FAQ
How do I get started investing with Cashflow Investor USA LLC?
The entire process of providing your personal information and handling other acknowledgements can be done online or in person, whichever you prefer. This is a very simple and pain free process. We are most interested in the on-going relationship with you but obviously the government needs certain paperwork filled out and you will want to know your investment is secure.
Can I invest in your deals if we do not know each other?
Yes. If you are an accredited investor, we would consider the idea of working with you. If you do not know us and you are an non-accredited investor, the SEC would prevent us from working together.
Am I an accredited Investor?
An accredited investor is an Individual (i.e., natural persons) who may qualify based on wealth and income thresholds, as well as other measures of financial sophistication.
Financial Criteria:
- Net worth over $1 million, excluding primary residence (individually or with spouse or partner)
- Income over $200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years, and reasonably expects the same for the current year
Professional Criteria:
- Investment professionals in good standing holding the general securities representative license (Series 7), the investment adviser representative license (Series 65), or the private securities offerings representative license (Series 82)
- Directors, executive officers, or general partners (GP) of the company selling the securities (or of a GP of that company)
- Any “family client” of a “family office” that qualifies as an accredited investor
- For investments in a private fund, “knowledgeable employees” of the fund
Is there a specific type of account that I need to use to invest?
When investing in one of our multi family properties with us you can do that by using funds individually, jointly, through an LLC, corporation, partnership, retirement plan/401(k), or a trust. We have professional teams in place to assist with the details
Can I invest in one of your deals using money from my IRA?
Quite often your existing custodian will allow you to “self-directed” all or a portion of your IRA or 401(k) from a previous employer into one of our deals. We encourage you to reach out to your current custodian and find out if they will allow you to self direct all or a portion of your IRA or 401(k). If they will not allow you to do so, please contact us and we would be more than happy to introduce you to one of our custodians who will allow you to use those funds to invest in alternative assets such as one of our properties.
If I invest, how long is the term of that investment or that particular multi family property?
Typically when we run our pro formas, we run them for 10 years. However, with our funds, we have sole discretion to extend the life of that investment or decrease the life depending on what is going on in the marketplace. We want to make sure we maximize the value of the multi family property and sell it at the right time. Our goal is to provide the biggest returns for those who invest with us so market timing is crucial in the selling process.
Will you have any of your own money in the deal?
Up to this point, it has almost always been our own money. We only began allowing friends and family to invest with us a few years ago. We wanted to make sure we had the proper track record and team in place before using somebody else’s money. This would completely depend on timing. As you can imagine, we are constantly analyzing properties and doing our best to place our money. So it really is on a case by case basis. Sometimes we have a lot of money to invest due to a refinance or a sale and other times we do not. We want to make sure we capitalize any good deal we find even if that means passing on most of the returns to you.
What happens if you as the owner/operator passes away?
Business as usual. This is not a problem for anyone other then that person’s family. We have worked very hard over the last 15 years (50 years combined experience) developing the proper systems and the property team to ensure the business runs smoothly with or without its ownership even though the ownership is very active in the business because they love doing what they do. We have a great property management team set up. We have a great construction team set up. We have great bankers, attorneys, insurance agents, investment advisers, etc. This team will ensure that the business continues as usual in an event like this so you can rest assure your investment is safe, protected and still getting the promised distributions.
Do we receive distributions monthly, quarterly, annually?
Our goal is to optimize deals that provide a monthly distribution, but depending on the length of time and capital necessary to reposition an investment, it may be quarterly or annually until that goal is met. Each deal will be evaluated individually with this principle in mind.
Other Useful Defintions
CAP (Capitalization Rate): Percent of cash return in the first year if the property were purchased for cash. The ratio of NOI to purchase price.
NOI (Net Operating Income): Income after vacancy and expenses and before debt service.
Rent Ratio: (monthly rent / purchase price or market value). Should be 1.0% or more for acceptable cash on cash return with 75-80% loan. Mostly used for rental homes.
Gross Rent Multiplier: (purchase price or asking price / gross rents received from an investment). Mostly used for multifamily (apartment) properties.
Depreciation: Commercial is 39 years linear depreciation, residential (to include multifamily) is 27.5 years. This assumes all physical assets will predictably depreciate to a value of zero after this time, and the losses from this offset income on a tax basis. Depreciation is one of the main benefits of investment real estate ownership.
Cash on Cash Return: Percent of cash out of an investment in a year relative to the amount of cash invested. It does not consider time value of money. It is a very commonly used metric however, seldom used professionally.
Internal Rate of Return (IRR): The annual rate of return that one receives on an investment for all of the capital and cash flows based on the net present value for each when deployed. It is the discount rate such that the sum of today’s investment and future cash flows have a net value of zero. It expresses in the form of an interest rate the value of a given investment in today’s terms. It is the most accurate and one of the most widely used ways of calculating and comparing multiple investments by professionals.
Self Directed IRA: an individual retirement account that allows you to save for retirement with assets that are off-limits for conventional IRAs, including precious metals, real estate assets and cryptocurrencies.
1031 Exchange: pursuant to Section 1031 of the Internal Revenue Code and Section 1.1031 of the Treasury Regulations in order to defer Federal, and in most cases state, capital gain and depreciation recapture taxes with the sale or disposition of real estate and the acquisition of like-kind real estate or personal property
Inspection Period: Sometimes called “due diligence” this is the period of time agreed upon in an executed sales contract the buyer has to inspect the property for defects that may affect the value. For a buyer, the longer the inspection period, the better. For a seller, the shorter the inspection period, the better
Environmental Inspections: A licensed professional that examines dwellings, land/soil and water to evaluate a property’s compliance with the EPA.
Eminant Domain: the right of a government or its agent to expropriate private property for public use, with payment of compensation.
Survey: is the scientific process of measuring the dimensions of a particular area of the earth’s surface, including its horizontal distances, directions, angles, and elevations. For our purposes it means a boundary measurements that denote ownership according to their mapping of the area.
Request to Remedy: the request the buyer makes to the seller for unsatisfactory conditions found in the inspection. Sometimes this could be a reduction in price of the sales contract but more often it is a request for improvements and reinspection of the repaired defects.
Earnest Money: sometimes called consideration, it is the money paid to confirm a contract. Held in escrow by a 3rd party it shows good faith the seller intends to perform on the sale.
Financing Contingency: is a clause in a sales contract that agrees to allow the buyer to secure financing in a specified period of time. The risk is the buyer may not obtain a loan and the sale does not proceed. However all cash sales limit the pool of buyers
Mortgage payoff: the balance of the loan to pay it in full at that particular time. Some mortgage loans have and early payment penalty when paid off early
Comparable sales: Recent sales of similar properties in nearby areas and used to help determine the market value of a property.
Title company: a third party that is hired to ensure that a home’s title is clean with no encumbrances. They provide research and insure the title to the home a buyer is purchasing, and usually manage the closing. We at List Premier have two Title Companies that we recommend depending on whether it is residential or commercial.
Title Insurance: Title insurance protects both lenders and homebuyers against loss or damage occurring from liens, encumbrances, or defects in a property’s title or actual ownership. Common claims filed against a title are back taxes, liens, and conflicting wills. Unlike traditional insurance, which protects against future events, title insurance protects against claims for past occurrences
Property Insurance: sometimes called “homeowners insurance” and usually with a sizable deductible, it provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft.
Down payment: the sum of money initially paid for for a larger transaction that was paid for with financing.
Loan commitment: a declaration to a borrower by a lending institution that it will loan a specific amount at a certain interest rate on a particular piece of real estate, usually for a specified period of time.
Attorney Approval Clause: enables buyers to sign a sales and purchase agreement with the transaction while consulting with an attorney. The clause dictates that fulfillment of the deal will not take place until it is approved by the attorney.
Buyers Market: a period of time in a particular market where there is a surplus of houses or properties and buyers can have a competitive advantage in price negotiations.
Sellers Market: a period of time in a particular market where there is a surplus of prospective buyers with a shortage of houses or property on the market and sellers can have a competitive advantage in price negotiations.
Market Appreciation: increase in the price or value of an asset which occurs when the market value of an asset is higher than the price paid for an asset.
Forced Appreciation: occurs when a real estate investor proactively increases the value of an investment property. An investor can force appreciation by increasing rental income, increasing property value, or a combination of both.