mohammedlone, Author at Multifamily Growth Capital

Multifamily Asset Classes

Multifamily is further divided into asset classes. As an investor, it’s important to know which asset class best fits your investment criteria.

Class A: Class A properties are essentially luxury buildings. They offer high-end amenities like pools and state-of-the-art fitness centers. As you might expect, these properties garner the highest rents, but they also require the biggest investment. They provide a safe investment with possibly less cash flow compared to other asset classes. Business owners, professors, white-collar workers usually live here.

Class B: Meanwhile, Class B properties still offer a good amount of value in terms of quality, location, and function, but they may not have as many amenities. Class B are also referred to ‘steady Eddie’ – they tend to be most stable during economic cycles. Both white- and blue-collar workers live here.

Class C: Class C properties are still functional but generally outdated. These properties offer the most affordable rents. These properties also offer high cash flow compared to class A or B but also provide less stability during recessions since the tenants are usually blue collar workers to tend to loose their jobs during these times.

Class D: Class D properties yield the highest cash flow with the highest risk of investment as well. It’s common for their properties to have tenants receiving government subsidies and usually are in high crime areas.

Other investor sectors include officebuildings, retail spaces, industrial properties, self-storage, and mobile homes. Our investment focus is on Class B and C value add multifamily assets.

Find out who is an accredited investor, brush up on history and clear up some common misconceptions about accredited investors.

You’re probably reading this because you want to invest in private placements. In that case, welcome!

Misconception About Accredited Investors

There’s no “process” or a certification exam or a piece of paper that exits that states a person has become an accredited investor. Instead, the companies that issue unregistered securities determine the investor’s status by conducting their due diligence prior to the sale.

History of Accredited Investment

Born out of the Great Depression, the Securities Act of 1933 is where the “accredited investor’ concept originated. The government wanted to protect people by keeping novice investors out of investments they didn’t have the knowledge or experience to objectively evaluate – That’s a good thing since uninformed investors are usually the ones that end up loosing more money than informed investors. This concept of protecting uninformed investors evolved through over the last few decades through things like:

Rule 4(a) (2)

Securities and Exchange Commission v. Ralston Purina co. court case

Rule 146

Regulation D (a.ka. ‘Reg. D’)

Definition of Accredited Investor

Within Reg D, Rule 501 ultimately defined what an accredited investor is. You’re an accredited investor if you meet any one of the following criteria.

Your net worth is at least $1 million excluding the value of your primary residence
You have a minimum income of $200,000 as an individual for the last two years with a reasonable expectation of achieving the same in the current calendar year
Your combined income with your spouse is at least $300,000 for the last two years with a reasonable expectation of achieving the same in the current calendar year

Net Worth Explained

Net worth is simply DOLLAR VALUE OF YOUR ASSETS minus YOUR DEBTS or LIABILITIES.

Example: If your entire assets equal $500,000 and your debt equals $300,000 then your net worth is $200,000.

$500,000 (assets) – $300,000 (liabilities) = $200,00 (net worth)

Individual Vs Spouse Income Explained

Suppose you make $250,000 a year and your spouse stays at home with the kids with no income. You still qualify as an accredited investor under the individual standard so long as you have a reasonable expectation of achieving the same in the current calendar year. Point being, you don’t have to have $300,000 per year income just because you have a spouse.

Reminder accredited investors do not have to meet both income and net worth requirements. When met, any one of the three criteria mentioned in the definition above can make you an accredited investor.

Summary

Accredited investor or not, all investments have potential risks and benefits. It’s your money and your future, so it’s on you to educate yourself before investing. We are here to provide you with transparent investment opportunities, so you can make educated, informed, and sound Multifamily investment decisions.

mohammedlone