Make smarter, informed investment decisions – our resources are all about how multifamily syndications work and the many benefits to investors.


1031 Exchange

Under Section 1031 of the Internal Revenue Code, like-kind property used in a trade or business or held as an investment can be exchanged tax-deferred. Under a fully qualified Section 1031 exchange, real estate is traded for other like-kind property. All capital gains taxes are deferred until the newly acquired real estate is disposed of in a taxable transaction. The underlying philosophy behind the deferral of capital gains taxes is that taxation should not occur as long as the original investment remains intact in the form of (like-kind) real estate.

Accredited Investor

An accredited investor is defined by the SEC as a person who qualifies to invest in real estate syndications 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 with a spouse) for the last two years with the expectation of earning the same or higher in the future, or a net worth exceeding $1 million, either individually or jointly with a spouse (not including equity in a primary residence)

Acquisition Fee

Form of compensation earned by the general partner in a syndication in exchange for sourcing, vetting, securing financing and closing on a new investment asset

Active Investor

An active investor does all the work of sourcing, structuring, managing and exiting investments


An increase in the value of an asset over time. The two main types of appreciation that are relevant to syndications are “natural appreciation” and “forced appreciation”. Natural appreciation occurs when the value increases due to market forces.  Forced appreciation occurs when the net operating income is increased by either increasing the revenue or decreasing the expenses of a property. Forced appreciation typically occurs by adding value to the asset through renovations and/or operational improvements

Asset Management

The management of one or more investment assets by an institution or an individual on the behalf of others. This includes working to appreciate assets over time while minimizing risk

Asset Management Fee

A recurring fee paid from property revenues to the general partner for asset management

Assumption Fee

This is the fee that a buyer pays the lender to take over the mortgage. It is often included in the closing costs with ~1% being common.

Capital Expenditure (CapEx)

Capital expenditures are funds used by the management company or active partners (GP) to acquire, improve or maintain a property. Often referred to as ‘CapEx’. Specifically applied funds improve the useful life of a property.  These expenditures are depreciated over the life of the asset

Capital Gains

A rise in the value of the property greater than the purchase price that is not realized until the asset is sold. A capital gain may be short-term (held one year or less) or long-term (held more than one year) and must be claimed on income tax returns. Short-term capital gains are taxed at ordinary income tax rates, while long-term capital gains are taxed separately

Capitalization Rate (CAP)

This is the rate of return on a real estate investment property based on the income that the property is expected to generate. The capitalization rate is calculated by dividing net operating income by the current market value of a property in order to determine a forecasted rate of return.  When acquiring a property, a higher cap rate is preferred and when selling a property, a lower cap rate is preferred

Carried Interest

Also referred to as sponsorship equity. A share of any profits that the general partners receive as compensation, regardless of whether they contribute any initial funds. Because carried interest acts as a type of performance fee, it acts to motivate the project’s overall performance. When used in a preferred return structure, carried interest is only paid from residual funds available above the threshold of the preferred return paid to passive investors

Cash Flow

Cash profit left after deducting operating expenses and any debt service payments.

Cash-on-Cash Returns (COC)

This is the ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage calculated by dividing cash flow being produced by a property by the upfront cash investment.

Closing Costs

Any costs required to close on a real estate or refinancing transaction. Can include origination, application, processing, underwriting, appraisal, and recording fees, as well as impounds for taxes and insurance

Cost Segregation

The process of identifying costs and assets, and their classification for tax purposes. Applied to reducing current tax liability and deferring taxes

Debt Service Coverage Ratio (DSCR)

This is a measure of the cash flow available to pay current debt obligations.  The Debt Service Coverage Ratio is used by commercial mortgage lenders to underwrite and qualify a property for financing. DSCR measures the cash flow that will be available to cover debt service after other operating expenses. A DSCR ratio of 1 means the cash flow should cover the debt payments. Lenders normally require a minimum DSCR of 1.2. A better ratio may qualify the borrow for better terms


Allows the cancellation of a mortgage upon repayment of the loan through substitution of collateral.


These are the characteristics of human population as defined by population size and density of regions, population growth rates, migration, vital statistics and their effect on socio-economic conditions


Tax depreciation can be listed as an expense on a tax return for a given reporting period under the applicable tax laws. It is used to reduce the amount of taxable income reported by a business. Depreciation is the gradual charging to expense of a fixed asset’s cost over its useful life


The funds paid out to investors. These profits can be paid monthly, quarterly, or on a successful exit event

Due Diligence

The process of examining and evaluating a property, the financial records, appraisals, surveys, inspections, and title work

Economic Occupancy Rate

The rate of paying tenants based on the total possible revenue and the actual revenue collected. The economic occupancy is calculated by dividing the effective gross income by the gross potential income

Effective Gross Income

EGI is the effective income calculated by subtracting any losses due to vacancy, lease concessions, employees, model units, and bad debt

Equity Investment

The amount cash put into an investment. In apartment building syndications this capital can be used toward down payment, closing costs, borrowing costs, funding an operating account, and compensation earned by the general partners.

Equity Multiple

Represents the total cash distributions received from an investment in proportion to the total equity invested. It is calculated by dividing total cash distributions (cash flow and cash on exit) by the equity investment made.  Values less than 1 imply that an investor loses money while a value greater than 1 implies that the investment makes money

Exit Strategy

How the syndication plans to cash investors out of their stake in the future. This may be through selling the property, purchasing their shares, or refinancing them out

Forced Appreciation

The increase in value of an asset over time. It can happen naturally or it can be forced. Natural appreciation or market appreciation occurs when the demands for rental properties outweighs the supply available or because of changes in inflation and interest rates

General partner (GP)

An owner of a partnership who has unlimited liability. A general partner is usually a managing partner and is active in the day-to-day operations of the business. In syndications, the general partner is also referred to as the sponsor or syndicator and is responsible for managing the entire investment project

Gross Potential Income

Potential income that a multifamily property could produce with no vacancies and all leases signed at market rates. Plus all other revenue.

Gross Potential Rent

A hypothetical amount of revenue if a apartment community was leased at 100% occupancy year-round at market rental rates. Aka ‘GPR’

Holding Period

The holding period is the amount of time the sponsor plans to hold the property.

Internal Rate of Return (IRR)

This is the discount rate at which the net present value (NPV) of a set of cash flows equals zero. It is the rate at which a real estate investment grows or shrinks. IRR is calculated based on all future anticipated cash flow, plus principal pay down on debt and proceeds from the exit of a property

Joint Venture (JV)

A Joint Venture is a partnership formed by two or more investment partners. They may be individuals or corporate investors

K-1 Tax Form

This allows the company to utilize a pass-through taxation which shifts the income tax liability from the entity earning the income to those who have a beneficial interest in it

Letter of Intent (LOI)

An LOI is a non-binding agreement provided by a buyer proposing their purchase terms. Typically used as a speedier method to make an offer, without being legally tied into the deal

Loss to lease

The revenue lost based on the difference between the market rent and the actual rent

Limited Partner

A Limited Partner’s liability is limited to the extent of their share of ownership. It is common in a real estate syndication that the limited partner is a passive investor who simply puts in capital.

Loan-to-Cost Ratio

LTC ratio shows the value of the anticipated loan amount against total costs involved (acquisition and renovations).

Market Rent

The market value of a rental unit for lease according to comparable rental rates for similar units in close proximity to the subject. Used to calculate value, cash flow and potential mortgage loan amounts.

Metropolitan Statistical Area (MSA)

Is a geographical region with a relatively high population density at its core and close economic ties throughout an area. An example is the Miami Metropolitan Area. This MSA actually encompasses Miami, Fort Lauderdale and West Palm Beach, 3 counties, dozens of cities and even more neighborhoods

Net Operating Income (NOI)

The annual income generated by an income-producing property.  NOI of a property is calculated by totaling all incoming revenue from a property and subtracting operating expenses

Non-Recourse Loan

Non-recourse loans are loans on which the borrower is not obligated to sign a personal guarantee. The lender’s recourse to pursue the debt in a default is effectively limited to the pledged real estate collateral the loan was made on. There may be carve-out exceptions to fraud and negligence

Operating agreement

A document that outlines the responsibilities and ownership percentages for the general and limited partners in the limited liability corporation (LLC) formed for a syndication

Operating Expenses

The costs to run and maintain an investment property. In apartment syndications, operating expense usually includes; payroll, maintenance, repairs, contractors, management fees, property taxes, insurance, marketing, admin, utilities, and capital reserves

Operating Expense Ratio (OER) or Expense Ratio

The cost of operating a property in proportion to the income that the property generates. A general rule of thumb is 50% although this varies from property to property

Passive Income

Earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved

Passive Investment

Placing your capital into a real estate syndication which is managed for you  This approach allows investors to experience diversification across multiple geographies, tenant types, product types, management styles, operators, and many more aspects of the real estate sector.

Permanent Agency Loan

A long-term mortgage loan guaranteed by a government sponsored agency like Fannie Mae or Freddie Mac. Loans can be amortized over as much as 30 years

Physical Occupancy Rate

The proportion of occupied units. The physical occupancy rate is calculated by dividing the total number of occupied units by the total number of units at the property

Preferred Return

Investors with preferred shares or preferred returns receive distributions and returns up to an agreed upon percentage before the sponsor. This holds them accountable and ensures interests are aligned.  This helps minimize the risk to investors and thus makes the investment more attractive

Prepayment Penalty

A penalty for paying off a loan balance early, securing a desired rate of return for the lender and their investors. These clauses can be especially complicated calculations in commercial mortgage lending.

Price Per Unit

The price per unit of an apartment building. For example; a 100 unit building for sale at $100k would have an effective price per unit of just $1k. Used as a method of comparing competing properties, assessing value and weighing returns between investments

Private Placement Memorandum

Also known as the offering memorandum. A legal document that lays out the risks, objectives and terms of an investment, in addition to documenting the syndicator’s business operations and condition


These are the projected financial results of a property over a number of future years usually 1-7


This refers to the “bonus” of sorts used to motivate the sponsor to exceed return expectations and reward them for their work in finding, managing and adding value to the property.

Property Management Fee

Recurring cost of  having a professional property management company handle the day-to-day operations of a property

Ratio Utility Billing Systems (RUBS)

A method of calculating a resident’s utility bill based on occupancy, apartment square footage, or a combination of factors.


The the right of a lender/creditor to pursue the debt owed to them. A full recourse loan can expose liability to  personal assets beyond the collateral in the case of a default on the loan.


Replacement of a debt obligation on a property with a new loan.

Rent Premium

Rent premiums can be earned by completing upgrades and renovations

Rent Roll

The spreadsheet or document detailing each of the unit in an apartment community. A good rent roll will include unit numbers, tenant names, unit types, square feet, market rents versus actual rent, deposit amounts held, move-in date and lease-start dates, plus lease-end dates and current status

Return On Investment (ROI)

ROI directly measures the amount of return on a particular investment relative to its cost. To calculate ROI, the investment’s return is divided by the cost of the investment. The result is expressed as a percentage or ratio. Also called total return

Sales Comparison Approach

The common method of estimating a property’s value based on recent similar sales in the area

Sensitivity Analysis

Also referred to as what-if or simulation analysis. This is a way to predict a certain outcome based on changing a number of variables. This is often used to showcase returns under a number of varied economic conditions, often times a downturn.

Sophisticated Investor

A individual deemed to have enough experience and knowledge to assess the risks and merits of an investment opportunity for themselves


See General Partner. Also referred to as general partner or syndicator

Subscription Agreement

Document used as a promise by the LLC that owns the property to sell a specific number of shares to a limited partner at a specified price, and a promise by the limited partner to pay that price


Syndications of apartment buildings are basically real estate partnerships. They bring together passive investors who have the capital with the active investor (General Partner, Syndicator, Operator, or Sponsor) which organizes and puts deals together and manages the process.  This investment structure allows several investors to pool their capital together and invest in projects much larger than they could individually


A T12 is a profit and loss statement showing the actual reported numbers for the last 12 months


The process of evaluating an apartment building community to determine the status, value, risks and potential returns

Vacancy Loss

How much potential revenue and cash flow is lost on vacant units.

Vacancy Rate

The percentage of vacant units in a multifamily community


Used to describe a property that offers the opportunity to increase cash flows through renovations, rebranding and/or increase operational efficiencies


A method for splitting profits amongst partners in a multifamily deal


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