Frequently Asked Questions

A real estate syndication is like “crowdfunding” in that a group of investors pool their capital together to make an investment in a real estate asset, such as purchasing a building or several buildings. The syndication is typically managed by an experienced general partner, manager or deal “sponsor.”

Investing as a group increases the purchasing power, allowing individual investors to participate in large real estate transactions they wouldn’t be able to do on their own.

According to the S.E.C, an accredited investor must meet one of the following criteria:

Net worth over $1 million, excluding the primary residence (individually or with spouse or partner)

Income over $200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years, and reasonably expects the same for the current year

Investment professionals in good standing holding the general securities representative license (Series 7), the investment adviser representative license (Series 65), or the private securities offerings representative license (Series 82)

Directors, executive officers, or general partners (GP) of the company selling the securities (or of a GP of that company)
For investments in a private fund, “knowledgeable employees” of the fund
Entities owning investments in excess of $5 million

Grow Developments invest in a variety of asset types including: New and existing single family residences and multi-family apartment communities, storage, retail, and notes.
Minimum investments vary depending on the specific investment, minimums typically range from $50,000 to $100,000.
Grow Development’s investments are intended to be long-term investments, held for approximately 3-7 years depending on the asset. During that time, the managers of the investments seek to improve the properties for maximum gain. Be sure to read the company’s PPM and Operating Agreement to understand the terms. Each investment is different and projections are not guaranteed. Investors should be in a position to have their funds invested for longer periods of time.

A private placement memorandum (PPM) is a legal document provided to prospective investors when a company is selling stock, LLC member units, or another security in a business. It is sometimes referred to as an offering memorandum or offering document. A PPM is not required for accredited investors, but highly recommended so that investors understand the details of the deal. The PPM generally includes:

  • Executive Summary
  • Company Purpose and Overview
  • Use of Proceeds
  • Financial Information
  • Terms of the Offering
  • Risk Factors

An operating agreement is a legally binding document that limited liability companies (LLCs) use to outline how the company is managed, who has ownership, and how it is structured. If a company is a multi-member LLC , the operating agreement becomes a binding contract between the different members. The operating agreement should include: 
Percentage of members’ ownership.
Voting rights and responsibilities.
Powers and duties of members and managers.
Distribution of profits and losses.

A subscription agreement is an investor’s application to join a limited liability company (LLC). It is also an agreement between the company and the new member (subscriber). A member “unit” in an LLC is like a share in a corporation.

Every PPM and Operating Agreement should provide a tax section. Always consult with your CPA before subscribing to any investment to ensure it is a fit for your financial situation. Each investment will have different tax aspects like allocations of ordinary income, capital gain, losses, possibilities of phantom income, or UBIT which will affect your investment.

A blind pool fund is one in which the deal sponsor has not identified the specific property it plans to acquire. The PPM and Operating Agreement should specify the parameters of the prospective purchase, target return and length of time of the investment. A blind pool fund allows the sponsor to raise funds before identifying the specific property in order to be certain of the ability to close before making an offer.

A preferred return is a predetermined percentage that must be paid to the investor before the sponsor receives any of the distributable cash. Generally, after the preferred return is paid to investors, any remaining profit above that percentage is split between the investor and sponsor at a predetermined ratio.  

A preferred return comes from the profits of the company and therefore is not a guaranteed return.  It is also not interest, which is an amount owed on a debt instrument.  How the preferred return is calculated depends on the agreement.  It can be a simple annual amount on capital invested or a compounding rate on all outstanding amounts.
Read the PPM carefully to understand the terms of the expected return and the waterfall (which investors get paid first). Loans generally take preference to preferred returns.

For example, a $100,000 investment into a syndication with an annual non compounding 6% preferred return would be a $6000 annual return until the project is finalized. If the project manager took 5 years to complete, the preferred return would pay out $30,000 plus the $100,000 investment. Once the total preferred return is paid, the remaining profit is split between the sponsor and investors, according to the offering documents.

Investing in a fund offers many of the same benefits of owning your own individual portfolio (leverage, tax benefits, appreciation), depending on the terms of the operating agreement.

The main difference is a fund offers more diversification and professional oversight. In a single family rental fund, for instance, the investor funds are spread amongst multiple properties. The investor is generally not responsible for any of the management of the property. It is all handled by the fund manager, including obtaining financing, insurance, property management, etc. Investing in a fund is far more passive than owning an individual portfolio.

Scroll to Top
Skip to content