A 

Accredited Investor 

• • Accredited investors are individuals who meet certain qualifications in regards to networth and liquidity. An accredited investor must have an annual income that exceeds $200K for the last two years, or $300K together with a spouse.  Or they need to have a $1M net worth.

Active Investment

• • An active investor does all the work of sourcing, structuring, managing and exiting investments.

Annualized Return

• • The annualized return is the geometric average of annual returns of each year over the investment period. 

Apartment Syndication

• • Pooling resources from numerous passive investors through a sponsor to acquire, execute, and resale an apartment building.

B

Breakeven Occupancy 

• • The occupancy rate required to bear all the expenses of a multifamily real estate property.

C

Cash on Cash Return

• • A rate of return calculated by dividing the cash flow being produced by a property by the initial cash investment.

Capital Expenditure 

• • These expenses are funds used by the managing company or partners to acquire, improve, or maintain a property. It specifically applies to when these funds improve the useful life of a property.

Capitalization Rate

• • Capitalization rate is a real estate valuation measure used to compare different real estate investments. It is calculated by dividing net operating income by a property’s current market value.

D

Due Diligence 

• • Due diligence is a group of detailed tasks and processes for screening and evaluating the property to confirm and support underwriting and business plan assumptions.

Document Management

• • Document Management is the process of searching and retrieving the required real estate deal-related and other crucial documents from a central storage location. 

Distressed Property

• • Distressed Properties are unstabilized, poorly managed, outdated properties that have an economic occupancy rate below 85%. 

E

Economic Occupancy Rate

• • Economic Occupancy Rate is the proportion of the actual money earned by a business to the gross potential rental income of a property..

Equity Multiple

• • Equity Multiple is a method to calculate a rate of return on commercial investment properties. It takes the initial equity investment plus the total cash flow plus the sales proceeds combined divided by the initial equity investment.

Equity Investment

• • The amount of cash put into an investment. 

F

Financing Fees

• • Financing Fees are the total amount paid by the borrower throughout the life of a mortgage. This includes the processing charges for the mortgage and the interest paid until the last installment.

G

General Partner

• • A General Partner owns the partnership and takes care of the routine adminstration and operations of the business. They are also known as the sponsor or operator and are responsible for the overall management of the apartment project lifecycle.

Gross Potential Income

• • Potential income that a multifamily property could produce with no vacancies and all leases signed at market rates including all other revenue.

H

Holding Period

• • The holding period is the amount of time the sponsor plans to hold the property.

I

Internal Rate of Return

• • IRR takes into consideration the time value of money and is calculated based on all future anticipated cash flow, plus principal pay down on debt and proceeds from the exit of a property.

Income Approach

• • Income Approach is a method in real estate to estimate the value of the property based on the income it can generate.

Investor Relations

• • Investor Relations is a combination of communication, financial transactions, and marketing to control the flow of information between the syndication project and investors.

Investor Updates

• • Periodic updates explaining how the investment has been performing and other relevant details. Investor updates are frequently given on a monthly or quarterly basis.

J

Joint Venture

• • A Joint Venture is a partnership formed by two or more investment partners. They may be individuals or corporate investors.

K

Key Principal

• • The key principle in apartment syndications controls or manages the borrower and is someone vital to the ongoing success of the investment. 

L

Lead Sponsor

• • The most important sponsor within a real estate syndication–this person often has the most responsibilities, in addition to being the largest stakeholder.

Letter of Intent

• • LOI is a non-binding agreement provided by a buyer proposing their purchase terms. 

Limited Partner

• • A Limited Partner, also known as a passive investor in apartment syndications, funds a portion of the equity investment and whose liability is limited only to the extent of their share of ownership. 

M

Market Rent

• • The market lease value of a rental unit according to comparable rental rates for similar units in close proximity to the subject.

Multifamily

• • Multifamily is a classification of housing property, in which there are 5 or more housing units accommodated in the same building, or multiple buildings in the same complex.  

N

Net Operating Income

• • NOI of a property is calculated by totaling all incoming revenue from a property and subtracting operating expenses.

O

Operating Expenses

• • The costs to run and maintain an investment property.

P

Passive Investing

• • Passive investing is a process of investing for a long term, earning a regular profit share regularly.

Passive Investment

• • Placing your capital into a real estate syndication which is managed for you.

Physical Occupancy Rate

• • Physical Occupancy Rate is the percentage of residential units that are already occupied by tenants in a multifamily real estate property.

Preferred Return

• • Investors with preferred shares or preferred returns receive distributions and returns up to an agreed upon percentage before the sponsor. 

Price Per Unit

• • The price per unit in an apartment building.

Property Management Fee

• • Recurring cost of having a professional property management company handle the day-to-day operations of a property.

R

Refinancing

• • Replacement of a debt obligation on a property with a new loan.

Rent Roll

• • The spreadsheet or document detailing each of the units in an apartment community

S

Sales Comparison Approach

• • The common method of estimating a property’s value based on recent similar sales in the area.

Sophisticated Investor

• • An individual deemed to have enough experience and knowledge to assess the risks and merits of an investment opportunity for themselves.

Sponsor

• • The General Partner individual or team, hosting a real estate syndication by gathering a pool of investors to acquire a property or completing a real estate project, and leading the routine administration and management of the real estate project (offering) is called Sponsor or Syndicator.

Submarket

• • Submarket is a geographic boundary outlining a core area competitive with other such areas comprising similar property types.

Syndication

• • Syndications of apartment buildings are basically real estate partnerships, or group investments.

V

Vacancy Loss

• • How much potential revenue and cash flow is lost on vacant units.

Vacancy Rate

• • The percentage of vacant units in a multifamily community.

Value-Add Property

• • Value-Add Property is a property that requires corrective actions or upgrades to reach its potential value.