An accredited investor, in the context of a natural person, includes anyone who:
On the income test, the person must satisfy the thresholds for the three years consistently either alone or with a spouse, and cannot, for example, satisfy one year based on individual income and the next two years based on joint income with a spouse. The only exception is if a person is married within this period, in which case the person may satisfy the threshold on the basis of joint income for the years during which the person was married and on the basis of individual income for the other years.
In addition, entities such as banks, partnerships, corporations, nonprofits and trusts may be accredited investors. Of the entities that would be considered accredited investors and depending on your circumstances, the following may be relevant to you:
In this context, a sophisticated person means the person must have, or the company or private fund offering the securities reasonably believes that this person has, sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.
We currently support personal investment accounts, joint accounts, and certain entity accounts (Trusts, Limited Liability Companies, Limited Partnerships, C Corporations, and S Corporations). For more information on IRA accounts, see below.
Yes, you can invest through your IRA. If you currently have a self-directed IRA, please check with your current custodian to ensure that they will allow you to place your investment with Legacy Link.
Distributions are planned monthly and quarterly depending on the particular investment.
An accredited investor is a person that can invest in securities (i.e. invest in an apartment syndication as a limited partner) by satisfying one of the requirements regarding income or net worth. The current requirements to qualify are an annual income of $200,000 or $300,000 for joint income for the last two years with expectation of earning the same or higher or a net worth exceeding $1 million either individually or jointly with a spouse.
A sophisticated investor is a person who is deemed to have sufficient investing experience and knowledge to weigh the risks and merits of an investment opportunity.
The sales proceeds are the profit collected at the sale of the apartment community.
For example, here is a how the sales proceeds is calculated for a 238-unit apartment community purchased at $12,500,000 and sold after a five year value-add business plan:
| Exit NOI | $1,125,713 |
| Exit Cap Rate | 5.9% |
| Exit Price | $19,079,881 |
| Closing Costs | ($191,836) |
| Remaining Debt | ($10,615,905) |
| Sale Proceeds | $8,272,140 |
The internal rate of return (IRR) is the rate, expressed as a percentage, needed to convert the sum of all future uneven cash flow (cash flow, sales proceeds and principal pay down) to equal the equity investment. IRR is one of the main factors the passive investor should focus on when qualifying a deal.
A very simple example is let’s say that you invest $100. The investment has cash flow of $10 in year 1, and $40 in year 2. At the end of year 2, the investment is liquidated and the $100 is returned.
The total profit is $50 ($10 year 1 + $40 year 2).
Simple division would say that the return is 50% ($50/100). But since time value of money (two years in this example) impacts return, the IRR is actually only 23.43%.
If we had received the $50 cash flow and $100 investment returned all in year 1, then yes, the IRR would be 50%. But because we had to “spread” the cash flow over two years, the return percentage is negatively impacted.
The timing of when cash flow is received has a significant and direct impact on the calculated return. In other words, the sooner you receive the cash, the higher the IRR will be.
The cash-on-cash (CoC) return is the rate of return, expressed as a percentage, based on the cash flow and the equity investment. CoC return is calculated by dividing the cash flow by the initial investment.
For example, a 238-unit apartment community with a cash flow of $320,285 and an initial investment of $3,645,170 results in a CoC return of 8.8%
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