With interest about the BAM fund only gaining momentum, we thought it would be good to put some basic info about the fund all in one place. Here, we’ll explain what it is, what it isn’t, how it works, and the best time to get in (spoiler: it might not be when you think)…
The Fund Is: Basically just the same as if you went out and bought (lots of) duplexes with us. You’ll get a K-1 at the end of the year, and you do own the real estate. You are a partner in the in the real estate.
The Fund Is Not: The fund isn’t a REIT. We often get asked if the fund works like a REIT (real-estate investment trust). The answer is no, it isn’t a REIT and you do own the real estate.
The Fund Is and Isn’t: The fund is and isn’t quite the same as a blind pool. Technically, the fund functions as a blind pool, in that you have less control over what we buy and we haven’t bought it all yet. The fund is also not exactly the same as a blind pool because we do have acquisition criteria, so you’ll know ahead of time what we’re looking for. At BAM, we would currently outline it something like this: newer properties built after 1995, B+,A- asset class range, light value add since we aren’t interested in heavy value add assets at this time, more than 180 units, etc. That way, you’ll have a general idea of what we plan to do with those funds.
Hypothetically, if we found a really good deal, but which didn’t fit the outlined criteria, we wouldn’t put it in the fund and would raise funds directly for that deal so people could decided yes or no. Although the fund is technically a blind pool, the provided criteria offer insight into what types of deals we want.
When to Get In: We’ve seen people with the assumption that joining the fund late is the best time, because they think it’s like getting the payout – but with a free ride: they’ll get the same returns as the person who was there on the first day. That isn’t really the way it works, and joining the fund early is actually the better bet. In fact, we’re paying out a preferred return of 7% from the time your capital is deployed. For the early bird who deployed their funds sooner, whose money was earning that return from Day One, that person is coming out the back end with more than the person coming in late. Essentially, you don’t want to lose the time-value of money, and the time spent having your money working for you.
If you’re looking for more multifamily investing insight, head over to ivanbarratteducation.com! You’ll find a free library of articles and videos featuring BAM founder and CEO, Ivan Barratt, and his knowledge and experience.