FAQ

Mae Holdings is a management company that will be a General Partner in the real estate deals. The general partner is responsible for handling the transaction of the deal as well as the day to day operations.

A real estate syndication deal is an agreement between a group of investors and general partners who share in the profits from a real estate property.

Currently our offering is a 506c and we are only taking accredited investors that are verified through your CPA. Stay tuned for when we open an offering for non accredited investors.

Bed & Breakfasts are known to be run as more “mom and pop” shops. Since Josh and Claire have experience running a short term rental business, they wanted to keep the “homey” touch while still having a “corporate” feels by automating a lot of the business.

For each of our offerings, Mae Holdings will be taking a 2-4% management fee for finding the deal, finding the money, structuring the deal and closing escrow. There is also a construction fee for the day to day operations of making sure the rehab process goes smoothly.

Mae Holdings will be doing disbursements after the first year of the project and will have quarterly direct deposit in your desired checking account.

For our initial offering, the plan is to refinance the property in 3-5 years when we have finished a full rebrand of the company as well as interior design changes.

An accredited investor is anyone with an earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) OR has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence), OR holds in good standing a Series 7, 65 or 82 license.

The LP Investor is the “money partner” and in many structures contributes 90% of the required equity in a project. The GP Investor is the operator that has the required expertise and infrastructure to invest directly in real estate, and also takes on the day-to-day management of the asset.

The big cash return is generally seen at the time the property is refinanced (a new bigger loan replaces the original loan) or the property is sold. If there was a large renovation on the property, this renovation likely helped to increase rents which will directly lead to a higher sale price. When a property is sold, the profits generated between purchase and sale get distributed to the investors and the operators.

Literally speaking, depreciation means a reduction in the value of an asset over time. As you might expect, the physical structure in a real estate investment (as opposed to the land it sits on) will deteriorate over time. The IRS recognizes that there is a cost associated with maintaining the physical asset, and they compensate investors in the form of a tax deduction known as depreciation. If you own a piece of real estate, a percentage of the value of the physical structure can be used as a deduction against the property’s income each year. In many cases, this deduction can completely (or nearly completely) offset the income the investment is generating, making that income nearly or completely tax-free. Many real estate investments will pass this depreciation benefit on to investors, allowing them to offset the income they generate from the regular cash flow payments. For both of these reasons, it’s important to speak with a good CPA, accountant or tax adviser to understand how a particular investment will impact your financial situation.

This is the anticipated hold time given the business plan that the operators have laid out for the property. Keep in mind that the hold period can change – in either direction – based on market conditions, property conditions and potential opportunities. In some cases, operators will choose to sell earlier if there is an opportunity to capture large returns quickly. In other cases, operators will hold the property longer, if they believe that there will be a more advantageous opportunity to sell in the future.

A Preferred Return directly relates to the regular cash flow you should expect to receive from the property. Example: An 8% preferred return means that the passive investors in the deal will receive the first 8% annual cash flow on their investment before the operating team receives any cash flow. For example, if an investor were to put $100,000 into this project, they could expect to receive $8,000 in cash flow ($100,000 * .08) each year, before the operators of the property received any cash flow.

Typically the deficit will accumulate and will roll over into year two. For example, with an 8% pref, if you only receive $3,000 in year one, your deficit for year one would be $5,000. That $5,000 would roll over to year two, and in year two, you are now owed $13,000 – your $5,000 for year one and your $8,000 for year two.

Example: If an investment structure indicates a split of 70/30, this means that investors own 70% of the equity in the deal, while the operators own 30% of the equity. Any cash flow above the Pref is split, with 70% going to the investors and 30% going to the operators. For example, if in year one, there is enough cash flow to pay the Preferred Return, and there is still $100,000 in cash flow leftover, that $100,000 will be split with $70,000 (70%) going to investors and $30,000 (30%) going to the operators. Profits at sale are treated the same way, first being used to pay any previous deficit in Pref payments, and then being split in the same fashion – 70% of the profit going to investors and 30% of the profit going to the operators.

The average annual return tells us, on average, what our simple percentage return would be each year of the project after adding up all the cash flow and profits from sale/refinance. For example, if our $100,000 investment generated a 90% return in five years (we earned $90,000 in profit in addition to getting our $100,000 back), the average annual return would be 18% (90% / 5).

IRR is a complicated metric, but commonly used for passive investments like this. It indicates the compounded return (assuming all cash flow was reinvested and your profits could compound).

The multiplier indicates how much you could expect your investment to grow should the project go as planned. In this case, you could expect your $100,000 investment to grow 1.8 times – to $180,000 – between the start of the project and its completion.