Want to know more about real estate syndication and our process? View our frequently asked questions and answers. If you don’t see your question listed, feel free to reach out to us.
We actively syndicate stabilized income-producing commercial properties selling at below market value, properties with incoming CAP rates in the nine to 10 range with market CAPs of eight or better, at least 30% credit tenants with five or more years remaining on primary lease term, price range of $2M to $20M, retail centers, office buildings, industrial buildings and flex buildings.
We do NOT syndicate pure land deals, development projects, value-added plays and multi-family.
To invest, you must be an Accredited Investor:
The minimum investment per property is $50,000 to $100,000. We can accept traditional or retirement funds and can accommodate some 1031 exchanges. In certain situations, we can accept non-traditional investments such as free-and-clear properties or promissory notes. You can invest as an individual, a married couple, LLC, corporation or trust.
You have a basic understanding of the risks and rewards of investing in income-producing products. You have a long-term (10 or more years) investment horizon. You are comfortable with an illiquid investment. You want completely passive income, and you can use tax benefits such as accelerated depreciation.
You are NOT a good candidate to invest if you just want a huge return, without understanding the inherent risks of investing in real estate, you want to get into an investment and out quickly, you do not have other sources of income to handle emergencies, or you want to be actively involved in the management of the property.
For most properties, during the holding period, you should expect about a 10% annual cash-on-cash return, which is broken down this way:
An 8% annual Preferred return
An approximate 2% annual Cash Flow return
A unique LLC is created for each property. Typically it has the name “HJH
The Investors own half of the LLC (5000 B-Units)
The Syndicators own the other half of the LLC (5000 A-Units)
The amount of the raise varies from property to property and is determined by various factors such as loan terms, complexity of the acquisition and the amount of operating reserves required.
A typical scenario would require a raise of roughly one-third of the acquisition price. Here is the breakdown of the usage of these funds:
The HJH Management entity makes the decision when to dispose of the property. We formulate a holding/exit strategy at acquisition to maximize shareholder profits; however, we sometimes change our strategy should market conditions warrant.
At disposition, we pay for Cost-of-Sales, which is typically 4-6% off the top of our gross sales proceeds. We also pay off the mortgage on the property, give investors their original investments back and distribute what’s left as profits to all of the owners (both Investors and Syndicators) based on ownership percentage.
For investors who come in with loans (such as self-directed IRA money), those funds will be paid back immediately at closing at the same time as mortgages. Note that those types of investors are not actual B-Unit holders, but receive the same ownership benefits (including quarterly cash-flow payments and disposition funds) as regular investors. The capital gains on these types of funds are already deferred, so there is no immediate tax consequence.
For regular investors, the HJH Management team will decide if the capital gains (i.e. disposition profits) will be returned directly to the investors (wherein they will be responsible for capital gains taxes) or deferred with a 1031 exchange. In the event that a 1031 exchange is selected, the gains will be rolled into another HJH property.
We target a Before-Tax-Internal-Rate-of-Return of 15-20% based on the following:
Occasionally, we will plan to hold properties less than seven to 10 years. We will let your know this before you invest by disclosing it in the Holding Strategy in the Investor Deck for the property. We normally try to hold the property for a minimum of one year, but we have flipped a couple of properties sooner than that. We do this only if we think it makes the most financial sense for our investors.
We do something called a Cost Segregation study on all of our new acquisitions. This allows us to accelerate depreciation on many of the properties which can be very advantageous for investors who are facing large capital gains taxes from other investments.