Navigating Your Path: Frequently Asked Questions at New Paradigm Capital

Commercial property, also known as commercial real estate, encompasses a diverse range of investment opportunities aimed at generating profit through capital gains or rental income. This sector includes various property types such as office buildings, medical centers, hotels, malls, retail stores, and multifamily housing. Each segment serves distinct purposes within the broader commercial real estate market. These properties are managed through buying, selling, leasing, and strategic management to optimize returns on investment within the commercial real estate landscape.

It involves multiple investors pooling resources to collectively invest in a property. A sponsor or syndicator manages the investment, while investors contribute capital. This strategy enables investors to access larger deals and potentially higher returns than they could achieve individually.

Benefits include access to larger investment opportunities, portfolio diversification, potential for significant returns, and passive income through professional management.

Commercial real estate investors can benefit from several tax advantages:

• Depreciation: Commercial properties can be depreciated over a 39-year period, providing annual deductions that can offset income.
• Cost Segregation: This tax strategy accelerates depreciation on certain aspects of a property, such as fixtures and fittings, to enhance cash flow.
• 1031 Exchanges: Allows investors to defer capital gains taxes by reinvesting the proceeds from a property sale into another similar property.

Investing in commercial properties often involves larger-scale operations, which can lead to economies of scale in property management, maintenance, and leasing activities. This can mean lower costs per unit and increased efficiency compared to managing multiple single family homes.

An accredited investor is typically an individual or entity that meets specific financial criteria set by regulatory authorities, such as the Securities and Exchange Commission (SEC) in the United States.  This may include individuals with a high net worth, a certain level of income, or professional expertise in financial matters.

Accredited investors are typically individuals that meet one of the below criteria: 

• Net worth exceeds $1 million, excluding the primary residence.
• Annual income over $200,000 (or $300,000 for joint income with a spouse) in each of  the past two years, with the expectation to meet or exceed that level in the current year.
• Individuals who hold certain certificates, designations, or credentials, such as Series 7, Series 65, and Series 82 licenses.
• Individuals who are "knowledgeable employees" of a private fund.       

Yes!  There are multiple ways to invest in Commercial Real Estate.  Investors can use various accounts such as self-directed IRAs (SDIRAs), Solo 401(k)s, and real estate investment trusts (REITs) to invest in real estate. Each account type offers different benefits related to tax deferral and investment options.

The minimum investment typically starts at $100,000, allowing investors to participate in deals that would otherwise be beyond their individual purchasing capability.

Commercial properties typically encompass transactions involving businesses, including offices, retail spaces, and industrial sites. On the other hand, multifamily properties consist of residential homes or apartments leased to individuals or families. While multifamily assets offer a lower risk with high returns, other commercial asset types present a higher risk profile but often yield greater returns and feature longer lease terms.

Class A properties are high-end, luxury units with premium amenities, located in desirable neighborhoods with higher rents and lower yields. Class B properties are older than Class A and offer more affordable housing options with potential for value-add improvements.

Investments are usually structured through a limited partnership (LP) or a limited liability company (LLC), where investors are limited partners or members who provide capital but do not participate in the day-to-day management of the investment property.

The investment period usually ranges from 5 to 7 years, depending on the project and market conditions.

The expected ROI can vary based on property type, location, and market conditions. Projections based on historical performance and market analysis are provided in the offering memorandum.

Profits are typically distributed based on the investor's share of the syndicate, as outlined in the investment agreement.

Risks include market volatility, potential for tenant vacancies, and the impact of economic downturns on property values and rental income. Investors should review the risk disclosures in the offering documents and consult with financial advisors.