Before you invest in interests in a Limited Partnership (“Partnership”) sponsored by BuyProperly Limited (“BuyProperly”), you should consider the various risks associated with the investment. Below, we summarize those risks.
The risks provided here do not purport to be a complete explanation of the risks involved in this opportunity. An investment in the Partnership is speculative, involves a substantial degree of risk, and should be made only after consulting with independent, qualified legal, tax and financial advisors.
Returns on real estate investing are affected by a number of factors, including the following:
- general economic conditions;
- local real estate market conditions;
- changing demographics;
- supply and demand for premises;
- location and attractiveness of the premises;
- competition from similar or competing premises;
- quality of project management and property management services;
- failure or refusal of purchasers of the converted real estate properties to complete their transactions and other legal impediments to the completion of the sale of the real estate properties;
- the financial resources of tenants;
- changes in building, environmental, zoning, and other laws;
- changes in real property tax rates;
- changes in interest rates and the availability of mortgage funds, which may render the purchase, sale, or refinancing of properties difficult or impracticable;
- environmental cleanup costs and other liabilities from hazardous waste, mold, or indoor air pollution;
- uninsured casualties, acts of God (such as earthquakes, tsunamis, hurricanes, windstorms, floods), epidemics, war, terrorism, nuclear accidents, labor disputes, riots, and other factors that are well beyond the control of BuyProperly;
- property damage and business interruptions that may not be insurable, or may not be insurable at reasonable cost to the full extent needed to protect the real estate or its revenue-generating capacity;
- Development, redevelopment, and construction delays and cost overruns.
Any inability of the Partnership to sell any or all of the real estate properties will negatively affect the profitability of investments.
A Partnership may use third-party debt to finance investments in real estate properties. Leverage such as this increases the potential for capital gains and increased income, but at the same time increases the possibility of a property sustaining losses. There can be no assurance that the leveraging strategies employed by the Partnership will enhance returns. The use of leverage may reduce returns and further, the use of leverage can expose a Partnership to potentially greater losses than non-leveraged investments.
As interest rates fluctuate in the lending market, generally so too do capitalization rates (i.e., an estimation of returns calculated by dividing a property's net operating income by the current market value). This in turn affects the underlying value of real estate. In general, when interest rates rise, generally capitalization rates should be expected to rise. These changes can result in capital gains and losses at the time of disposition of a property.
Investments in real estate, and any investments with BuyProperly, are not diversified investments, and they may be more volatile than other investments. Unlike other asset management programs that may invest in diversified assets, BuyProperly’s investment strategy is concentrated in a single asset class: fractionalized real estate assets. This concentration maximizes the degree of an investor’s exposure to a variety of market risks associated with real estate. Any losses suffered as a result of a decrease in the value of real estate overall can be expected to reduce the value of your investments held with BuyProperly, and will not be offset by other gains that might occur if BuyProperly were to invest in underlying assets that were diversified.
The current market for properties that meet BuyProperly’s offering and investment objectives is extremely competitive, and many of its competitors have greater resources than BuyProperly. The BuyProperly platform competes with numerous other entities engaged in real estate investment activities, including individuals, corporations, banks and insurance company investment accounts, real estate investment trusts (“REITs”), real estate limited partnerships, the U.S. government, and other entities to list, offer, and sell real estate and real estate-related assets. Many of these competitors enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase. Competition with these entities may result in even greater demand for the acquisition of real estate and real estate-related assets, which would result in increased prices for real estate and real estate-related assets and/or in lower returns for related securities as competition drives rates down.
No regulatory authority has approved or expressed an opinion about any of the securities offered by BuyProperly. No offering of any securities issued by a Partnership has been registered with the Securities and Exchange Commission (“SEC”) or any other regulatory authority, and neither BuyProperly nor any BuyProperly affiliate or Partnership has been registered under the Investment Advisers Act of 1940, the Securities Exchange Act of 1934, or the Investment Company act of 1940. As a result, investors will not receive the protection of these laws or related rules and regulations when investing in a Partnership. In addition, while BuyProperly believes it and its affiliates and Partnerships have no obligation to register under any of those laws, a regulator could disagree, which could result in a significant disruption to our business.
BuyProperly investments have a lock-in period of 5 years. As a result, there is restricted liquidity during this period. BuyProperly will periodically review properties for an attractive opportunity to sell. Even at the end of the lock-in period, however, there may not be anyone willing to buy your investment at a price that you deem reasonable (or buy it at all). Any sale of your investment may take several months.
Investors are generally unable to make any changes to or withdrawals from their investments. Although investments may generate current income, the return of capital and the realization of capital gains to investors, if any, from an investment will generally occur only upon the partial or complete disposition or refinancing of such investment. It is not generally expected that this will occur for several years after the investment is made. Dispositions of investments may also be subject to contractual limitations on transfer, the desire to minimize or delay transfer or taxes, or other restrictions that would interfere with the subsequent disposition of such investments or adversely affect the terms that could be obtained upon any disposition thereof. As a result, there is a significant risk that an investor may be unable to realize its investment objectives by sale or other disposition at attractive prices or will otherwise be unable to complete any exit strategy.
BuyProperly reserves the right to dispose of any properties held by a Partnership and return net proceeds to investors in its sole discretion. Any such sale may result in an investor receiving back substantially less than was invested, and the timing of any such disposal may result in taxable income sooner than expected
Neither BuyProperly nor any of its affiliates provide tax advice and do not represent in any manner that an investment or its returns will result in any particular tax consequence. Prospective investors should confer with their personal tax advisors regarding the tax consequences based on their particular circumstances.
BuyProperly generally relies on third-party data when offering investments in real estate. While BuyProperly believes that data from third parties is reliable, it does not verify the accuracy and completeness of that data, and BuyProperly has no responsibility for any third-party data. If any data received by BuyProperly or provided to third parties is inaccurate, complete, or misleading, it could result in a loss of capital or diminished returns.
Past performance is no guarantee of future results. Any historical returns, projected returns, or probability projections provided by BuyProperly may not accurately predict actual future performance.
BuyProperly and its affiliates are subject to operational risks through breaches in cybersecurity. These breaches may include intentional or unintentional events, such as hacking, malicious software, breach of a third-party service provider’s systems, or misdirected email. Breaches may cause the loss of proprietary information, data corruption, lost operational capacity, or loss of investor information, among other things. Although BuyProperly seeks to reduce these risks through management systems, there is no guarantee that BuyProperly’s efforts will succeed.