Frequently Asked Questions
What is an accredited investor vs a sophisticated investor?
The SEC defines an accredited investor as an individual with a net worth of at least $1 million or an annual income of $200,000, or $300,000 for married couples. A sophisticated investor is defined as someone who has sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. New Sight Capital has done offerings for accredited and non-accredited investors.
How are investor distributions amounts determined and when are they paid?
Distributions are a function of profit generation at a property for a given period.
We generally target distributing the offered preferred return each quarter, in addition to any additional upside at the end of Q4 each year. If a property performance is strong, distribution levels can be above projections and if property performance is weaker than expected, distributions may be below targets or may not occur.
How are investors compensated in the event of a refinance?
In the event of a refinance, investors would be compensated as they would for a capital transaction. In other words, at refinance, any proceeds received will go directly back to investors, paying down their initial principal. This decreases investors initial equity exposure, while maintaining their pro rata share of ownership within the deal.
What is the typical tax treatment of apartment syndications for investors?
Cash flows returns are typically recorded as return on invested capital. Taxes for properties are driven by the income and expense of a given property over the year. As a result of the accelerated depreciation realized through cost segregation, there is a noncash expense that typically reflects in losses shown in a K1 tax document in early years. (for all tax related questions, please confirm with your own CPA/tax preparers as individual circumstances vary; we are providing directional guidance only)
What is a K1? When do investors receive them?
As a limited partner in the LLC that purchases the properties, you will receive a K-1, which is a tax form used by partnerships to provide investors with detailed information on their share of a partnership’s taxable income. Partnerships are generally not subject to federal or state income tax, but instead issue a K-1 to each investor to report his or her share of the partnership’s income, gains, losses, deductions and credits. The K-1s are provided to investors on an annual basis so that each investor can include K-1 amounts on his or her tax return. All investors should consult their CPA’s with questions about how K1 returns impact them.
Can an investor pull their money out in the event of an emergency?
Investments in apartment syndications are illiquid investments. This means most apartment syndications do not allow for redemption of investor shares. Please carefully read through the investment legal documents with your advisors to fully understand how this may impact your financial situation.
