Frequently Asked Questions
A syndication, at its core, is a partnership. It involves multiple parties pooling their resources together to acquire an investment property. General Partners (GPs) are responsible for the execution of the business plan while Limited Partners (LPs) assume a passive role. By investing their capital, Limited Partners collect the greater part of the profits and can often times find more success by partnering with experienced operators rather than using their own time and energy to find, manage, and dispose of the investment alone.
BAM Capital seeks out assets that have a targeted return of 15-20% IRR or 2.0-2.5X Equity Multiple in 5-7 years.
The obvious benefit of a Fund is diversification. The investor in a Fund is instantly diversified across multiple assets. A Fund portfolio can contain 10 to 20 separate investments spread across a broad geographic area. This can lower risk compared to owning a single asset. The effects of a poorly performing deal are muted by the other, better performing properties.
At the end, BAM Capital plans to sell the portfolio to a larger firm as a package deal. Just like selling any packages of business, whether it's apartments or any other operating company, you typically receive a premium for the aggregation of those assets.
The fund is not a REIT (Real Estate Investment Trust). When you invest with BAM Capital in the fund, you are a partner in the actual, physical property. You get the advantages of the ownership of that building, the tax advantages, the cash flow, and the upside.
BAM Capital looks at 200 assets to find one that has the ability to distribute cash monthly and gives a high degree of confidence that BAM Capital can execute its value add strategy. So, when it comes time to sell, the targeted returns can be delivered
In apartments, it's all about the ability to add value. Why? Because every dollar that we can bring to the bottom line of an asset creates anywhere from a 17 - 20 multiple when it’s time to sell. First, BAM Capital targets markets where people are moving. There's job creation, demand, good schools nearby for children living at the properties.
Second, BAM Capital looks for assets with the ability to reduce costs through managerial efficiencies.
Third, BAM Capital seeks out properties with the ability to add improvements. Perhaps that means the amenity center or a gym that hasn't been touched in a couple of decades. It may be a pool that needs new furniture/cabanas. Or, it could be cosmetic upgrades for all units.
Value add is simple. It’s not always easy to execute, but it comes down to great markets, reducing costs, and raising rents.
The preferred return is a preferential rate of return that the LP receives before the GP participates in any cash flow or profit on a given asset.
Historically, the Midwest hasn't boomed or busted. In fact, Indianapolis for example, rent growth has been 2.9% for almost 40 years. It's the tortoise versus the hare theory of investing.
During COVID-19, the Midwest has been a standout performer in the areas we target: occupancy, rent growth, and demand for workforce housing. COVID-19 has actually allowed for a unique investment advantage. BAM Capital has been able to find more deals and product demand, allowing BAM Capital to maintain a high occupancy and continue to raise rents. BAM Capital has seen demand increase in two key areas: people leaving downtown, urban core areas and moving out of luxury apartments into workforce housing.
BAM Capital loves the suburbs. BAM Capital targets workforce housing, B+, A-, secondary tertiary markets, while avoiding the urban core.
Your liability is limited to the capital that you invest.
The BAM Companies was born in property management, which is a key competitive advantage. Today, The BAM Companies has over 100 employees and is vertically integrated from the people on the ground, property management, and the team at corporate. This culture gives BAM a much higher degree of confidence in the execution of our strategy.
The BAM Companies invests in its people. The BAM Companies’s leaders have the autonomy to make decisions in their departments and help it to execute the business plan. When asked about the culture of The BAM Companies, the first word that readily comes to mind is family. Here we call it the BAM Fam.
As usual, investing in real estate provides tax advantages. Investing in multifamily amplifies it, both in accelerated depreciation and the ability to shelter cash flow.
This is active management. And, it takes a team to execute the business plan. BAM Capital strives to be in the middle of the bell curve so that it isn’t fee-heavy and still has the resources to put an A-team on the field for the best chance to win.
BAM Capital now offers investors both Series A and B share options when it comes to investing in its Fund. "Series A" shares gives the investor an option at higher yield from the start, while the "Series B" shares offer higher capital appreciation advantages on the back end.
No matter which asset you invest into the fund, you (as the LP) are an owner in all the assets inside the Fund. Whether it's $50,000 or $5M, your capital is spread across a portfolio of apartments versus a single asset.
No. The properties are not cross-collateralized. Each asset is its own special purpose entity and has its own debt.
Investors at BAM Capital have access to industry leading technology. In our investor portal, you have 24/7, 365 access to the reports that come out quarterly, the accounting for distributions and capital events, as well as a repository of tax documents. In addition to a portal, BAM Capital has a great in-house Investor Relations team ready to hop on the phone and respond to an email or text.
As the deal sponsor or GP, Ivan Barratt and his partners put actual skin in the game in the form of capital and personal guarantees of their balance sheets against any debt.
Entering the fund early means the preferred return clock starts ticking for you earlier. If you join later, you're missing out on that window of preferred return. On the exit of the property, your percentage return might look higher, but your multiple (your dollars in versus dollars out) is going to be a little bit less, due to that loss of that preferred return.
Investors can allocate and increase their position size in any round.
Nearly every retirement account product including IRA 401k and Roth IRA can actually be self-directed. If you're looking for help in this area, BAM Capital can't offer advice, but can certainly help point you in the right direction to unlocking your retirement funds and using them to invest in apartments.
The bad news is that you can't 1031 into the fund. However, there's still some good news. The losses that you receive as a member of the fund can oftentimes offset the gains you may have from the sale of that asset. So again, while you can't technically 1031 oftentimes you can achieve the same effect and not pay taxes.
At this time, BAM Capital will drawdown, also known as calling capital, a to-be-determined amount of subscribed commitment in order to close on a specific asset. As more assets are identified, you will receive future drawdown notices. Your uncalled capital will get priority in the next drawdown over subscribers who joined the Fund at a later date.
The capital that you invest into BAM Capital's offerings should come from the long-term, illiquid portion of your portfolio. While the Private Placement Memorandum (PPM) has a provision for returning capital early for specific situations, you should expect some level of discounted returns if you exit early.
In a real estate transaction, BAM Capital's biggest partner is the lender/bank. BAM Capital is lucky to have a preferred relationship with a publicly traded, national bank. This gets the very best lending terms available in the multifamily market.
If an investor has both Series A and Series B units, they will get two K-1 packages. But, if an investor has only Series A OR Series B, then they will receive only one K-1 package.
For Fund II, within each K-1 package will be one Federal K-1, one Indiana K-1, and one Iowa K-1.
Whether an investor will file taxes in Indiana or Iowa will be determined by their personal tax situation and CPA advice.
When an investor in the Fund passes away, the asset often receives a stepped-up basis, which is its market value at the time the benefactor dies. Due to the federal estate tax exemption, the investment may be passed tax-free along with the decedent’s other assets.