Group Investing
What is Group Investing?
Group Investing, or Syndication in real estate involves the pooling of investment capital amongst investors to purchase together, as a group, real property with the intent to profit. The organizer and manager of the group is the Group Sponsor or Syndicator who has a “fiduciary duty” to the group-members and significant authority to manage the Group’s business.
Group Sponsor
Ergodio, Inc., or an affiliated controlled entity, is the group sponsor or syndicator managing the entire process from formation to the eventual resale (disposition) of the investment property. Typical activities of the sponsor include:
- Setting up and maintaining legal compliance of the investment entity
- Raising the investment capital
- Finding, negotiating and contracting for the investment property
- Conducting full Buyer’s due diligence
- Negotiating and arranging for debt financing, if needed
- Closing the purchase
- Implementing value-add plan, if appropriate
- Managing the asset and/or directly managing the property
- Maximizing the value of the property
- Tax compliance of the ownership entity
- Periodic financial reporting and cash flow distributions to the investors
- Marketing the property for disposition
- Managing the sale of the property
- Upon resale, distributing the initial investment and resale profits to each investor
- Winding down of the ownership entity
How does an Investor benefit?
An investor, or Group Member into a real property group-investment sponsored by Ergodio, benefits in the following three major ways:
In general, apartment properties offer cash-flow from operating the property with quarterly distributions made to the investor; resale profits (capital gain taxed at generally reduced tax rate); the annual write-off tax benefit of depreciation during the holding period; equity-built-up if an amortized loan is used to purchase the property; and finally, the benefit of higher returns through asset cost leverage which can have a significant impact on resale rates of return to the Group Investment. Allocating capital investment and expertly balancing higher returns through leverage and measured risk is a big part of the Sponsor’s activity and a good reason to consider Group Investing. More information on profitability.
In a group investment, the investor doesn’t have to go out and look for a specific property. Major decisions like what markets to invest in and why, and whether to participate in a repositioning for higher return or buy into a market in emergence are all handled by the Sponsor. The Sponsor’s business is to deal with all these aspects of the investment and to provide all information including risk factors and probable returns to the investor. It’s all done through the Private Placement Memorandum (PPM) document which details all aspects of the investment and can be accessed by completing the one-page Suitability Questionnaire.
Is the ability to invest in smaller amounts on multiple properties. As a Group Investor you do not need to come up or raise all the cash needed to close a deal. Also, having the ability to spread investment in multiple properties leverages risks and potential returns just like an investor looks to purchase multiple stocks when investing in the stock-market rather than buying into a single stock.
Can anyone participate as an Investor?
An investor into a group investment must meet certain criteria established by the Sponsor. This is common practice and determining investor suitability is a simple, straight-forward process. To determine your suitability and gain access to the offering documents click here.
Here is why an investor must be evaluated for suitability:
Because an investor participates by acquiring shares (securities) in a Limited Liability Company (LLC) that owns the investment property, certain strict rules must be followed by the Sponsor.
The issuance of securities is regulated by the Securities and Exchange Commission (SEC) and state regulators. Registering securities with the SEC is a very expensive and lengthy time-process rendering it unsuitable for smaller issues like those in apartment properties. Ergodio, as many other sponsors do, relies on an exemption to registration provided to a Sponsor under SEC Regulation D. To qualify for the exemption, the offer to invest (offering), must be made to suitable/qualified investors and entirely through the Private Placement Memorandum (PPM). The SEC and state regulators are notified by the Sponsor by filing what is known as “form D” with the SEC and the appropriate state. To gain access to the suitability questionnaire so that you may receive information on current and future offerings click here.
