“Landlords grow rich in their sleep.”

– John Stuart Mill, English philosopher and economist

Frequently Asked Questions

What is passive investing?

A syndication is simply a pooling of resources toward a common purpose—in this case, to buy a property.

Think of one of our syndications as a plane ride. The deal sponsors are the pilots. They deal with the property’s day-to-day operations.

BluSky is the travel agent, helping people find the right flights and determine their destinations. We’re helping fly the plane as deal sponsors, too! (we’re overworked, lol)

You’re one of the passengers. You choose a flight, buy the ticket, and enjoy the ride.

The plane itself is the business entity (an LLC) we form to hold the property we’re buying. Every investor owns part of the plane. (Try telling that to an actual airline!)

As a passive investor, you just invest your money, then sit back and start receiving returns. We take care of the rest and provide you regular updates.

What are the benefits of investing in our syndications?

The direct benefits of investing with us are cash flow, equity growth (capital gains), and tax benefits.

During the time we own the property (the holding period), its cash flow is returned regularly to you through distributions.

The equity you initially invest grows during the holding period as the property’s value increases (capital appreciation). When we sell, you get your investment back plus this equity growth — this is the largest payout, but is less predictable than cash flow.

Part of the magic of real estate is its tax benefits, including depreciation. Thanks to depreciation, our taxes may reflect a “paper loss” for the year even though we’ve made money. This means your income tax for the year may be lower  despite having made more money! And if not, the income from a passive investment is usually taxed as passive income or long-term capital gains, which have lower tax rates than ordinary income. Depreciation may be particularly high early in an investment because of cost segregation and bonus depreciation.

One of the key indirect benefits of investing in a real estate syndication is leverage, which is based on the loan we take on a property. The debt acts as a lever that increases profits. 

Note: BluSky Equity Partners does not provide tax advice. Please consult your own financial or tax advisor for your personal tax situation.

What are the risks involved?

Let’s be real. There are risks in any investment. Bottom line, there’s always a possibility you could lose a portion of—or all of—the principal you invest, just like with any other investment. Since we’re buying a business anchored by a piece of real estate (e.g., an apartment complex, self-storage facility, etc.), anything that might jeopardize its profitability constitutes a risk. Many of these are foreseeable and are mitigated by our purchase criteria, our education, and our experience, as well as that of the partners we work with. But unexpected things can happen, despite the best planning. A few hypothetical examples include:

  • A large insurance loss, such as a fire or natural disaster, that reduces the property’s potential income for some time.
  • A significantly higher-than-planned-for increase in expenses like taxes or insurance.
  • New public policy (perhaps after an election) that negatively affects the type of business or real estate as a whole.

But…there’s good news. Commercial real estate assets like apartment buildings and self- storage facilities operate independently of the stock market. In fact, most segments tend to fare far better in recessions than stocks do. A sudden plummet in the stock market has little bearing on the value of our property. Our properties also tend to be safer investments than single family homes because if one tenant moves out, you still have others to pay down the mortgage, and we have more control over the property’s value than investors do with single family homes.

Through our education, we’ve learned how to pick properties and markets that are less susceptible to many of these risks and are likely to perform better than average during bad times, as well as to structure and capitalize the projects to outlast them until times are good again. In most cases, the worst this means to you is that we might have to suspend distributions for a while and hold the property a year or two longer than intended before we can sell for a profit.

Compared to investing in stocks, where a recession might mean the market takes a huge drop and companies go under (losing your investment in them), we feel this is much better!

Who can invest with us?

We accept Accredited Investors in our projects. We may also accept Sophisticated Investors with whom we have pre-existing relationships, based on the syndication structure, per Securities and Exchange Commission (SEC) regulations. We also accept accredited investors as key principals (KPs) or guarantors, which is valuable for those who want to purchase larger properties on their own or as syndicators in the future.

Can I invest with retirement funds?

Yes! You can use retirement funds to invest in a syndication without earning penalties for early withdrawal (because it’s not a withdrawal). This is one of the best little-known strategies for investing capital in a retirement account, and lets you invest it in recession-resistant real estate instead of more volatile stocks or mutual funds.

To invest your retirement funds in one of our properties, the first step is opening a self-directed account with a qualified provider (we can recommend a few) and rolling an existing retirement account into it. This new account may be a Self-Directed IRA or a Solo 401k (a version of which is marketed and branded as an “eQRP”). This step can take some time, so it’s best to do this before you decide to invest in a specific property. Once it’s done, investing from your retirement account into one of our properties is nearly the same as investing cash.

Note that investing in a project through a retirement account can have unique tax consequences. We recommend scheduling a call with us about it and consulting your tax advisor before making a decision to invest this way. However, it can be quite advantageous, and is one way we invest as well.

Note: BluSky Equity Partners does not provide tax advice. Please consult your own financial or tax advisor for your personal tax situation.

Can I invest through a trust or business entity?

Yes, you can invest through a family trust (or other type) or business entity (LLC or corporation). You can invest cash or through a self-directed retirement account.

How long will my money be invested?

Most projects plan for a 5-year holding period, so you should plan to have your money in the investment for at least that long. However, it may be less than that if the project is going well, or more than that if we enter a recession late in the holding period. These are illiquid investments…you’ll receive regular distributions while we hold the property, but your initial investment cannot be withdrawn until sale.

That said, we know 5 years can be a long time, and unexpected events happen in life. If a major life event happens and you need out, talk to us. We’ll do everything in our power to help you out, including buying out your shares ourselves if need be.

What is the minimum amount I can invest?

While the minimum investment can vary, the typical minimum is $50,000.

How often should I expect to get distributions?

Distributions are typically made quarterly, though they might be made monthly, based on how we organize for the deal.

Distributions are not guaranteed, but are made as long as the sponsors determine they can be without undue risk to the project overall. There may be times, such as after an unexpected large expense, an insurance claim event, or during economic recession, when the sponsors determine we’re unable to make a distribution without unduly risking your principal. If a situation like this arises, rest assured we’ll be in communication with you.

What communications do investors receive?

Investors will receive a monthly report that provides property updates and performance indicators, property financials, and what it means for our business plan.

What tax reporting will I receive?

Each individual, trust, entity, or retirement plan investor receives an IRS K-1 form for use preparing your tax returns. The K-1 is issued annually for an investment in partnership interests and reports earnings, losses, deductions, and credits. They are typically distributed in March. Your K-1 may show a “paper loss” even though you received cash flow because of depreciation. This is one of the great tax advantages when investing with real estate syndications.

Note: BluSky Equity Partners does not provide tax advice. Please consult your own financial or tax advisor for your personal tax situation.

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