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Launching Real Estate Syndications – Final Distributions to Your Investors

By: Tilden Moschetti, Esq.

You’ve basically re-entered the atmosphere and you’re on the surface of the earth. Now you just need to emerge from the capsule. And that means making those final distributions to your investors. There are several processes to do this. 

First off, there’s a big pot of money now that the deal is closed. So the first thing to do is call up the accountant and say, “Is there going to be a taxable event? What is it going to cost for me to close out anything that happens?” Most of the time, your taxes are going to flow through directly to your investors, and you don’t need to worry. But check with your accountant. 

Once you figure out what the cost is going to be, see if you can pre pay that amount with the accountant to do all of your closing paperwork. See if you can arrange to get a fixed price on it. And see whether they can do that work right now, rather than waiting until the normal tax cycle. They may not be able to actually issue the paperwork yet, but they can certainly charge you for it, and then do the work when it’s time. This way, it’s just one thing that’s off your plate. 

Talk to a lawyer if you’ve also got other closing items to see to, and if there are any costs associated with them. What we’re trying to do is take this pot of money and get rid of all of the expenses out of it, so that the only thing left is distributing that cash to the investors. 

Now that you’ve done that, take all that cash and add into it the amount that’s left in reserve. That reserve money is also cash that goes back to the investors. It’s their money. That’s what the reserve account was for. Then it’s a simple matter of figuring out what the home price is going to be per share, queuing it up, and making it accordingly. 

One other recommended step is to send each investor a final accounting that shows every single distribution that you’ve done, and then show them where that relates into the pot. Because every now and then, there’s a slightly different calculation that’s moved things by $1 or $2. And this is your chance to square it up. 

Once you make a statement that shows everything, and make sure everything tallies at the end, send it to all your investors. And then you can make those payments, whether by direct deposit, which is preferred so you can close that bank account sooner, or by check if needed.

 

Are you ready to get started with your own syndication and need a private placement memorandum? Moschetti Law Group is a real estate syndication law firm and we’d be happy to meet with you to put together your Regulation D syndication documents and guide you through the process of launching your own offering.

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