Have you ever heard about or explore
d the opportunity to sponsor a child through a non-profit program such as Children International? Contributions through these organizations change children’s lives exponentially in areas of health, education, and even safety.
As you may know, when you choose to help a child through such programs, you receive updates about the child regularly, including notes they’ve written and even pictures of them. You get to have a supportive hand in their growth from afar while never having to enforce a bedtime or wash the ice cream off the child’s shirt.
Investing in a real estate syndication is very similar in this aspect. As a passive investor, you would receive regular updates on the progress of the project after the deal closes, but you don’t have to field phone calls from tenants when an issue arises.
Typical Real Estate Syndication Communications and Touchpoints
There are 3 key communications you should receive at important intervals once you invest in a real estate syndication. From the closing date, through the hold period, until the asset sale, here’s what to look for:
Progress updates – monthly
Cash flow distributions – either monthly or quarterly
Schedule K-1 – annually
Upon Closing
Upon the close of a real estate syndication deal, you should expect an email notification letting you know that we have closed on the property. Included in that same package should be an Investor Guide, which will provide an overview of what to expect in the following months/years and answer some frequently asked questions, including questions about cash flow distributions and taxes.
Monthly
Each month thereafter, you should expect an email update on the progress of the real estate syndication project. Depending on the deal’s structure, you may receive monthly or quarterly cash flow distributions.
The monthly email will likely contain current occupancy rates, the number of renovated units, whether progress is in line with the business plan, and, occasionally, some photos of the latest progress.
Here’s an example:
Example Monthly Progress Update Email
On-site, things continue to go well at XYZ Apartments as we execute our business plan.
What we’ve accomplished:
Current occupancy is 90.8% and preleased occupancy is 92.6%
We’ve renovated a total of 11 units since acquiring XYZ Apartments and another 28 units are in the process of being renovated
We’re continuing to achieve our projected rents on all renovated units
What we’re working on:
Building repairs: the carpentry, siding, and trim repair projects are completed
Exterior paint: the prep for 8 buildings is in progress
Dumpster enclosures: in progress
Parking lot: repairs are completed and restriping will be scheduled
Water conservation project: completed
As you can see, the monthly emails are mostly anecdotal and include a quick, high-level overview of multiple initiatives occurring at the property. More details are provided in quarterly financial reports.
Annually
Each year during tax season, you should be on the lookout for a Schedule K-1. This tax document gets issued for partnership-type investments, like real estate syndications, and reports your share of the income, deductions, and credits.
A separate K-1 is issued for every investor in the deal and is typically available around the same time as 1099s, serving a similar purpose for tax reporting.
Recap
Your active participation in a real estate syndication is complete once you’ve reviewed the investment summary, signed the PPM (private placement memorandum), and sent in your funds.
Once all investor funds have been submitted and the deal closes, the sponsor team begins executing the business plan through renovations, property improvements, and increasing rent and occupation rates among other things.
From closing through sale, you can expect the following:
Progress updates – monthly
Cash flow distributions – either monthly or quarterly
Schedule K-1 – annually
Similar to how a child’s sponsor receives regular updates about their life from afar, these key communications help keep you in the loop throughout the lifecycle of your real estate syndication investment.
Learn more about passive real estate investing and how to invest in upcoming real estate syndication deals! CLICK HERE to apply to join the Three Keys Investments club!
This work by Annie Dickerson is licensed underCC BY-NC-SA 4.0