Multifamily Syndication Sale and Winding Down

[Michael Anspach]

Hi Guys, in process of selling first syndicated multifamily property.  While there is a ton of information about buying and managing, looking for some recommendations on the winding down process of a multifamily syndicated deal.

For example:

1.  How fast after closing to return investor money?

2.  How much to hold back temporarily for unexpected costs after sale?

3.  For how long?

4.  When to cancel insurance?

5.  When to close up LLCs?  (Operating and Mgmt)

All answers, suggestions and anything else to be aware of are all greatly appreciated.  Thank you!

[Kim Lisa Taylor]

Hi Michael, 

Your operating agreement may talk about how long you have to return investor capital contributions, but if it's silent on that matter, you will generally want to do it as soon as possible after the final accounting is done. Assuming there is enough to pay back investor capital contributions plus a share of profits, you should withhold money for anticipated or unanticipated liabilities before making any final profit distributions, which could mean you hold back some of the funds for 6 months or more. This is a business decision that you must make, as only you can imagine what might still be out there unpaid. While you can ask for a clawback from your investors if something unexpected arises, it may be difficult to get everyone to comply - but what do you do to those who don't? You should seek advice from your insurance agent on when to can cancel your property insurance. Once you are sure all of the company expenses have been paid, you should be able to make your final distributions and dissolve the LLCs.