What type of properties do you purchase?
CF Capital focuses on acquiring multifamily assets that provide stable cash flow, capital appreciation, and a margin of safety. We target stabilized properties with physical and/or operational reposition opportunities. Typically, these include 70+ unit garden-style communities that are well-located, underperforming and/or value-add assets in growing MSA’s throughout the Southeast and Midwest regions.
Who can invest in your deals?
You need to be an Accredited Investor to participate in our deals. Per the U.S. Securities and Exchange Commission (https://www.sec.gov/node/172921), an accredited investor, in the context of a natural person, includes anyone who:
earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
What is the minimum and maximum investment amount?
The minimum investment amounts will begin at $50,000.
The maximum investment amount will be 19% of the total equity investment of a deal.
Does your firm guarantee a return for an investment?
No. Our offerings will include a preferred return to our capital partners which are based on the business plan for the specific property
How frequently do investors receive distributions?
Typical deals pay partners full or partial preferred returns on a quarterly or monthly basis. Profits above and beyond the preferred amount are distributed generally at a capital event (sale or refinance).
Additionally, you will receive your initial equity investment plus any profits from the sales proceeds at the end of the sale.
What happens if you can’t make the projected cash flow?
Our firm will always strive to have our projected returns exceed the preferred return offered. This will allow for any shortcomings in the projected returns to still allow for distribution of the full preferred return. If the actual returns are lower than the preferred return offered, then the preferred return will accrue until it can be paid with the sales or refinance proceeds.
What type of on-going reports should investors expect to receive for their investment?
You may receive updates once a month with updates on the status of the property. Our monthly reports will provide you with updated occupancy rates, updates on the number of renovated units (if applicable), details on our rental premiums and how they compare to our budgeted projections, capital expenditure updates, and any relevant market updates. On a quarterly basis we will provide a more robust report that includes the community’s financial statements including the rent roll and trailing 12-month operating statement.
What type of financing do you typically use to purchase assets?
The appropriate loan is determined on a deal-by-deal basis to best fit the business plan identified for the opportunity. Some business plans will utilize long-term permanent agency debt that includes the capital expenditure costs needed for unit renovations and property improvement. Other plans will use a short-term bridge loan, preferably interest-only, before refinancing into a permanent loan once the property has been stabilized.
Who actually owns the property?
CF Capital creates an individual LLC and purchase the property with that specific entity. All limited partners will then purchase shares of that LLC.
What happens if the property needs additional operating funds?
In addition to the equity needed to purchase the property we also budget for an operating fund to cover any unforeseen shortfalls. These reserve accounts typically amount to 1-5% of the purchase price and are determined by the asset’s business plan. These contingency funds are used in times when our capital expenditure projects exceed their budget and other unexpected expenses like dips in occupancy, unexpected maintenance issues, lump sum tax or insurance payments, etc. In rare cases, capital calls will be offered for optional investor participation, in the event that reserves are not sufficient.
How do you make money as the sponsor?
We make our primary returns based on the equity that we invest inside the deal alongside our capital partners. As sponsors we are confident in every deal that we put together and feel the best way to convey this belief is to always invest alongside our capital partners.
As the General Partner, we receive an acquisition fee for identifying the opportunity, performing due diligence and acquiring debt to close the deal. Additionally, we earn an ongoing asset management fee throughout the hold period for ensuring the completion of the capital improvements, overseeing the property management company, communicating monthly and timely updates to the limited partners, and ultimately executing the overall business plan for the property. Furthermore, as the General Partner, we earn a percentage of the upside along with our Limited Partners for executing on our business plan.
Who is responsible for day-to-day management of the property?
As General Partner, CF Capital is responsible for partnering with best-in-class operators in each market that we own in. All of our communities are managed by a professional 3rd party property management company. In some properties we are partners in the hired property management entity which allows us to more closely align the interests of property management with our partners’ investment interest. As GP we manage the property management firms and are in direct contact with the regional, construction manager and onsite leasing and maintenance staff on an on-going basis.
What are my responsibilities as an investor?
After the deal is funded and you’ve signed the legal docs your active role in the deal is complete. After that point as the limited partner you will be receiving distributions and investor reports to review. From time to time you may be asked to review and or sign documentation when appropriate, and you’ll be asked to maintain accurate data on your investor profile on our investor portal.
What are the general partner’s (CF Capital) responsibilities?
Build a team of best-in-class industry professionals
Source and discover opportunities for our investors
Analyze and identify hidden value within the community
Produce an achievable business plan that includes physical and operational value-add opportunities
Make and negotiate offer and terms and win the deal
Finalize purchase and sale agreements
Conduct thorough on-site due diligence with our property management team and professional property inspectors
Secure attractive financing via our lending relationships
Coordinate with our attorneys to create the LLC and partnership agreements
Close deal and assume ownership of the property
Execute property business plan with our property management team
Refinance and/or sell property to maximize investor returns
What's an accrued preferred return?
An accrued preferred return is a cumulative and unpaid distribution of profits to investors. It represents the obligation to pay a specified return on invested capital before the GP receives their share of profits.
What tax documentation do I receive as an investor?/When do you send our Schedule K-1s?
As an investor, you will receive a Schedule K-1, which details your share of the partnership's income, deductions, and credits. We typically aim to send out Schedule K-1s by the tax filing deadline, but actual timing may vary.
Will you be doing a cost segregation study?
Yes, we typically conduct a cost segregation study to accelerate depreciation on eligible components of the property. This can result in potential tax benefits for investors.
Do I have to file income taxes in the state of the investment?
You may be required to file income taxes in the state of the investment, depending on state tax laws. We recommend consulting with a tax professional to ensure compliance.
What all goes into asset management?
Asset management involves overseeing the property's performance, financials, and operations. Tasks include property maintenance, financial analysis, risk management, and implementing strategies to enhance property value.
What all goes into executing a business plan on a multifamily real estate investment?
Executing a business plan involves tasks such as property improvements, optimizing operations, tenant relations, and financial management. The goal is to achieve the investment objectives outlined in the initial plan.
What does Elevating Communities Together Mean?
"Elevating Communities Together" reflects our commitment to not only achieve financial success but also to contribute positively to the communities where our investments are located, which includes our residents, staff and the surrounding neighborhoods. We strive to create value and enhance the overall well-being of these communities and simultaneously with our partners through adding additional value through our partner community.
Is the projected hold period guaranteed?/What if the market is soft when the projected hold time ends?
The projected hold period is an estimate, and market conditions may impact the actual duration. If the market is soft at the projected hold time, we may reassess the situation and determine the best course of action to maximize returns.
How does CF Capital keep my best interests in mind at all times?
● We prioritize transparency, effective communication, and diligent management to ensure alignment with investor interests. Our decisions are guided by a commitment to long-term success and risk mitigation.
● We co-invest our own capital alongside investors
What does CF Capital's Due Diligence look like?
Our due diligence process involves a comprehensive analysis of financials, market conditions, property condition, legal aspects, and other relevant factors. This rigorous assessment helps mitigate risks and ensures informed investment decisions.
Who guarantees the debt?
The General Partner (GP) guarantees the debt on our investments. Limited Partners (LPs) are not required to guarantee debt on these investments
Would you be able to provide me with a reference from one of your existing investors?
Yes, we can provide references from existing investors who have experienced successful partnerships with CF Capital. Please contact us directly for more information.
What does CF Capital do to stress test their real estate investment deals prior to acquisition?
Stress testing involves evaluating the investment under various adverse scenarios to assess resilience. We analyze potential challenges such as economic downturns, rising interest rates, rising operating costs, reduction and sustained economic occupancy loss and market fluctuations to ensure the investment can withstand adverse conditions.