Case Study: Multifamily Syndication
The following case study shows how an Advanta IRA client invested part of her IRA in a multifamily syndication.
Linda has over $100K in a self-directed Roth IRA that she would like to invest in real estate. Like many individuals, she does not have time to find and manage a piece of real estate. She also does not want to use all of the funds in her IRA to invest in one property. For Linda, a passive investment into a multifamily syndication is ideal.
Linda meets a local multifamily syndicator, Susan, who is raising capital for her next venture. Susan is offering investors a preferred monthly return of 8 percent, plus a portion of profits (the investors get a split of the profits and Susan take a percentage as well) when the property is sold in five years. After reviewing the prospectus for the investment and talking with Susan, Linda agrees to invest $50K into the LLC. Linda’s account manager at Advanta IRA helps ensure the subscription documents for the investment are completed in the name of Linda’s IRA and ensures Linda has reviewed and approved all of the documents. Advanta IRA then wires the $50K to the bank account for the syndication.
Going forward, Linda receives quarterly distributions of $1,000 to her IRA. Over the five years of the investment term, Linda’s IRA receives $20,000 in quarterly distributions. When Susan sells the property, all of the investors get back their initial investment, plus an additional percentage of the profits. For Linda’s $50K investment, her IRA also receives an additional $20K. So for her initial investment of $50K, Linda’s IRA receives $40K of gains over 5 years, an annualized return of 16 percent.