What is the Minimum Investment for a Multifamily Syndication?
Historically speaking, real estate investing has been an investment class that only the rich could participate in. Before the creation of the modern mortgage, investors could only purchase properties by paying all cash or having a connection to someone with deep pockets. Today, real estate investing has become more common place and almost any prudent individual can purchase a single family home with a relatively low down payment. However, how can the average investor get involved in large commercial real estate investment?
The answer to this question is of course real estate syndication. A syndication is a real estate investment deal where an experienced sponsor allows other investors to passively participate in the investment. There are many advantages to passively investing in a syndication with some of the most notable being strong returns, tax benefits and the fact that it requires minimal time or experience from the passive investor. While the exact minimum amounts required vary from project to project, the typical amount is $50,000 for most of the investments done by Apogee Capital. Brand new sponsors may have investment minimums as low as $25,000 while other companies that complete very large transactions might have a minimum of $100,000 or even more.
Why is there a minimum investment?
All of the projects that Apogee has completed so far have been registered under SEC Reg D 506b. What this means is that we are allowed to take on an unlimited number of accredited investors for our deals, but only 35 non-accredited investors. Typically, at the start of a capital raise, we will make an educated but conservative guess on how much we will receive from accredited investors. We will then take the remainder (that must be raised from non-accredited investors) and divide it by 35. The resulting number is the absolute lowest that the minimum can be in order to be compliant with the SEC. However, there is an additional reason for minimums on investments which is the quality of investor relations. We want to provide each of our investors with the best experience possible and to be able to attend to their questions and needs in a timely manner. While this is doable in the 40-50 investor range that most of our projects result in, it would be much more challenging with a higher number of investors.
Where can I find the money for my first investment?
Some people might initially think that you must be rich to be a passive investor on a multifamily deal. However, there are a number of ways in which people source money to invest with and so I thought it would be worth mentioning a few beyond cash. One, many investors use their retirement accounts to source equity by placing it in a self-directed IRA. This allows them more flexibility in their investment choices Others have simply taken a loan or withdraw from retirement accounts for the purpose of investing. Another common way people have made their first investment is through equity in other properties. Whether that is selling or refinancing a single family investment property or even personal residence there is an opportunity to put this equity to work for you in the world of passive investing.
There are many important considerations when evaluating a multifamily deal and we make it our mission to careful vet each of these items. If you would like to learn more about passively investing in multifamily, please check out our free ebook "Achieving Financial Freedom Through Multifamily Investing."