- Is there a predicted average return on my investment?
PRIMARQ is an exchange and not a direct investor, and as such, does not guarantee, speculate or predict on potential returns. PRIMARQ provides objective market information to investors through our data partners on current market conditions and appreciation potential, which is available in both the initial offering disclosures and portfolio management reports. PRIMARQ also provides certain analytical tools for investors to assess possible returns based on different variables, including appreciation rates and time horizons. Note that as a leveraged investment the return may be greater, or less than, the appreciation of the home. PRIMARQ will offer a few different economic characteristics in the structure. Certain transactions will involve structures that the returns will be solely based on property appreciation, i.e., capital appreciation. Other transactions in the future may include a preferred return to the investor and a lesser participation in the equity appreciation. But, as mentioned, there are no guarantees on the performance of an investment.
COSTS & FEES
- As a PRIMARQ investor, am I responsible for the typical payments and
expenses associated with purchasing and owning residential property?
No. Your investment is a “passive” equity stake. Your co-investor is the resident of the property and is solely responsible for mortgage payments, property taxes, insurance, home owner dues and maintenance costs.
- Why might I invest in real estate through PRIMARQ rather than thru REITs or
Currently, PRIMARQ investments are pure capital appreciation investments. In other words, the investor return rests solely on the appreciation of the property, and no current income is provided. PRIMARQ is currently focused on residential real estate, whereas, REITs largely consist of commercial properties, which tenants are obligated to pay rents. Under the tax code, to maintain its tax status and avoid taxes at the corporate level, REITS are required to pay out 90% of their income to shareholders, which largely consists of such rents. Consequently, REIT equity interests are generally valued on the current income (or yield) generated rather than solely on the sale, and appreciation of the properties within the REIT. So, look at PRIMARQ as providing access to a new category of real estate investing, i.e., residential vs. commercial, which should have a differing market return.
- Is there a minimum size of investment for each PRIMARQ transaction?
The minimum financial investment is $25,000 per transaction. With the nature of PRIMARQ’s process, this minimum investment may serve as the sole source of funds in an individual property or as part of a group in larger investment sizes.
- What is the timeframe of my investment before I can expect some degree of
Generally, real estate is not considered a liquid investment, i.e. buy it one day and sell it the next. Typically, real estate investments, whether direct or through partnerships, generally have a duration of 3-7 years in order to generate attractive returns. Publicly traded REITs, on the other hand, can be sold like any publicly traded stock, but the price changes are typically muted, as REITs are driven by yields. PRIMARQ exchange investments are structured to trade in its secondary market which will be periodically opened, so the investor can liquidate his investment at his discretion, even without the property being sold or refinanced.
- Will there be other investors in a property I invest in?
Depending on the size of the transaction, there may be various numbers of coinvestors. The minimum investment per investor is $25,000 so in the case of larger transactions there may be 2, 3, 10 or more. With our transaction structure, each investor will have a pari passu interest in the property.
- I belong to a real estate investment club that buys property as its own standalone
legal entity. Can our club be the co-investor?
Absolutely. Our market is open to approved accredited investors. If your real estate investment club consists of individual accredited investors, or complies collectively with the definition of “accredited Investor” pursuant to applicable securities laws, your club may participate in PRIMARQ investment opportunities.
- Can I use my retirement account funds to purchase real estate, including coowned
As PRIMARQ investments are unregistered (with the SEC) investments and many institutions have prohibitions on what may be included in your retirement account, including those unregistered, we suggest you consult with the institution that holds your account.
- Should I invest in markets close to me or in other geographic regions?
That depends on you. PRIMARQ will present investment opportunities on a national basis, which you can review. You may find markets that offer exceptional opportunities, which may include yours or elsewhere.
- Can I invest only in single properties or can I invest in portfolios?
Initially, PRIMARQ will be focused on single residential properties, and suggests that you build a diversified portfolio on your own. Soon, PRIMARQ will include predetermined portfolios, which may be aggregated by geographic region, price level, and other classifications. Additionally, we anticipate other classes of real estate, such as multi-family, commercial and other classes will be introduced, both on a single property or portfolio basis.
- Does PRIMARQ intervene if I want to invest in a property but not in a
potential home buyer (e.g., with a poor credit history or limited employment)?
While your investment is in the real property, you do consider who your “home owner co-investor” is, as they reside in the home, maintain it, and pay the expenses associated with ownership, such as mortgage payments, insurance and property taxes. Investments in the PRIMARQ exchange are initially packaged with a designated buyer and designated property. If you like the property, but not the buyer, you may decline the opportunity.
- As a co-owner, am I obligated on the mortgage as a co-borrower?
The PRIMARQ transaction structure enables you to enjoy ownership but not be a co-obligor on the mortgage loan.
- Regarding property taxes and other expenses, am I responsible for paying a
portion of them?
Your resident co-owner, under the PRIMARQ agreement, is responsible for maintenance expenses, property taxes and insurance. If however, property taxes are not paid, for example, you may intercede, which will adjust the equity participation, in your favor, between the resident and you.
- Do I, as an investor, get to live in the home at any point? Do I get to rent this
home – either for my personal use or to others?
No. The property is the primary residence of the home owner exclusively. Investment in the property does not convey any occupancy privileges. Since it is a primary residence, the owners may not rent the home to any party. This owneroccupied requirement is meant to protect the property since owner-occupied dwellings, by and large, are better maintained than rented dwellings.
- Do I have a say in which lender the buyer will work with for their mortgage?
No. You are not party to the mortgage and will not have a say in the lender selection. However, since the property will be used as collateral to secure the loan, i.e., have a priority claim on the property ahead of the equity holders (home owner and you), you will have the opportunity to review the terms of the mortgage, including the size of the payments, and may decide that the terms are unattractive, leaving you to decline the investment.
- Do I have a say in what types of home insurance the home owner must
secure to protect my investment?
Yes, to the same degree that a normal mortgage lender would. For instance, you may not require flood, earthquake or other insurance coverage if a mortgage lender normally would not require it. Once the insurance is secured, it is the home owner’s responsibility to maintain the insurance indefinitely. Failure to do so would be considered a default, similar to a failure to pay the mortgage and would allow you to accelerate the monetization of your interest or be credited for specific value. And in most structures, the investor will be an additional loss payee (behind the lender) on the insurance policy.
MANAGING AND PROTECTING YOUR INVESTMENT
- Is my investment through PRIMARQ willed to heirs?
Yes. As a PRIMARQ investor you hold an ownership interest that can be gifted or willed to heirs. Both of these options can be useful long-term investment and estate planning strategies.
- Will PRIMARQ provide me with updates on the status of my investment,
including its current and projected value?
Yes. PRIMARQ will make available to investors a quarterly portfolio report that provides information on the property and on the financial health of the residents. There will be a nominal annual fee for this service. Generally, an annual report will contain more comprehensive information than the quarterly reports.
- Do I have input if the owner wants to refinance the property and possibly
cash out some of his equity?
Absolutely. The investment was predicated on a certain level of mortgage debt on the property and a down payment (equity contribution) of the home buyer. When there is a change in the level or pricing of the debt or the level of original equity contribution, it can affect both the risk profile of the investment as well as ultimate return to the investor. As such, any type of refinancing is subject to review and approval of the investor.
- If a home owner wants to make improvements to the home, and fund it with a
line of credit, what is my role in the process?
As mentioned above, any change in the original capital structure of the home (i.e., amount of mortgage debt vis-à-vis equity value) will require the approval of the investor. You may find that additional mortgage debt is palatable if funds will go into improvements which raise the value of the home, and, net of the debt, your investment value is enhanced.
- Do I have a say in when the home is sold? Do I have a say in which offer is
accepted and at what selling price?
The sale of the home can happen at any time through your investment period, and is generally at the discretion of the home owner. You do have a say in what the property is marketed at as well as the final purchase price. Contained within the PRIMARQ structure, you as the investor do have a first-right-of-refusal on the outright purchase of the property at market value. Additionally, if the property is sold within a short period of time from the original purchase, you may be entitled to a preferred return.
- What access to the home do I have as an investor? What’s the process for
asking to enter the home?
As part of the equity sharing agreement, the home owner has exclusive occupancy rights. You will be entitled to limited visitation rights, but with certain provisions such as advanced notice and the extent of the visitation. PRIMARQ’s quarterly reports are intended to provide the investor with sufficient detail on the property, including updated photos, maintenance review, and other information as to minimize the level of visitation.
- Is the home owner permitted to rent the home to tenants? If the home owner
rents the home, do I have say in tenant selection?
No. The owner may not rent the home to tenants. Doing so is a violation of their PRIMARQ agreement. In the event that the owner does rent the property to another party, the equity sharing agreement provides for certain rights, preferences and privileges including due-on-demand clause or a reallocation of the equity split between the investor and the owner in your favor.
- If the home owner defaults on their mortgage payment, how does this impact
me and my investment?
If the owner becomes delinquent or defaults on his mortgage, which threatens the value of your investment, you have the right to intercede and maintain the payments. In this case, while still not an obligor on the mortgage, it may provide time for the home owner to catch up with their payments, but in such cases, your participation in the payments will force a reallocation of the equity split in your favor.
- Who manages my investment – PRIMARQ or a third-party financial
PRIMARQ investments are self-directed so you or your personal financial manager will oversee them. PRIMARQ does provide quarterly portfolio reporting on the performance of the asset.
- If a home is lost due to a natural disaster how do I collect on my investment?
You will be an additional loss payee on the property insurance behind the mortgage lender.
- How can I be sure that the home buyer/owner is making the payments on
As part of the quarterly portfolio reports, the investor will be informed as to the status of the mortgage. Further, the investor will be entitled to receive information directly from the mortgage lender.
- What if the home buyer/owner is not taking good care of the property?
Unlike a renter, the owner has a significant financial stake in the property and, therefore, is motivated to take care of the property and even improve its value. Nevertheless, the PRIMARQ agreement assigns maintenance obligations and necessary capital improvements to the owner. If for some reasons your owner does not take good care of the property, the PRIMARQ agreement considers this a default.
- What happens in a default?
The agreement includes certain rights and privileges to the investor in the case of a default. Remedies include a reallocation of the equity participation, the opportunity to purchase the home owner’s equity at a discounted price, and the ability to prompt the sale of the home.
- How does real estate co-ownership diversify my assets as a third-party
Some investors purchase homes and rent them while others immediately resell after making property modifications. PRIMARQ offers investors a third option, passive co-ownership opportunities with a smaller investment requirement - a minimum of $25,000 - than purchasing a home outright. This allows investors to spread their investments among several homes across the PRIMARQ marketplace, or diversify through other investment strategies.
PRIVACY & SECURITY
- Is my financial information protected? Is the PRIMARQ site secured?
Yes. Information security is a paramount consideration at PRIMARQ. We take the following measures to ensure that all our customer data is secure:
PRIMARQ employs some of the strongest methods of encryption commercially available today. All online activity involving personal or sensitive information is encrypted from the point it leaves your computer until it enters our systems.
- Customer ID & Password
When you sign up for online access to PRIMARQ, you create your own personal password. Together with your customer ID, your secret password allows you encrypted, secure access to your account.
- Timed log-off
The PRIMARQ exchange automatically logs you off after an extended period of inactivity.
To block unauthorized access, all our computer systems are protected by firewalls, electronic barriers that prevent unauthorized access to our networks.
- Employee access to your information
Just as we limit physical access to our work areas, we also restrict access to systems containing customer data and monitor system access continuously.
- Will home buyers/home owners know who I am? Can I be anonymous?
You may not be anonymous unless your investment is through an LLC or other legal entity. Either way, your relationship with the home buyer/home owner will not be a direct one. Any contact between you and the home buyer/home owner will be coordinated through a PRIMARQ manager or a neutral third party.
TAX & LEGAL
- Are there beneficial tax treatments by investing in PRIMARQ transactions?
PRIMARQ transactions may enjoy the benefits of investment property including participating in like-kind exchanges. Currently, PRIMARQ is pursuing a revenue ruling with the IRS to establish the position of PRIMARQ investments being eligible for such tax deferred exchanges. However, there is no assurance that we will be successful in such position. We advise you to consult with your legal and tax advisors on such treatment.
- How will my investment be treated on my tax return?
Since the home owner lives in the entire property, but only owns part, the IRS requires the occupier to rent your investor interest in the property. The home owner pays a small portion of the expenses earmarked as rent into an investor account. Then they pay an equal amount of property expenses out of this investor account. The net result is that you have some rental income offset by deductible property expenses, thus a zero net cash flow. This enables you to claim the property as investment property and receive investment property tax treatment.
- Should we have our transaction reviewed by an attorney or tax professional?
Yes. While it is PRIMARQ’s intent to standardize the investment documents, we suggest you review each document with your legal and tax professionals
- Does the IRS allow mixed tax treatment for one property?
Yes, the mixed tax treatment in the PRIMARQ equity share is permitted by the IRS. Internal revenue code §280a allows the occupier to claim interest in the property as their primary residence while the investor claims it as an investment property.
TRANSPARENCY & OBJECTIVITY
- Does PRIMARQ partner with home valuation companies or sites?
There are many valuation websites and data sources, and PRIMARQ does partner with several of these so that we can provide current and relevant data to you. In order to maintain transparency and objectivity, PRIMARQ does not appraise or set valuations for investment opportunities.
WORKING WITH HOME BUYERS AND HOME OWNERS
- Do I know who the home buyer or home owner is?
Yes, the buyer or owner will be identified since part of your investment decision is based on your confidence in the home’s resident to maintain the property and continue to support the ongoing financial and maintenance obligations.
- Will I have access to a HOME BUYER’S financial information?
Since you are making an investment based on (1) the house itself, and (2) the ability of the consumer to financially support the ongoing maintenance of the property, upon signing a confidentiality and nondisclosure agreement, you will be given access to the home buyer’s or home owner’s financial and employment records (e.g., financial history, assets, employment history, FICO scores, etc.). This is not unlike the information that a lender uses in qualifying buyers for a mortgage.
- Are BUYERS AND OWNERS scored or graded on creditworthiness?
No. PRIMARQ provides complete information for you to make your own decision without giving a recommendation. Just as NASDAQ provides historical stock performance data without making a recommendation for stocks on its market, so PRIMARQ is an objective, transparent exchange that does not make recommendations or endorsements for any property or person.