No, although we are deeply rooted in the agricultural community, this platform is open to anyone to join, learn and experience the benefits of investing in commercial real estate together.
This type of investment involves bringing together a group of individuals to pool their money and purchase a property. A real estate syndication can be a great way to get involved in real estate investments without having to go it alone or deal with the burden of tenants, toilets, and termites.
No, syndications have been around for a long time, but only recently have they become more accessible to every day investors following the passing of the JOBS Act of 2012. Prior to 2012, the Securities Act of 1933 relegated passive commercial real estate investing largely to only institutional investors like pensions, endowments and hedge funds.
Syndications have become more available to every day investors just in the last decade, so not everyone is aware of them, or how to go about getting started. Many have a $25,000 to $50,000 minimum investment threshold which can be a limiting factor for some. Also, most financial advisors are only licensed to sell stocks and mutual funds or lack the resources to help their clients diversify into alternative assets such as real estate.
Yes, most employer-sponsored retirement plans allow you to roll over all or a portion of your funds into a self-directed IRA. There are many custodians which can help you with this process and invest your retirement funds in alternative assets such as real estate.
It depends on whether the particular investment opportunity is a 506(b) or 506(c) offering. A 506(b) offering is often times referred to as friends and family, and the real estate sponsors may take the investor’s word whether he or she is accredited. On the other hand, a 506(c) offering is if for accredited investors only, and reasonable steps must be taken to verify the accreditation status.
Accredited investors are those individuals having an average yearly income over $200,000 (or $300,000 together with a spouse), or has a net worth of over $1 million, either individually or together with a spouse (excluding the value of a primary residence).
The average internal rate of return (IRR) for these type of real estate syndications has historically outperformed the stock market and are common to be double digits. This is in addition to the monthly cash distributions, equity from forced appreciation, and tax benefits.
Forced appreciation is achieved by increasing below market income to market rates, identifying additional opportunities for generating income, and wisely managing operating expenses.
At Farm Raised, we love farmland. However, land is not depreciable. Commercial real estate offers accelerated depreciation which can offset other taxable income as well as much of the gain from the forced appreciation at the year of exit.
In general, monthly distributions start three to six months after the initial investment. You should consider the money you invest illiquid for the life of the investment period. Typically, a return of your initial investment is made in year 3 during a refinance. Then, another final distribution at the final year of sale.
There is risk involved investing in real estate syndications much like any other investment. A number of market factors could change in a certain geography which might impact the business plan for any given property. However, from a liability standpoint, investing as a limited partner (LP) limits your liability as the day-to-day risks from managing a rental property are those of the general partners (GP).
We have been investing in commercial real estate since the late 2000’s. We have transitioned to passively investing as LP’s in respect of our time as well as the worry of tenants, toilets, and termites. We now spend our time and resources vetting the top real estate operators we wish to partner with on future opportunities.
In most cases, you invest as a Limited Partner (LP) as part of a larger investment. Each year, you receive a tax form K1 with your proportionate share of net income and any pass-through depreciation losses. Please note: although most real estate sponsors are timely in providing K1’s to their investors, we cannot control this timing ourselves. In some instances, we’ve had to file an extension of our tax returns due to a delay in K1’s.