In this video, Joel, Principal Broker, answers the question of what is an example of a multi-tenant investment?
Joel discusses ways that the return on the investment can be split along with several example situations.
Can this type of investment truly be a passive investment?
If you’re an accredited investor, and you’ve invested $100K into a retail shopping center typically the returns vary across the board. However, a lot of syndicators will offer a 7-8% preferred return on this type of investment. For example, if you invest $100K, in a span of 12 months that is pre-tax, an accredited investor would likely receive a return of $7-8K. Typically anything above the 7-8%, the syndicate sponsors have a split for the remaining cash flow.
For example, let’s say the return was 9%. The investor receives 7% and the remaining 2% would be split between the syndicate sponsor and the investor. When the property is for sale, the internal rate of return, which is your total overall return, would be much higher. Typically you have, as an investor, tax depreciation benefits, mortgage principal paydown over time, and sometimes cap rate compression which can increase the value of the property. All of these things can compound the return on the investment and can increase growth into a higher number.