FAQs

As a partner in the LLC that purchases the properties, you will receive a K-1. A K-1 is a tax form used by partnerships to provide investors with detailed information on their share of a partnership’s taxable income. Partnerships 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.

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.

Distributions are planned quarterly.

A Sophisticated Investor doesn’t meet the requirements of an Accredited Investor but they have investor experience. This could mean the person believes they have sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.

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 allowed to visit the property before investing and during the life of the project. If you provide sufficient notice, we will personally be there to show you around and answer any questions.

Generally, investing your post-tax dollars allow for the greatest tax-efficiency. However, if you have a 401(k), 403(b), 457(B), or any other deferred compensation plan from a previous employer, you can rollover these funds into a solo 401(k) or a self-directed IRA (SDIRA) that allows real estate investment without any penalties. We are happy to discuss this option with you in greater detail but please discuss this with your tax professional to best understand how this would affect your investment portfolio and taxable income. In some cases, your current employer may allow you to rollover part of your deferred compensation plan into a solo 401(k) or SDIRA. Please check with your employer if this may be an option for you.

While it is not necessary to invest through an LLC, we highly advise that you consider doing this if you are using post-tax dollars to maximize the tax-efficiency of your investment. If you are using pre-tax dollars, the benefits to setting up an LLC are quite limited. We are happy to discuss these with you in further detail but please discuss this with your tax professional to best understand how this would affect your investment portfolio and taxable income.