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November 12, 2021

Terminology for Multifamily Investing

LP is a Limited Partner also known as a passive investor. A limited partner has a limited liability.Ā  LP is basically responsible for bringing capital to the deal, and earn true passive income.

GP means a General Partner/ an operator/ or a syndicator. GPs are responsible for qualifying the market, meeting with brokers, finding the property, coordinating the prospectus, attracting investors, operating the property. Enormous amount of responsibility on their shoulders. šŸ˜µā€šŸ’«Ā  GPs also participate as LPs as well in most cases.

šŸ‘‡ Residential multifamily

is 2-4 units in one building.

šŸ‘‡ Commercial multifamilyĀ 

any residential property that is more than five units.šŸ¢Ā  The main difference from residential multifamily is how they are valued. A residential property is generally valued based on the recent sales in the area, a number of bedrooms/ bathrooms/ school districts so on, while a commercial multifamily is valued as a business, therefore the stream of revenue generated by the property is a significant factor how much a multifamily property is worth, in addition to the recent sale comparables. That’s why cash flow is crucial.

Syndication

means “pooling resources” together amongst a group of people to go after a particular asset, it can be a hotel, a yacht, the White house lol. Short term rental in the White House. šŸ§ šŸ˜†

Accredited Investor

is an individual with an income of at least $200,000 per year or a $1 million net worth (without your primary residence). For married couples, combined income more than $300,000 per year.

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