If you want to invest now, the entire account creation and investment process is completed online. You will be prompted to provide or verify any required information, as well as make the necessary acknowledgments electronically. If you would like to schedule a call first, you will be prompted to provide your contact details. A member of our investor relations team will call you and answer any question you might have.
Up to this point, our funds have been offered through Regulation D 506C under the Securities Act of 1933 which dictates only accredited investors can participate. Basically this means you must have earned income that exceeds $200,000 for each of the past two years (or $300,000 together with a spouse) and reasonably expect to make that income in the current calendar year. Or, if you do not have that kind of income, you can qualify if you have a net worth over $1 million, either alone or together with a spouse. But, the net worth cannot include the value of your primary residence. We did not set these rules. The government did. We have the option to offer funds through Regulation A which allows investors who do not meet the accredited investor income or net worth tests to participate (known as non-accredited investors). We hope to offer some of these Regulation A funds in the future.” Recent Government rule changes have expanded who can qualify as an accredited investor. See the next FAQ “Am I An Accredited Investor” for more details
An accredited investor, in the context of a natural person, includes anyone who:
- Has earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current calendar year, OR
- Has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence), OR
- Holds good standing a Series 7, 65 or 82 license
On the income test, the person must satisfy the thresholds for the prior two 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. 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:
- Any trust with total assets in excess of $5 million, not formed to specifically purchase the subject securities, and whose purchase is directed by a sophisticated person, OR
- Certain entity with total investments in excess of $5 million, not formed to specifically purchase the subject securities, OR
- Any entity in which all the equity owners are accredited investors.
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.
If you have an existing IRA or 401K from a previous employer, it is likely that you will be able to self-direct all or a portion of it into one of our funds. Check with your current custodian to see if they will allow you to self-direct your retirement account. If the answer is no, please contact a member of our Investor Relations team and we will introduce you to one of the custodians that we work with that will allow you to invest in alternative assets using your retirement funds
As a partner in the LLC that purchases the properties, you will receive a Form K-1. A Form K-1 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 Form K-1 to each investor to report his or her share of the partnership’s income, gains, losses, deductions and credits. The Form K-1s are provided to investors on an annual basis so that each investor can include Form K-1 amounts on his or her tax return.
Our goal is to finalize all Form K-1s annually by March 31st, however, we do rely on outside reporting and may require additional time to furnish the forms in a way that is to the investor’s best advantage. Accordingly, you may be required to obtain one or more extensions for filing federal, state and local tax returns, but that is not our intention.
The term of our funds are generally 5 years, but we may offer funds that are shorter or longer or even have a perpetual life. Additionally, we have sole discretion to extend the life of the fund or even decrease the life of the fund after you have invested. The reason for this is we want to maximize the value of the fund’s investment in MHC’s. We do not want to be forced to sell the fund’s investments when the market is bad, nor do we want to pass up the opportunity to sell the fund’s investments when the market is great. We are long-term investors and the more time we stay invested in a property, the better chance we have of capturing property appreciation from inflation and rising rents.
We offer investor focused funds. Our investors receive a preferred return first, typically 8%, before investor/promote splits are paid from the remaining distributable cash flow. For stabilized, income-producing property, we target investor returns in the mid-teens to-mid-twenties equity returns from operations and high twenties-to-mid-thirties equity returns on an annualized basis over the entire life of the investment (IRR). We may target equity returns that are higher or lower depending on the type of investment and amount of leverage utilized. For example, if we invest in a property that requires significant repositioning through capital and marketing investments, we may forego near-term distributions to achieve a higher gain on the sale of the property in the longer term. We target higher equity returns for these types of investments as they involve some additional risk.
Our targeted returns are just that, targets. Investment involves risk and our actual returns may be higher or lower and could include a complete loss of your investment.
We typically pay distributions quarterly but may change the frequency at our sole discretion during the term of the fund. We may also offer funds that pay distributions monthly. The change in frequency can depend on many factors such as the property’s cash flow level of needed capital expenditures. Sometimes the cash flow of the property may not support a distribution. Additionally, our funds may invest in a property with the plan of not paying any near-term distributions while we undertake a capital and repositioning program.
We offer investor focused funds. Therefore we do not charge the annual fund management fee typical for private fund managers. Otherwise our fee structure is typical for private fund managers, and we believe our fees are lower than many other real estate investment managers. We charge asset management fees based on a properties revenues, transaction fees based on the acquisition and disposition of properties, and a management promote based on the distributable cash flow. Essentially, our asset management and transaction fees pay the monthly bills at NextGen Capital Group LLC, and our management promote rewards us for the performance of the investment. Keep in mind that if the property’s cash flow goes up or down, so does our management promote. This aligns our economic interests.
That’s it. No hidden fees or other miscellaneous fees, such as financing fees or loan guarantee fees.
All investments involve risk, including those investments made in our funds. We do not guarantee that you will earn our targeted returns. There are many factors that can impact the performance of the fund’s investments, many of which are out of our control.”
We do believe that investing in private real estate poses less risk than many other types of investments. Private real estate has historically been less volatile than the stock market, and properties generally appreciate over time as inflation pushes rents up. Additionally, we conduct extensive research and due diligence on every property and have a high degree of conviction that our risk is balanced with our targeted returns.