Wave Impact Capital Group
Multifamily syndication is to form a group of people to purchase an apartment complex together.
A Multifamily Syndication allows investors to participate in an otherwise unobtainable real estate investment opportunities by combining capital and experience through teaming up with other like-minded investors. This also allows you to reduce the investment risk by dispersing it among all the investors and to diversify your capital into other real estate or in other economic sectors. See the Benefits of Multifamily Investing video on the Wave Impact website for more information.
Apply common sense. Wave Impact / the closing agent / SEC and real estate attorney’s will make sure all paperwork is properly completed. As an investor, you should monthly or quarterly review the documents of your investment to know that it is being managed well so your interest and principal are protected. Wave Impact makes this possible with our monthly updates and quarterly reports. Real estate can be risky but for high risk there can be high yields. Wave Impact will take every precaution to reduce as much risk as possible throughout the entire purchase, hold and sale of the property. One of the most important precautions Wave Impact implements is to not over leverage a property. There is at least a 20% cushion, where if something does go wrong the property can be sold with the high likelihood of principal and interest being fully paid.
The biggest difference between single family and multifamily is the way it is valued. Single family is valued by the comp next door. Multifamily (5 units and above) is a business valued primarily by its Net Operating Income (NOI). Through physical and operational improvements, you can increase the value of the property by increasing NOI.
Demand is strong for multifamily. By 2030 over 4.6 million new multifamily units are needed. The census bureau shows that nearly a third of US households rent their primary residence. This has remained steady for almost two decades. The student loans and car loans that many young people have, make them ineligible for a home loan. Some people will never be able to afford a home, but they need a place to live. When income is tight and people can’t pay the mortgage and the taxes on their single family home, they move back into an apartment. Some people choose apartments for convenience - no maintenance, often with many amenities and conveniences.
We all know real estate can be risky but Wave Impact has your money backed by a promissory note, mortgage-which is a lien on the property, lender title insurance, and hazard insurance just like the bank did with your personal residence when you bought it.
Each syndication purchases the multifamily asset through a limited liability company (LLC). An LLC provides its members with certain personal legal protections against lawsuits and personal financial liability. Consult with your attorney, CPA and financial advisor for specific advice on the benefits of investing through a multifamily syndication.
Bank CD’s are FDIC insured because the government has the taxpayers to back them. Wave Impact can not demand an increase in taxes to pay your interest and principal back. Therefore, real estate investing and Wave Impact's Private Lender Program is NOT FDIC insured but the loan is secured by the real estate.
A security is when someone gives you money that you manage for them in some form and you promise them a return. When that money is backed by using some form of physical collateral (property you own) to secure the principal then it is no longer considered a security but simply a loan.
The Washington State government website has great information written to the average person if you wish to have a better understanding of this.
The SEC still has many laws that govern a multifamily syndication business. Wave Impact works with a few teams of SEC experts and attorneys to ensure that we are following the guidelines and laws.
When making any major decision you seek advice from a professional, like our closing agent / attorneys, and let them handle the details. There is a list of items that must be in place before the funds are distributed.
The first thing the investor should get from the borrower (Wave Impact) is a disclosure statement. This is part of the Offer Book sent out on each individual property. This tells about the real estate investors program, how you get paid, how the money is secured, details of the particular investment, all the ins and outs of the LLC specific to the investment.
Second, Wave Impact will get an appraisal done by a licensed appraiser. This will let you know the market value of the property and tell you if the loan exceeds the 80% loan to value we promise to stay under.
Third is title insurance. Wave Impact always has title insurance issued at closing naming all investors as the insured. This protects you against title defects and it could affect your collateral.
Fourth is fire and damage insurance. If something happens, you want to know that the repairs will be made and you will get paid. Most of the time, banks will not close on a multifamily syndication if inusrance contracts do not far exceed this bare minimum of fire and damage insurance.
You should have your original promissory note (property specific LLC lending paperwork) and a copy of the recorded mortgage or deed of trust. The mortgage or trust deed will get recorded and then a copy forwarded to you on, this is the job of the closing agent.
A good closing agent makes sure it is all easy and assures proper execution.
You should never write a check out or wire funds to the borrower or Wave Impact Capital Group. All closings are done by a real estate attorney or a title company or another closing agent of some kind. Your funds should be made out to and go directly to the company closing the loan, not to the borrower. It is the closing agent's job to receive your funds, make sure the documents are in place to secure your interest just like they do every time they close a loan from a bank or any other lending institution. The closing agent also distributes funds when the property sells.
That will depend on the terms you choose. If you wish to receive quarterly or monthly income in the form of interest checks then you would get 6% annually. If you do not need the quarterly income and wish the principle to accrue interest without receiving the quarterly checks, being paid all the interest and principal at the time of the sale of the property, then you would get 8%. This higher interest rate is our way of saying thank you for allowing us to hold your interest money longer, to use as working capital if needed.
Regardless of if you decide to receive quarterly/monthly interest payments or let your interest accrue you will receive the 70/30 split in additional profits.
I don’t know of many banks or investment companies that let you pick your own terms and interest rate.
There is no guarantee in real estate. The formal paperwork that is signed by all involved in the investment and given to you is as close to a guarantee as there is. The deed of trust / mortgage is what gives the security to the private lender LLC member because it gives you a lien on the property. Meaning, legally that amount must be paid back to you.
The interest rate is fixed for the life of the loan. You should know the minimum amount you will receive in interest payments each year. This would assume that no additional profits were distributed that year. Furthermore, with Wave Impact you get to pick your rate, terms and conditions from the programs options to fit your needs.
With Wave Impact the investor has a choice of when they want their distributions. They can receive interest only payments monthly or quarterly or wait until the property sells or is refinanced to receive all of their interest. The principal is paid back upon the sale or refinance of the property.
Most properties that Wave Impact purchases will be cash flowing from the beginning. In some cases where the value-add component, renovations or vacancy, is higher, the investment strategy may require investors to accept more risk with little or no distributions in the beginning in exchange for a larger return later. This would be laid out in the information given to you when choosing to invest in that particular property.
No fees are taken out of investors principal or interest amount. There is a one time acquisition fee, 1.5% of purchase price, that is included as part of the funds raised from investors before purchase, not individually charged. A monthly management fee, 1% of rent revenue, is paid as an expense of the complex before monthly profits are determined.
Wave Impact follows performanced based pay to the owners of the company. The investors get paid with the profits before the general partners (deal organizers/owners) get paid. If Wave Impact manages the investment poorly, then profits will be minimal and we will be paid little to none. This is an incentive for the deal organizers to make sure the property is functioning at optimal levels so cash flow remains steady and strong.
This varies between properties but typically it will be 4 to 6 years for investors. Wave Impact will evaluate the market and the property to see if we should continue to hold the asset or sell it. If planning to hold the property, a refinance may take place. At the time of a refinance, in most cases, the investors would receive their principal amount and additional profits, causing their investment term to end.
If an investor needs to get out of the loan for some reason before the property is sold or refinanced, then all Wave Impact needs is 30 days notice. There are no early withdrawal fees.
There are no early withdrawal fees. You came into the investment knowing it would be a 4 - 6 year, or more, commitment. If you truly need out early, then you probably have had a life crisis happen and need a hashel free process for your early withdrawal. Wave Impact has 30 days from the withdrawal requests to return your principal and earned interest. We use this time to have the lawyer rewrite the contracts and find another lender if needed.
Many factors go into deciding when to sell, reaching all the way from national and local economic conditions to property performance and needs to investor desires. Exit strategies and sell times may vary for each property. This will be discussed with all investors for each individual property starting around 4 years after purchasing the property.
Single family properties or small multifamily properties do not have sufficient revenue to hire full time staff. Because of this, owners are typically required to handle all day to day operations of the property. With the larger property size of a multifamily syndication, revenue is sufficient to hire full time staff to operate the property with oversight and direction from the syndicator. Wave Impact will manage the 3rd party property management company that was heavily vetted before joining our team but will not manage the property itself.
I am not a CPA and suggest you consult with your CPA for specifics on how this type of investestment can impact you and your personal taxes.
For the owners of Wave Impact - there is no tax on borrowed money, the interest we pay investors is tax deductible to us and the profit we make on the management and sale of the property is taxable income to us.
For you as the private lender - the interest Wave Impact pays you is considered taxable income and we will send you a K-1 for any interest and profit amounts earned that year. This is the same as it would be with your interest earned on a CD or dividends paid by stock.
Yes, you can use your self-directed IRA (SDIRA) or you can convert an existing IRA or old 401(k) to a SDIRA to invest in a Wave Impact syndication. Contact your CPA to learn the details. Quest IRA is a popular IRA custodian among investors. Be sure to shop around to find the best services and fees to fit your needs.
The minimum investment amount varies from $25,000 to $100,000 depending on the property of that particular syndication.
Generally speaking, sophisticated investors must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. To qualify as an accredited investor, at a minimum you must have 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).
Reference the SEC guidelines for a more detailed description. To find out if you are qualified under this definition, contact us.
No. Wave Impact Capital Group works with accredited and non-accredited investors.
As a Wave Impact private lender, you do not have to invest in all the properties offered. You get to decide which of the properties you invest in. You can invest in one or you can invest in many.
As an investor you do not get to decide which properties Wave Impact will offer to investors to team up with us and purchase. Let's look at another business as an example of why this is - a dentist. If you are having a root canal done are you going to tell your dentist how to perform it? I hope not, the results could be a bit scary if you do. The dentist has had the schooling and training on how to perform the procedure. The same is true with a real estate investing business. Wave Impact team members have the education on what makes a good apartment deal. We have the education on how to purchase the property and manage the property manager. We have the education on how to be a successful real estate investor. As the private lender your job is to provide funds for the property you choose to invest in, then sit back, watch your money grow and wait for the investment income to arrive.
Impact will have the properties in trusts within the LLC so that if this occurs, the trust will have instructions to sell the properties and pay back the investors.
If you own stock in a company, can you call the company and find out what they are doing in the company, get specifics about current and future decisions? No you can’t, good luck if you try. Even though owning stock is technically owning a part of that company, you don’t have a say in that company.
If you invest with Wave Impact you can call or email anytime and ask questions, we will give you the answers and if we don’t have them we would find out and get back with you right away. You also have access to the lender portal which allows you to see all the documents related to the property and company.
If you don’t have the education, successful mentors, a rock star team and systems in place then you will most likely make mistakes. Mistakes are very costly in this business.
If you can not answer yes to most of these questions, then I would say you probably should not try to pursue this business on your own.