So, you’re ready to invest in a real estate syndication. What’s the process?
In this week’s video blog, I cover the syndication investment process.
I explain what it means to make a “soft commit” versus a formal offer and share the general timeline from live deal to close.
You’ll understand who can invest in a multifamily syndication and learn the step-by-step process for becoming an LP in a Nighthawk Equity deal!
Watch the video below (or keep reading).
Before I get into the process, I’m going to assume that you’ve decided you want to invest in a multifamily syndication opportunity with a specific deal sponsor.
(If you’re still on the fence, check out my special report called “What’s the Better Investment: The Stock Market or Real Estate” – you might find this helpful).
I’m also going to assume that you have a “substantive relationship” with whatever sponsor you intend to invest with.
While the SEC doesn’t specifically define what “substantive relationship” means, it provided clues in this letter. In short, the better you know the deal sponsor, the better they know you, and the more interaction you’ve had, the stronger you can make a case you have a “substantive relationship” and the more likely you’ll be invited to invest in the opportunity.
(If you’d like to establish a substantive relationship with us, please join our Nighthawk Investor Club. You’ll be asked to fill out a short questionnaire and schedule a phone call with our Nighthawk team so that we can get to know each other a bit more. We can then present you with an upcoming opportunity.)
Assuming you’re ready to go and your sponsor has a live investment opportunity, here is generally what happens next.
Step # 1: Learn About the Opportunity
The best way to learn about multifamily investment opportunities is to get on the syndicator’s email list. If you’ve joined the Nighthawk investor club, you’re good to go.
We send out regular emails with educational content. And when a multifamily deal comes through, we forward an Executive Summary and set up a live webinar to present the opportunity–and give you the chance to ask questions.
Step # 2: Express Interest via a “Soft Commit”
If you’re interested in the opportunity, the next step is to fill out a short form telling us how much you’d like to invest in the multifamily syndication. (The minimum is usually $50K.)
The “soft commit” doesn’t put you on the hook yet, but it does give us an idea of who we can expect to invest in the syndication deal. And the “soft commit” window typically stays open for 3 or 4 days after the live webinar. So, if you want in, act fast!
Step # 3: Register on the Investor Portal
If you haven’t already registered on the Nighthawk Investor Portal, you will then fill out an online form to get a username and password. The Portal allows us to communicate with you securely through the rest of the process.
Step # 4: Satisfy the Minimum Requirements
Next, we double check that you are either an accredited or sophisticated investor. (You will find a detailed explanation of the difference on my video blog Who Can Invest in Multifamily Syndications?)
If you’re not accredited, and we don’t know you very well yet, we may ask you to hold off until the next syndication. Remember, SEC guidelines require a “substantive relationship” between the passive investor and the syndicator.
Step # 5: Make a Formal Investment “Offer”
Those who raised their hand with a “soft commit” now have the chance to let us know they are serious. At this point, you promise a specific amount of money to the multifamily syndication deal.
We usually give prospective investors 3 to 5 days (after the “soft commit” window has closed) to make this formal offer. But remember, it’s all on a first-come, first-served basis.
Step # 6: Review and Sign the Legal Documents
At this point, you will receive the operating agreement, a document outlining the parameters of the partnership. It breaks down the role of the General Partners (GPs) and Limited Partners (LPs), explaining who is responsible for what decisions. The operating agreement also covers profits and splits.
Once you looked through the legal documents, you sign them online via DocuSign.
Step # 7: Wire the Money into the Escrow Account
Once you’ve signed on the dotted line, you receive the wiring information and send your funds to the escrow attorney. Congratulations, you are an LP in a multifamily syndication deal!
Don’t forget, a multifamily syndication is a limited time offer. We can’t hold your spot if you don’t wire your money. (And if you send money after the deal is full, we’ll wire it back to you.)
Step # 8: Wait Until Closing
Now, you sit back and relax. And wait for the syndication deal to close. This takes between 7 and 21 days, depending on the deal.
We typically do a live webinar at closing and monthly updates moving forward. (Look for another video next week for more information about what to expect after the close!)
To review, the simple process of investing in a multifamily syndication involves the following:
- Learn about the opportunity
- Express interest with a “soft commit”
- Register on the investor portal
- Satisfy the minimum requirements
- Make a formal offer
- Sign the legal documents
- Wire the money to escrow
- Wait until closing
And the best way to get going with step #1 is to join the Nighthawk Equity Investor Club!