Frequently Asked Questions

A group of investors pooling money to buy a property none of them would buy alone.

A new LLC is formed for each property. The limited partners put in the capital and own the LLC. The general partnership finds the deal, raises the money, arranges the financing and runs the asset. You own a share of the entity that owns the building, and you are paid your share of what it earns and what it sells for.

The trade is straightforward. You give up control and liquidity. You get a property you could not have bought yourself, run by someone whose job it is, without a tenant ever calling you.

A REIT is a stock. This is a property.

You can buy a REIT this afternoon and sell it tomorrow, you own a slice of a portfolio somebody else assembled, and your return moves with the market’s opinion of that portfolio. There is no cost segregation study working for you and no depreciation on your return.

Here you own a share of one LLC that owns one building you can drive to. You know the address, the business plan and the person operating it. You cannot sell on a Tuesday, and that illiquidity is the price of the other three things.

A REIT is the better instrument if you want exposure to real estate and the ability to leave. This is the better one if you want to own a specific asset and keep the tax treatment that comes with owning it.

Cashflow/Cash on Cash Return is the distributable profits that an investment generates from the revenue during ownership, such as rent, less any expenses such as management fees and mortgage payments. Cashflow/Cash on Cash Return does NOT Factor in the final sales price of the asset as profit. Cashflow/Cash on Cash Return is typically expressed as a %, based on how much an investor invested. If the year 1 Cash on Cash return is 5%, and an investor put in a $100,000 investment, they should expect to receive $5,000 in distributions that year. If they only put in a $50,000 investment, they should expect to receive $2,500 in distributions that year. Because Cash on Cash return does not take into account the final sales price of the asset as profit, it only shows part of the story of the investment, and is not as strong of a tool to evaluate an opportunity as a whole, compared with Average Annual Return, or Internal Rate of Return.

Average Annual Return takes into account the final sales price of the asset. Average Annual Return takes the total profit of the entire lifecycle of the deal, and averages it out over the years it took to generate that profit. For instance, a 100% profit on a deal that took 5 years to generate would be a 20% Average Annual Return. If an investor realized a 100% investment in 4 years, that would be a 25% Average Annual Return. The Average Annual Return does not show preference to when profits are distributed. It doesn’t matter if the deal made $0 in cashflow every single year, and then sold for 100% profit in year 5, it would still have a 20% Average Annual Return. A deal that made $100,000 profit in year 1, then $0 profit in years 2-5 before it sold would also have a 20% Average Annual return, but tell a much different story. This is why we think Average Annual Returns only tell part of the whole investment story, and IRR is a better metric.

Internal Rate of Return does take into account the final sales price of the asset, as well as the timing of when distributions are made. Similar to compounding interest, profit earned sooner is more valuable than profit earned later on, because early profits can be reinvested to compound and earn more money. This is why Internal Rate of Return is the best metric to use when evaluating an opportunity. The formula for generating the internal rate of return can be complicated, so to learn more, and see a calculator to figure out an investment’s IRR, check out this website here: https://www.calculatestuff.com/financial/irr-calculator

GP (General Partner) / LP (Limited Partner) Split refers to the profit split between GPs and LPs. If a GP/LP Split is 30/70, then a General Partner will make 30% of the profits generated, and the limited partner’s will make 70% of the profits generated.

General Partners earn their share of the split from the sweat equity built into the deal by finding the opportunity through direct sellers, brokers, networking, assembling the management team, overseeing the asset for the life of the deal, working with the attorneys, lenders, insurance agents, and all other aspects that make these deals possible. This is how the General Partners get paid to bring these opportunities to you.

All capital contributed to a deal is contributed on the limited partner split side of the deal. General Partners do typically invest their own money along side other limited partners to have skin in the game. Any funds a General Partner puts into a deal is still considered a Limited Partner investment, and their profits get paid out the same as any other limited partner. The General Partner Split is paid out based on sweat equity, not their amount of capital contributed.

A Capital Stack dictates who gets paid profits from a deal in what order. For instance, when you buy a rental property, you typically pay the mortgage lender (1st Lien) for their capital in the deal (the mortgage loan) before you get to keep any of the profits yourself.

A Preferred return dictates that after mortgage payments, limited partners get paid out all profits on a deal until they hit a certain threshold. For instance, a 5% preferred return on a deal means that if an investor invested $100,000, the first $5,000 of profits are required to go to the limited partner before it starts getting split with the general partner. This guarantees that limited partners are paid first, before general partners make any profit on their end.

A waterfall structure may incorporate additional levels of preferred returns, and adjust the GP/LP Split on certain thresholds. For instance, a waterfall structure my indicate an 20/80 GP/LP Split up until the LP hits a 15% LP IRR Hurdle, after which the GP/LP Split adjusts to 50/50. This would mean that if an investor invested $100,000, and the total profit from the deal that 1st year was $20,000, the payout would look like this. First, we calculate how much an investor needs to profit before the hurdle is achieved. In this case, since there is a 15% LP IRR Hurdle, they are owed $15,000 of profits before the GP/LP Split adjusts. Since $15,000 of profits represents the LP 80% share, the GP share would be 20%, which is $3,750. The formal is $15,000 / 0.8 = $18,750 (total Profits Paid out so far). GP calculation is $18,750 x 0.2 = $3,750. That means that $18,750 is the total profit to be paid out before the next GP/LP Split Begins of 50/50. Since the deal paid out a total of $20,000, there is still an additional $1,250 to be paid out as profit at the post hurdle rate of 50/50. That would mean the remaining $1,250 is paid out 50% to the GP, and 50% to the LP, so $625 to the GP, and $625 to the LP. We would add those amounts to the previous payouts for the GP and LP.

LP Payout = $15,000 (Pre-hurdle Split) + 625 (Post Hurdle Split) = $15,625

GP Payout = $3,750 (Pre-hurdle Split) + $625 (Post Hurdle Split) = $4,375

Total Payout = $20,000

While there is no clear cut definition, there are some rules of thumb to help us classify properties.

A Class: Typically built within the last 20 years. These are some of the nicest and newest properties out there, typically collecting the top 30% of rents in the area. These include garden style to mid and high rises, properties with tons of amenities such as luxury pools, spas, game rooms, gyms, social events, and all kinds of amenities that you can think of. Usually high income earners live here.

B Class: Properties built from 1970 to 2010 or so. These are slightly outdated, but may have renovations inside of them. Generally these properties are nicely kept, garden style or mid rise properties, with rents that can be afforded by the median income earner in an area. These may include amenities such as a pool, fitness center, dog park, kids playgrounds, etc. but is likely not considered luxury. These properties attract residents that are upper working class, starter families, and budget conscious individuals.

C Class: Properties built from 1940 to 1980 or so. These properties are old, outdated, and typically in need of renovations. They are typically in not as desirable parts of town, and may have problems such as being considered dirty, minor crime, recurring maintenance issues, etc. These typically attract working class families or those on a strict budget, and likely the lowest 30% of rents in town.

D Class: Properties that are in severe disrepair. These properties typically are ridden with higher crime, the lowest income earners, and heavy problems with maintenance, violations from the city, and other problems. Most investors are warned to stay away from these types of properties, as these are typically referred to as “Slum Lord” Properties.

For the right person, and there is a wrong person.

It is a good fit if you have capital you do not need for five to ten years, you want to own real estate without operating it, and the tax treatment is worth something to you. Depreciation is the part most people underrate: it can shelter the income while you hold it.

It is a bad fit if you might need the money, if you want to be able to sell on a Tuesday, or if you want a say in how the property is run. There is no secondary market for this. Your capital is committed until the property sells.

Anyone who answers this question with a yes and no caveats is selling you something. Read the rest of these questions, especially the ones at the bottom, and decide for yourself.

Yes. For each property we buy we run a cost segregation study, which accelerates the depreciation on the asset and front loads it into the early years of the deal. That typically gives investors access to considerably more depreciation in year one than most other investments allow, while your capital stays working in the property.

How much of that depreciation you can actually use, and what it is worth to you, depends entirely on your own tax situation. We do not provide tax advice. Take any opportunity to your CPA before you invest, and see the next question for how this interacts with W2 and self employed income.

In opportunities like Starlight Horizon, we offered investors the ability to personally stay in one of the cabins for one week a year, and may offer similar perks on appropriate opportunities in the future.

Typically no, unless you are a real estate professional. If you qualify as one, the depreciation write off will go against your active W2 or self employed income. Consult your CPA to find out which one you qualify for.

For everyone else, here is what the depreciation actually does, because “it is passive” sounds like a dead end and it is mostly a question of timing.

Your share of the depreciation is a passive loss. It offsets passive income: this deal, other syndications, rental property, any other passive activity you hold. It does not touch your salary.

What surprises most investors is what happens to the part you cannot use in year one. It isn’t lost. It is suspended, it carries forward indefinitely, and it sits there against the future passive income from this same deal. In practice that means your quarterly distributions can arrive while the carried forward depreciation absorbs the taxable income behind them. You are getting paid, and the depreciation is covering the tax on what you are paid.

Then the property sells and the rest of it releases. On a full disposition of the activity, the suspended losses stop being passive and become deductible against any income you have that year, including ordinary income.

Two things worth knowing about the current rules. One hundred percent bonus depreciation was made permanent for property placed in service after January 19, 2025, so a cost segregation study now writes off the reclassified five, seven and fifteen year components entirely in year one instead of spreading them out. And short term rentals sit under a different set of rules than apartments do, which is part of why a property like Starlight Horizon can work differently for some investors than a multifamily deal.

Accelerated depreciation is mostly a timing benefit rather than a permanent one. Some of it comes back as recapture when the property sells. It is still worth doing, because a dollar you keep today is worth more than a dollar you keep in five years, and because the carryforward shelters income the whole way through.

None of this is tax advice and your situation is your own. Take any opportunity to your CPA before you invest.

Texas has no personal income tax, and every property we own is in Texas.

For an investor who lives in a state that does tax income, that matters more than it sounds. Invest in a Georgia or an Ohio deal and you generally pick up a nonresident filing obligation in that state on top of your own. Invest in a Texas deal and there is no Texas return to file, wherever you live.

Your home state still taxes you on your income under its own rules, and you still owe federal tax. What you avoid is the second state. Confirm your own situation with your CPA.

By March 15th of the year following your investment.

A K-1 is the tax form a partnership issues to each of its partners. It reports your share of the income, the losses and the depreciation, and it is what your CPA needs to file your return.

Late K-1s are the most common complaint passive investors have about syndications, because a sponsor who is slow closing their books pushes every one of their investors onto an extension. We treat the March 15th date as a commitment, not a target.

Distributions are sent out quarterly. Some stabilized investments may see their first distribution after the first completed quarter of ownership. However, since most of the opportunities that we typically invest in are value add deals, the available cash the first 12 months is being used to renovate and stabilize the property. Once the TPIC deems that the property is stabilized and profitable, we will begin distributing profits quarterly to investors. The first distribution typically happens 1 year after ownership, but may be sooner or later depending on the nature of that specific opportunity. Once the property is fully renovated and stabilized, any superfluous reserves in the operating account will be distributed to investors as well, which typically happens towards the middle to end of the 2nd year of ownership.

For each property that we purchase, a new LLC is created created before closing and used to purchase the property. That entity is the owner of the property. The Private Placement Memorandum you sign with your investment establishes that you are an investor in that LLC, a part owner of the LLC, and thus an owner of the actual property itself. In this way, you have direct ownership of the property, and your original investment, any profits, proceeds, and distributions are required by law to be distributed to you as owner of the LLC that owns the property.

We typically charge a 2% acquisition fee and a 2% asset management fee, and no fees beyond that other than the GP/LP split and waterfall structure.

Fees are set deal by deal. The ones that govern your investment are the ones written into that deal's offering documents, so read those rather than relying on this page.

Typically $50,000, and up to $1 million per check on a single deal.

That is the size at which this makes sense for both sides. Below it, the paperwork, the reporting and the K-1 cost more to produce than the position is worth to you.

If $50,000 is a number that would change your life to lose, read the question on whether you need to be accredited before you go any further.

The total investment needed to be raised comes from a combination of the following:

Down payment (usually 20-50% of the purchase price, as determined by the lender)

+

Renovation budget (if it is a bridge loan, the raise would need to be 20-50% of the capital expenditure budget as determined by the lender. If financing does not roll in construction costs, we would budget to raise for 100% of capital expenditures up front).

+ Any closing costs needed (Including title, attorney fees, lender fees, acquisition fees, commissions, etc. needed to close on the purchase)

+

Reserve funds (typically 4-12 months of operating expenses and mortgage payments, depending on the expected vacancy of the property during the renovation period).

Most timeframes from contracts to close are 60-90 days. Loan assumptions may take longer. Usually around day 15-20 of being under contract is when we host the investment webinar for investors.

We typically buy one property a year. For every 100-150 deals that we review and analyze, there is one that is worth putting investor money into, and that is the one we buy.

Keeping it to about one a year is deliberate. I self-manage what we own rather than handing it to a third party management company, and that only works if the portfolio stays small enough for me to be in it every week. We hold each asset until it has reached the end of its business plan, and then we sell.

No. We accept sophisticated investors on some occasions. Before you ask to be one of them, read the rest of this answer.

Real estate is risky. Any good investor understands three things before they wire a dollar: the sponsor, the market, and the asset. If you cannot explain all three back to someone, you are not ready to invest in this deal or in anyone else’s.

A sophisticated investor can know all three just as well as an accredited one. The difference is what the check represents. The accreditation thresholds exist because $50,000 out of a large net worth is a different thing than $50,000 out of a small one. Same deal, same risk, a much bigger hole if it goes wrong. That is worth taking seriously even when the rule does not legally apply to you.

So here is our standard. This should not be your kids’ college fund, your retirement savings, or any money you are going to need. Treat it as illiquid, because it is. Your capital is in the deal until we sell, which is usually five to ten years out. This is money going into real estate as a diversification asset, money that can sit still and survive a long hold and a bad year.

For the right sophisticated investor we will make room. You have to understand what you are buying, and we have to be comfortable that you are not putting a meaningful share of your net worth into one illiquid asset. If that is not you, we would rather tell you now than take your money.

Go in with your eyes open. This is a serious commitment and it is not a starter investment.

Yes. We accept retirement funds, and for a lot of investors it is a great vehicle for growing wealth and for diversifying away from traditional stock investing.

There is a real difference between the two accounts and it is worth knowing before you pick one. When a property carries a mortgage, the share of the income attributable to that debt can be taxable inside a self-directed IRA, which surprises people who assumed everything inside an IRA grows untaxed. A solo 401k is generally not subject to that same treatment on debt-financed real estate.

That is a meaningful difference on a leveraged deal, and it is a question for your CPA and your custodian rather than for us. We do not give tax advice.

Yes, prior investors, and those considering investing over $500,000 into a single deal will be given early access opportunities into any upcoming deals.

If for some reason the general partnership does not go through on closing on the purchase of the property, 100% of all limited partner funds will be returned to the contributing investors.

A detailed investor letter every quarter. Property-level performance against the plan, what changed, what did not go the way we expected, and the distribution.

Between the letters, my email and my cell are always open. If you have a question, a concern or a comment, if you want to understand something in more detail, or if you want to talk through an opportunity or an idea you have had, call me. You are not routed to an investor relations desk, because there is not one.

You also get your K-1 by March 15th each year.

The role of the limited partner is to stay limited, and for this investment to be treated passively. Trust in the general partnership is necessary to run the deal effectively, and you are letting us run the asset the way we see fit and in your best interest.

What should make that comfortable is not our word for it. We typically buy one property a year, which is the only reason I can be in the asset every week rather than reading a report about it. I operate it myself rather than handing it to a third party management company. And my own capital is in the deal on the same terms as yours, so we get paid together and we lose together.

Limited partners can remove the general partnership for cause. The grounds, the vote it takes, and the process are written into each deal’s operating agreement, and that is the document to read rather than this page. Broadly they cover fraud, gross negligence, and a failure to execute the business plan as promised.

We work to execute above the business plan on every deal.

Five to ten years, and you should plan on the long end.

We buy a property, execute the business plan, and sell when it has reached the end of it. That is not a date we can set in advance, because the right time to sell depends on the market we are selling into.

There is no secondary market for a limited partnership interest. You cannot list it and you cannot get it back on demand. In rare circumstances you can offer your shares back to the general partnership, which the next question covers, but plan as though you cannot.

It is always best to consider your investment into this as completely locked into the deal. These are not liquid investments like stocks that can be easily traded between parties. However, in rare circumstances when it is absolutely necessary, you are allowed to offer your shares to the general partnership to buy you out for the cost of your initial equity investment. If the General Partnership declines to purchase your shares, they can elect to allow you to offer your shares to other limited partners in the group to purchase. If the other limited partners also decline, then with general partnership approval, you may offer your shares to other outside investors for a fair market value.

Typically no.

A 1031 lets you defer capital gains on a property you sold if you buy a like kind property inside the timeframes the IRS allows. The rule that gets in the way here is narrow and specific: the tax code excludes interests in a partnership from like kind treatment. Our syndications are LLCs taxed as partnerships, so when you invest, you own a piece of the LLC and the LLC owns the building. A piece of an LLC is not like kind to real estate, so a 1031 cannot land there.

The same rule runs the other direction, and that is the part most investors do not expect. When we sell a property, the seller is the LLC, not you. You never held the real estate in your own name, so there is nothing of yours to exchange, and you recognize your share of the gain that year.

What does happen on that sale is worth knowing. Every year of suspended depreciation that has been carrying forward releases in full when the property is sold, and stops being passive. For an investor who has been building up cost segregation losses they could not use, that release can absorb a real part of the gain. The cost segregation question above explains how it accumulates.

There are structures built specifically to receive 1031 money. A Delaware Statutory Trust is treated as direct ownership of real estate, which is why most passive 1031 money goes there, but the same rules that make it work also freeze it: no new capital once it closes, no refinancing, no renegotiating leases. That is the opposite of a value add business plan, which is what we do.

Tenant in common ownership is the other route. There you take deeded title to an undivided share of the property itself rather than a share of an entity. In rare occasions a major investor may be invited into a tenant in common agreement on one of our deals, which does allow a 1031 from a property you sold into partial ownership of a multifamily property.

If you are holding 1031 proceeds and a deadline, talk to your qualified intermediary and your CPA early. Any structure that works has to be set up before the sale closes, not after.

Please consult your tax advisor and CPA for any tax advice.

The role of the general partnership will continue to run the asset, and the other partners will step in to fill the spot of the general partner who is no longer able to handle their role. That could mean taking on their responsibilities with the existing general partnership, or adding in an additional general partner to take over the shares of the partner no longer involved.

First, no one has a crystal ball to predict the future, so we have to be prepared for a number of possible outcomes. The economy typically is cyclical rising and falling about every 5-10 years going through cycles. Because most of these investment deals are over 5 year holds, we have to account for market fluctuations and recessions, as well as bull markets in our pro forma calculations.

The reason we like cashflowing multifamily assets over single family assets is because if the housing market crashes, it is hard to extract value out of the single family homes that you are trying to flip. In an apartment complex, even if the value of the building goes down, residents still need a place to live, and it can still cashflow profitably even in a recession. Because of this, it gives our team of multifamily operators the ability to hold onto an asset longer term and ride out a recession until it makes sense to sell, rather than being forced to sell at a loss when the market happens to be down before it can recover. Even if the business plan estimated a sale in the 5th year, but the economy is in recession and it does not make sense to sell, the General Partnership can make the decision to hold onto the investment for additional years until the economy is recovered and it is a better time to sell.

You can be offered the chance to. You are never obligated to take it.

A capital call is when a property needs money the operations are not producing, usually a renovation that ran over or a stretch of vacancy nobody underwrote. On our deals, participation is voluntary. If you put more in, your ownership goes up. If you pass, you keep your position and it is diluted by the investors who did put in.

That is the honest cost of passing, and it is a real one. What you do not have is an open-ended obligation: nobody can require you to write a second check, and the most you can lose is what you already put in.

The terms for any specific deal are in that deal’s offering documents. Read them.

We certainly never expect an investment opportunity to go anywhere close to foreclosure. In the extremely rare case that a property starts having financial hardships, the general partnership will elect to fix any issues by injecting their own capital, doing a capital call of limited partners, or sell the asset well before the property ever comes close to a foreclosure to recover any outstanding profits and investments.

If the team has done every conceivable remedy and foreclosure is decided as the last and only remaining option, the property will be given back to the bank. Any proceeds will go to the investors original capital contributed, but will NOT affect the limited partner’s credit. A recourse loan may affect the general partner’s credit score, but will NOT affect the limited partner’s score.

No. All investing is considered risky. Please consult a financial advisor or professional before investing in any deal.

However, it is in the general partnership’s best interest as well as all parties to the deal to maximize the returns on the property, so TPIC will work hard to meet or exceed expectations on a deal.

Yes.

The Texas market has been through a brutal stretch. Nearly a third of every multifamily loan that went to special servicing in the country last year was a Texas property, according to Morningstar Credit.

We have been part of deals where limited partners and general partners lost some or all of their capital. On those deals I was raising money into a syndication led by someone else, with their own management company running the asset. They ran things very differently than I would have, and I worked tirelessly to change how operations were handled. Because I was not the lead partner and did not have the final say, I could not force a change in management, and the asset lost investor capital.

My own money was in those deals alongside my investors. That does not undo it for anyone who lost money, but I was not on the other side of it.

It was a terrible loss, and I feel it deeply for every investor involved. It was a hard lesson and it sharpened us in three ways.

• How fast improvements have to be made to run a deal well, and how fast you have to adjust to hold occupancy. Keep it in house instead of handing it to a third party manager.
• How quickly market rents can regress, and how to price that into the underwriting instead of hoping.
• Never put investor capital into a deal where we do not control the operating decisions.

We will not work with those partners again, and we will not take on a new deal in any structure where we do not directly control operations. On the deals I operate myself, no investor has lost money.

I also put my own capital into every deal I bring you, alongside my limited partners and on the same terms you get. I am not going to ask you to take a risk I am not taking with you.

None of that makes any deal safe. Every real estate investment carries the risk of loss, including the loss of your entire investment, and anyone who tells you otherwise is selling you something. What I can tell you is where you sit if a deal underperforms. Our structure puts limited partners ahead of the general partnership, and we do not earn our share of the split until limited partners are earning profits.

If a property sells for less than the business plan anticipated, the proceeds are paid out in this order:

• The mortgage lender
• Any outstanding balances and invoices owed to vendors and payroll staff
• All initial capital contributed by limited partners
• Any preferred return owed to limited partners
• Any remaining splits due to limited partners and the general partnership

Yes, in certain situations, and the shape of it matters more than it used to.

We will look at a partnership on the capital side, on sourcing, or on anything where a relationship makes a deal possible that would not have happened otherwise. If you bring us a property we would never have seen, that is a real conversation.

What we will not do is share operational control. On every deal we take now, we hold the final say on how the asset is run day to day. That is not a preference. We learned it on deals where we raised capital into someone else’s syndication, watched the operations go a direction we would not have chosen, and could not change it because we were not the lead. Our investors paid for that lesson. We are not going to ask them to pay for it twice.

So if you are an operator looking to be part of asset management on a deal, we are not that. If you find genuinely great deals and need a strong asset manager and operator on the team, that is the role we want and the one we are good at. Email Ryan directly at [email protected] with what you have built and we will take it seriously. Join the investor list as well, so you see new properties when the rest of the list does.

Please email [email protected] and we will work to get your question answered.