the GP team.
8% means you’ll receive an annual return (usually by way of distributions) of 8% on your investment.
An investment of $100K will pay you $8K/year. (Distributions are typically broken into quarters.)
Break it down further: $2000 per quarter paid to you.
How’s that for passive income?
Next up are the IRR and AAR:
What's IRR? This is a bit more complex of a calculation but can be done through excel.
The IRR is a returns metric (the annual rate of growth) that also factors in the time value of money. The sooner you are paid back all or portion of your capital back, the higher the IRR.
AAR- Average annual return. Think of this like your ROI, except it does NOT factor in the time value of money.
In the end, the IRR and AAR both measure the investors expected rate of return. The way in which it’s calculated (aka mostly time of capital) is what closely differentiates the two.
Lastly, and this is my favorite metric of all when comparing deals side by side. The equity multiple!
Here a 2.1X EM means your making a profit of 1.1X or 110%
Anything above a 1X is your profit. Remember this!
So if you've invested $100,000 with a 2.1X EM, you’d expect to receive back $210,000.
This is your $100,000 capital back PLUS profit of $110,000.
Total them together $100K + $110K = $210K returned.
See how 4 little lines on a post can translate into a lot of background numbers? And that's just the beginning. Who's presenting these deals? What's their underwriting look like?
It's up to you to educate yourself and seeing as how I just hired another mentor for a separate part of my business, you'll get there a whole lot faster if you can lean on someone for guidance, knowledge and support.
As always, stay tuned if you're ready to invest. Deals will flow from the portal as an announcement.
And if you're open to it and ready to learn...take a look at my program.
It's much more than just a course...it's hand holding at it's finest and direct access to me and my growing community. I'm there every step of the way.
In fact, here's a testimonial to prove it.
Signing off for now,