+ What is Multifamily Real Estate?
Rental apartments that have five or more units are classified and multifamily real estate and are valued based on the income the property generates. Apartments buildings with four units or less are usually valued based on comparable sales of similar units within the market.
+ Am I a Sophisticated Investor?
A “Sophisticated Investor” is one who, alone or with his or her purchaser representative, has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment alone, or with assistance of a purchaser representative.
+ Am I an Accredited Investor?
An Accredited investor is defined as, any natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000, except that, the person’s primary residence shall not be included as an asset.
OR
Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.
+ What is the minimum investment?
The minumum investment is $50,000
+ How did multifamily perform in the last recession?
During the worst of the last economic recession in 2008- 2009, multifamily real estate performed the best compared to the retail, industrial, and office sectors. While rents did decline, they were the quickest to recover to their pre-recession peak. A significant number of homeowner households moved to rental properties as their home equity diminished. Fortunately, today's lender underwriting standards are more robust, which bodes well for the overall housing sector.
+ How long do I have to be invested?
Investing in real estate is an illiquid investment, and committed capital is not returned quickly, unlike stock holdings. The typical planned hold period for the investment is five (5) years, and generally, investor capital remains in the project for that period. In special circumstances the investor can have their capital returned early adn this process will be outlined in the Private Placement Memorandum. In some cases, the hold period may be shorter if favorable sale conditions arise or a refinancing event occurs. It is also possible that a hold period longer than five years may be required. If the investor feels they may need their capital returned in a short timeframe, then alternate investments may be more suitable.
+ Is my investment guaranteed?
While investing in real estate has been proven to be an excellent way to build wealth over time, it is not a risk-free investment, and the loss of invested capital is a possibility. However, having excellent manangement along wiht prudent selection criteria, and by investing in cash-flowing properties at acquisition, located in economically diverse markets, with population and job growth, the investment risk can be reduced.
+ What happens if I die or the sponsor dies?
The Private Placement Memorandum and Operating Agreement for the property will outline the process and procedures of how the interest of the members is addressed in such circumstances.
+ What’s the downside risk?
There is a risk that the business plan fails to meet its projected targets, and anticipated investor returns my not be realized. Property damage from natural and accidental occurrences could result in lost revenue and profits, while federal, state, and local government ordinances could impact future property revenue growth and property values.
+ Can I use my 401K or IRA or home equity to invest?
Yes, there are several methods through which an investor can participate in investment opportunities. Solo 401k's, SEP, and Self Directed IRA plans can be established, allowing you to become the custodian so you can allocate the funds to allowable investments. Depending on your tax and estate circumstances, some methods may be more beneficial than others. We do not offer legal, or tax advise and recommend that you consult with your professional advisors to determine the best approach for your situation.
+ How am I kept informed about my investment?
Once the property is acquired, Claddagh Capital will provide you with regular updates via email on the operations and performance of the property with investors. Approximately once a quarter, we will hold a live webinar to go through the property performance and answer any questions investors may have. You can also reach out at any time to keep updated.
+ What is a K-1?
When you become a Limited Partner in a property, you are part of the LLC that owns the property. On an annual basis, the LLC will send you a K-1 form typically by the end of March. This form reports your portion of the partnerships income or losses or any gains or credits that occurred during the year. You then use the K-1 information as part of your annual tax filing.
+ What kind of returns can I expect?
Each investment opportunity has different return metrics depending on the business plan for the property. The anticipated returns will be laid out in the Private Placement Memorandum given to investors to review before investing.
+ Who manages the property?
An experienced and professional third party property manager handles the day to day operation of the property. The asset manager assigned by the LLC general partners is actively involved in managing the implementation of the property business plan and for regularly engaging with the property manager to execute the strategy.
+ Can I use passive losses to offset my W2 income?
No, passive losses can not be used to offset W2 income unless you qualify as a real estate professional, as defined by the IRS. Limited Partners may be able to use passive losses in the year they occur to offset other passive income, provided they meet specific criteria. Unused passive losses can also be carried forward to offset future gains, but you should consult with your professional CPA for advice regarding your tax situation.
+ How do I get started?
To get started and to learn more about investing and Claddagh Capital LLC, please complete the contact form by clicking on the "Contact Us" button below. We will reach out to you to discuss your investment criteria and goals and discuss if investing in multifamily real estate is right you. Thank you.