FAQs - Let Us Answer Your Questions

FAQs - Let Us Answer Your Questions

Discover everything you need to know about our services.

General

What is REAL Company?
REAL Company ("RC") is a holding company that invests in, operates, funds and advises companies and funds in the real estate industry. Our 3X flagship fund is our main division. It has an initial capitalization of $100M with a primary focus on diversified, low-leverage real estate related investments. It offers opportunities in coliving, short-term, mid-term, and long-term rentals.

Why is it called "REAL" Company?
R - E - A - L is an acronym that stands for Renewed, Eco-friendly, Affordable Living.



In a broader sense, each letter is an expression of attitudes while designing our products and services:

R — Reimagined, Renewed, Revitalized, Radiating

E — Eco-friendly, Energized, Enlightened, Evolved

A — Affordable, Approachable, Accommodating, Aligned

L — Living, Love, Leisure, Laughter, Luxe, Lasting

C — Community, Convenience, Confluence, Convivial, Cheer

What do you do?
RC specializes in identifying and investing in high-potential real estate related investments and combining them in new, unique and synergistic ways to the benefit of RC's investors.

Why do people choose to do business with you?
Investors choose RC for our track record in real estate and our unique approach to diversified and low-leverage strategies.



Leverage: We recommend investors choose the ALL CASH or LOW LEVERAGE investment tracks. We also offer a track that employees typical leverage for investors that are focused on wealth building over wealth preservation. Our unique approach produces high cap rates, so that a zero or low leverage track still provides attractive returns.



*Leverage must be prudently managed based on an investor’s individual needs and tolerance for risk. We recommend consult with their financial and other professional advisor when making leverage decisions.



Experience: We have collectively completed over $1Bn+ in U.S. and international business/commercial real estate transactions. We have experience in most asset classes including, but not limited to, land development, office, multifamily, single family, fix & flip, short-, mid- and long-term rentals. We have limited experience in-house when it comes to investing in hotel, retail, special use properties, and medical properties. If you are looking for such opportunities there are likely better service providers to meet your unique needs.



Relationships: We have a network of in-house and local partners, experts in their respective local sub-markets. We have worked with them in the past or know of someone who has. We leverage our network to find deals, raise capital, and create performance that lends others to refer more business to us.



Scale: We offer an opportunity for you to participate in a unique, multi-layered way to invest in a unique combination of real estate investment strategies, while allowing you to choose your own leverage level.



Speed: We can deploy large amounts of capital at a velocity that would be hard to replicate without our infrastructure for deal flow and operating partners, while not having to manage the individual pieces yourself.



Underwriting: Our unique operating model provides us with an edge that is hard to replicate. Operating multiple business models to manage each asset at its highest and best use results in more assets qualifying against our high cap-rate criteria. This increased deal flow allows us to say "no" to a large percentage of deals and only take on deals that we think are going to be strong performers.

Are you a real estate investment firm?
While some of our in-house or partner experts have real estate brokerage licenses or advanced accreditations in commercial real estate, we are not a real estate brokerage firm.

How is REAL Company different, and what's unique about it?
REAL Company's approach is unique because it is a diversified, low-leverage investment strategy focused on coliving, short-term, mid-term, and long-term rentals as well as operating company investments. This unique blend ensures stability, control and lower risk exposure.

What is the difference between a REIT and a Fund?
With a REIT, investors commits money upfront before properties are purchased and typically does not know what properties are invested in. REIT investors evaluate the company’s general ability to perform, rather than the company's investment strategy and operating model and its specific properties under management. REITs are similar to stocks (and in some cases, they are available to invest in via the stock market).



In theory, an investor buys a diversified pool of properties, but in practice, REITs don’t start with a pool of properties. They start by paying dividends to their investors. REIT managers have the propensity to invest in properties quickly to generate dividends to pay investors. This immediate need for returns can lead to making less than optimal investments.



On the other hand, REAL Company seeks to make investments that provides all the conditions of a great investment, including cash flow, operating model competitive edge, location, and view of the future.

What are the benefits of investing in a fund?
The obvious benefit of a fund is diversification. An investor a REAL Company fund specifically is diversified across multiple assets and geographies, rather relying on a single property to appreciate or single or operating model to produce returns. REAL Company's portfolio will contain hundreds of separate investments spread across a broad geographic area and multiple different types of properties and operating models, which can lower risk, compared with just owning a single asset or being concentrated to a single geography. Better performing properties or investments mute the effects of a poorly performing investments. Additionally, investing in a fund can help eliminate the stresses, hurdles and management overhead that you’d find when investing on your own.

Investment Criteria

What size deals do you work on?
Our focus is on $250,000 to $10M for individual properties. We can go higher and lower as needed based on the opportunity and investor interest.

What types of properties do you invest in?
We invests in a variety of real estate assets, including single family, multi-family, office, flex spaces and other property types that meet our return criteria.

What asset classes do you invest in?
We generally limit ourselves to asset classes for which our specialized knowledge provides a competitive edge based on the operating model we will deploy, such as residential real property, small to medium sized office, flex spaces and both equity and debt investments into real estate related operating companies. We do not invest in other specialized asset classes such as hospitals, hospitality repositioning, car washes, amusement parks, or racetracks.

How do you select your investment opportunities?
All potential investments go through rigorous underwriting to increase the likelihood that the projected performance of an investment meets our investment criteria.

What markets does REAL Company operate in?
We operate in diverse real estate markets across the US that support strong demand a mix of our operating models: coliving, short-term, mid-term and long-term rentals. Some of our operating partners (in which we may hold an equity position) operate nationwide.

Investment Process

How do I start investing?
Request an invite through our website. We will schedule a private consultation to ensure that your goals are aligned with the kind of opportunities we offer. Once approved, you'll receive detailed instructions on how to proceed.

How does RC ensure the security of my investment?
RC ensures the security of your investment through compliance with SEC regulations, rigorous risk management practices, and transparent reporting.

What is the expected holding period for investments?
The expected holding period for investments in the REAL Company is 5 to 7 years, allowing time for asset appreciation and strategic exits for our operating partner investments.

What happens to the money when an investor funds an investment?
Funds can be wired directly into the subscription account of the fund you invested in. The funds are typically held there until deployed towards the purchase of equity or debt interests in real property and operating partners.

What if there is a downturn in the economy?


Selling during an economic downturn “locks in” losses. This is why we personally prefer, and recommend you to take low leverage or all cash positions for at least a portion of your investment with REAL Company. We seek to operate high cap rate / cash flow properties based on the robust economics of our mixed operating models, making it less likely that we need to be in a position to sell during a downturn.

Can investors cash out of an investment at any time?


No. By their nature, real estate and operating company investments have a longer time horizon than stocks or bonds. REAL Company's investments are structurally illiquid because it can take a considerable amount of time to convert a real property or an equity position in an operating company into its cash equivalent. However, we allow for the sale or transfer of an interest in an investment. Please contact our team for more information.

What kind of support do I get as an investor?


You will receive regular updates, performance reports, and access to our team of experts for any questions or assistance you may need.

Returns & Performance

What kind of returns can I expect?
Returns vary based on the specific investments and market conditions. Historically, RC 3X Fund has provided consistent, high returns through diversified real estate investments.

How often will I receive updates on my investments?
You will receive quarterly updates on your investments along with performance reports and insights from our team. For some asset groups, reporting is available on a monthly basis. For others, it is semi-annually. This includes updates on refinances, acquisitions & dispositions, and others. All updates will be sent via the investor portal and/or via email.

What are the potential returns I will make?
The potential returns on investments made in REAL Compant can very and depends on your chosen leverage level. Our investments seek to generate "Net to Investor" returns of 5-10% for the "all cash" no leverage path, 8-12% for the low leverage (<50% LTV) and 10-15% for the typical leverage (<75% LTV) paths. These return goals relate to capital invested in real property. Additionally, a certain portion of capital will be invested in operating partners. These returns are volatile, but expected to be higher and raise total performance by another 3-10%, depending on your overall leverage level. Combined returns can range from 8-25%. Investors may opt-out of operating partner investments.



* Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable. They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur. Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein.

Are there any fees associated with investing through REAL Company?
REAL Company charges various fees for its services. Depending on the investment offered, there may be acquisition, disposition, asset management fees, as well as a performance fee. Additionally, there may be costs associated with the operation of the assets that are charged by REAL Company, which are reflected in an asset's projected returns. The exact fees charged depend on the investment and are disclosed in your investment portal.

Can I reinvest my returns into new opportunities?
By default, returns are reinvested into new opportunities. Investors have the option to withdraw their returns.

How soon after I invest can I start making money?
You can start seeing returns shortly after your investment, typically within the first quarter. The exact timing may vary based on the specific investments and market conditions.

What is a preferred return?
Preferred return is a designated amount of distributable cash to be returned to the investor before any return splits. For example, if a deal has a preferred return of 7%, then the first 7% returned on an investment (distributions from cash flow or capital events such as refinance proceeds or disposition) will go entirely to the Limited Partners.



REAL Company offers preferred returns, which depend on leverage level and type of investment chosen. Please refer to your investment portal or our team for details.

What is the internal rate of return (IRR)?
The internal rate of return (IRR) is a key metric in real estate investments used to assess the relative return of an investment over time. It represents a compounding, annualized percentage return, that when applied every year, results in the total return earned over the lifetime of an investment.



IRR can vary depending on the length and timeline of an investment (e.g. if an investment is exited after a short period of time at a higher value, the IRR increases dramatically. While a high return was generated over a short period of time, the investment now no longer generates returns and you need to re-invest the capital returned to you). IRR is also heavily influenced by leverage. Higher leverage will yield a higher IRR, but exponentially increases the risk of loss of some or all of your capital.



In summary, high IRRs create the illusion of a strong investment, but that does not mean it is a good investment. That's why we prefer to speak in terms of Cap Rate, which expresses the annual profitability of an investment before fees. See more under "Cap Rate". Generally speaking, unlike IRR, the higher the CAP rate, the better an investment.

What is an equity multiple?
The equity multiple (EM) is a key metric in real estate investments used to evaluate the total return on an investment. It measures how much money an investor will receive relative to their initial investment. Essentially, the equity multiple tells you how many times over the initial investment is expected to be returned.



The formula for calculating the equity multiple is:

[include graphic to right]



where:

— Total Cash Inflows are all the cash distributions received from the investment, including rental income, refinancing proceeds, and the final sale of the property.

— Total Cash Outflows are all the cash invested in the project, including the initial investment and any additional capital expenditures.



For example, an equity multiple of 2.0 means that for every dollar invested, the investor expects to receive two dollars in return. An equity multiple greater than 1 indicates a profitable investment, while an equity multiple less than 1 indicates a loss.



To put this in numbers, if the total equity invested is $100,0000 and all cash distributions received from the investment total $200,000, then the equity multiple would be $200,000 / $1,000,000, or 2.0X.

What is the cap rate?
The capitalization rate, commonly known as the CAP rate, is a metric used in real estate to assess the expected rate of return on an investment property. It is calculated by dividing the net operating income (NOI) of the property by the total cost invested to purchase and generate revenue from the property. The CAP rate helps investors determine the potential profitability and risk of a property.



The formula for CAP rate is:

[include graphic to right]​



where:

— NOI (Net Operating Income) is the annual income generated by the property after deducting operating expenses but before deducting taxes and financing costs.

— Property Value is the current market value or total cost invested to purchase and generate revenue from the property.



A higher CAP rate can indicate higher risk (much like IRR), because high cap rates are often generated by properties in less desirable markets (with lower appreciation), higher vacancy rates, from properties in poor condition that require significant repairs, poorer quality tenants.



REAL Company's investments feature high CAP rates because of our unique combination and mix & match of operating models (coliving, short-term, mid-term and long-term), resulting in a 50%+ uplift in gross recents collected on a property.

What is a split, and what is a waterfall?
Split: In real estate and private equity investments, a split refers to the distribution of profits between different parties, such as the general partners (GPs) and limited partners (LPs). The split determines how the profits from an investment are divided once the project generates income or is sold. These splits are predefined in the partnership agreement and can vary depending on the terms negotiated by the parties. For example, a common split in real estate might be an 70/30 split, where 70% of the profits go to the LPs and 30% go to the GPs. The split can also change based on achieving certain performance metrics, which is where waterfalls come into play.



Waterfall: A waterfall structure is a detailed framework used in investment agreements to describe how and when distributions are made to investors and partners. It outlines the sequence and priority of payouts from the investment's cash flows, typically prioritizing the return of capital and preferred returns before sharing any remaining profits.



A typical waterfall structure might include the following tiers – this is just an example. REAL Company's tier depends on the specific investment an investor participated in.



1. Return of Capital: Investors receive their initial capital back before any profits are distributed.

2. Preferred Return: Investors receive a preferred return (often a fixed percentage) on their invested capital before profits are split according to the agreed-upon split ratio.

3. Catch-Up: The general partners may receive a catch-up distribution to bring their share of profits in line with the agreed-upon split ratio once the preferred return has been paid.

4. Profit Split: Any remaining profits are distributed according to the predetermined split between the investors and general partners.



Example of a Waterfall Structure:

1. Return of Capital: 100% of distributions go to LPs until they have received their initial investment back.

2. Preferred Return: 100% of distributions go to LPs until they receive a 7% annual return on their invested capital.

3. Catch-Up: 100% of distributions go to GPs until they have caught up to 30% of the profits (ensuring the GP's share matches the agreed split after preferred returns).

4. Profit Split: Remaining profits are split 70/30 between LPs and GPs.

The waterfall structure aligns the interests of the general and limited partners, ensuring that the GPs are incentivized to achieve higher returns for the investment, as they receive a larger share of the profits once certain performance benchmarks are met.



REAL Company typically deploys a 70/30 straight LP/GP split structure, with an increase to 60/40 if returns exceed 15% IRR Net to Investors.



Following the payout of any preferred return, the “split” will be paid to both the general partners and limited partners, using a pre-determined payout structure. The split is how the returns are allocated between the GP and the LP after the preferred return has been reached. If the split is 80% to the LP and 20% to the GP, after the preferred return is paid, then the LP and GP split all other proceeds from distributions or capital events 80/20.

That split can change if a certain hurdle (or waterfall) is achieved. Example: A split could be 80/20 then go to 70/30 once the IRR hits 17%. Any returns higher than 17%, will then be split 70/30 LP/GP. The changing of the split by hitting milestones is a waterfall. In some cases, a firm might have multiple hurdles or waterfalls.

What does NOI mean?
Net Operating Income (NOI) is a crucial metric in real estate that measures the profitability of an investment property. It is calculated by subtracting the operating expenses from the total income generated by a property. NOI provides an estimate of the property's ability to generate positive cash flow.



The formula for NOI is:

[include graphic to right]



where:

— Gross Operating Income includes all the revenue generated by the property, such as rental income, parking fees, and other miscellaneous income.

— Operating Expenses include costs such as property management fees, maintenance, insurance, utilities, property taxes, and other day-to-day expenses required to operate the property.



NOI is used to evaluate the profitability and performance of an investment property and is a key component in calculating the CAP rate. It helps investors compare different properties and make informed investment decisions.

Requirements

Who is eligible to invest in REAL Company?
Accredited Investors (those with a net worth exceeding $1M excluding your home, or an annual income exceeding $200K for individuals, $300K for joint income, for the past two years) are eligible to invest with us. We may explore opportunities for non-accredited investors in the future.

What is the minimum amount I can invest with?
Our target investment amount is $100,000. Certain offers may carry a lower or a higher minimum investment amount.

How do you verify customer identity?
To comply with regulatory requirements, REAL Company requires potential investors to provide personal information to verify your identify and accredited investor status. For verification, we use document and online account verifications with third party technology partners.

How do you verify customer identity?
To comply with regulatory requirements, REAL Company requires potential investors to provide personal information to verify your identify and accredited investor status. For verification, we use document and online account verifications with third party technology partners.