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). On the income test, the person must satisfy the thresholds for the three years consistently either alone or with a spouse, and cannot, for example, satisfy one year based on individual income and the next two years based on joint income with a spouse. The only exception is if a person is married within this period, in which case the person may satisfy the threshold on the basis of joint income for the years during which the person was married and on the basis of individual income for the other years. In addition, entities such as banks, partnerships, corporations, nonprofits and trusts may be accredited investors. Of the entities that would be considered accredited investors and depending on your circumstances, the following may be relevant to you: n any trust, with total assets in excess of $5 million, not formed to specifically purchase the subject securities, whose purchase is directed by a sophisticated person, or any entity in which all of the equity owners are accredited investors.”
(Source: ​https://www.sec.gov/files/ib_accreditedinvestors.pdf)

A fee paid to the General Partnership at the closing of the purchase of a property for finding, evaluating, financing, organizing, and closing the investment.

Someone who is involved in some, if not all aspects of the investment. Examples include finding, qualifying, securing financing, closing, and managing of the investment.

Paying off an amount owed, over a specified period of time, by making fixed payments of principal and interest.

When a group of individuals and/or companies pool their resources (time, expertise, money, etc.) to achieve a common goal (acquire, manage and sell an apartment(s)) that would otherwise be impossible, or very difficult to achieve alone.

An evaluation by a certified appraiser to identify the market value of a property. For apartments, the value based on three evaluations: cost, comparable sales, and income.

When the value of an asset increases over time. With respect to apartments, there are two types of appreciation: natural and forced. Natural appreciation occurs over time, and is heavily influenced by the market. Alternatively, forced appreciation is when the value increases via targeted efforts made to increase the net operating income (as the net operating income is one method used to evaluate the value of the property). The means in which one increases the net operating income is by either increasing revenue, or by decreasing the expenses.

An ongoing fee paid to the General Partnership for the ongoing asset oversight. The typical fee is 2% of the gross income, or $250 per unit per year.

Any uncollected money owed by a tenant after his/her move-out.

The occupancy rate needed to cover all property expenses. The calculation is performed by dividing the sum of all operating expenses, including debt service, by the gross potential income.

A short term mortgage loan that typically has higher interest rates, but is almost always interest only. Loan terms are normally six months to three years, with the option to purchase additional months/years. This type of loan is often used for value add apartments in which traditional financing is not an option. Bridge loans are also referred to as interim financing, gap financing, or swing loans.

The funds used to upgrade a property. Often referred to as CapEx, these upgrades are one time expenses, and can be either on the interior, or exterior. Examples of CapEx include new siding, roofs, pool, countertops, light fixtures, and paint. Some examples that are not CapEx are operating expenses, debt service, investor distributions.

The rate of return the property is expected to generate based on the income it receives.

The revenue after all expenses are paid. Cash Flow is calculated by subtracting operating expenses and debt service from the actual gross income.

The rate of return based on the total equity investment and the total cash flow. It is often abbreviated to CoC.

All expenses incurred to complete a real estate transaction. These expenses include origination fees, application fees, recording fees, attorney fees, underwriting fees, due diligence fees, credit search fees, title search fees, notary fees, and state and local municipalities fees.

Credits given to entice a tenant to sign a lease.

Also referred to as replacement cost, it is the method used to calculate the cost of replacing (or rebuilding) the property. This is one method used to conduct an appraisal.

The mortgage amount paid to the lender. Typically, this includes principal and interest, but there are loans that are interest only, in which case the debt service would only be the interest payments.

The ratio of cash flow to debt. This is calculated by dividing the net operating income by total debt service. A DSCR of 1.25 or higher is preferred; rates of less than 1.25 is a riskier investment.

The opposite of appreciation, depreciation is a decrease in value, and can be caused by multiple factors (for example market, age, and wear).

A property that has below 85% economic occupancy due to one or more of the following reasons: poor operations, tenant problems, outdated interiors, exteriors, and amenities, mismanagement, and/or deferred maintenance.

The portion of the profits that are distributed to the Limited Partners on a monthly, quarterly, or annual basis, at refinance (if applicable), and at sale, as defined by the General Partnership.

The process in which the General Partnership investigates a property, audits the seller’s claims of the subject property, and confirms their underwriting assumptions and business plan.

A deposit the buyers pay which is part of the purchase price. There is typically a short period when the deposit can be refunded, but after this period the money is not refundable, otherwise known as “going hard”.

The occupancy rate of paying tenants. This differs from physical occupancy where the occupancy rate is based on tenanted units.

Also referred to as total income, or total revenue, it is calculated by subtracting the loss-to-lease, concessions, vacancy, bad debt, from the gross potential income (gross potential rent plus other income).

An apartment unit rented to an employee at a discounted rate, or for free.

All upfront costs associated with purchasing a property (including down payment for mortgage loan, closing costs, financing fees, operating account funding, and acquisition fee).

The projected rate of return based on the investment verses the return over the course of the hold. A multiplier of 1.0 means you are not getting back more than you invested.

The plan for selling the apartment as outlined in the business plan by the General Partnership.

Fee charged by the lender for providing the debt service. Typical fee is approximately 1.75% of the purchase price.

The owner of the partnership that has unlimited liability, and is responsible for the entire apartment project. The GP is also referred to as the sponsor, or syndicator.

The total annual income a property is capable of receiving through 100% occupied units plus all other income.

The total annual income a property is capable of receiving if all units were leased year round.

The total number of years it would take for a property to pay for itself based solely on the gross potential rent.

A fee paid at closing to a loan guarantor for guaranteeing the loan. A standard fee is between .5% to 5% of the principal balance of the loan paid at closing and/or 5%-30% of the General Partnership.

The period of time, from purchase to sale, that the General Partnership plans to hold the asset.

One of the three methods for calculating an apartment’s value. The calculation is
Value = Net Operating Income / Capitalization Rate

The monthly payment that is owed to a mortgage company, where the borrower only owes the interest on the principal.

The rate charged by the lender to the borrower for the use of the their funds.

The most common term for assessing profitability of a potential investment. IRR is a calculation used to measure your return on investment, while factoring the time it takes to return your initial investment.

A legal contract between a landlord and a tenant to occupy an apartment unit for a specific time and price under certain defined terms.