VonFinch Growth Fund II

Projected Returns:

Investors (Limited Partners) in this fund will participate in the common equity position within the capital stack, similar to purchasing shares in a company. Common equity investors benefit from the highest upside potential but also take on more risk, as debt, preferred equity, and other senior positions must be paid first. The fund offers a tiered investment structure, providing incentives for larger check sizes through improved profit splits and reduced manager catch-up provisions.

Exact profit splits depend on investment tier (see below), but this fund has an 8% preferred return with a 4-5% projected annual cashflow. meaning all unpaid dividends to 8% will be paid either in later years or at exit (cumulative non-compounding). there is then a 100% manager catchup meaning the next 8% will go 100% to the fund manager up until a 15% IRR where profits will be split according to the investment tier below. Proceeds above a 15% IRR will be subject to a hurdle rate also defined below.

Keep in mind the preferential return is is based on a total ROI, or 8% of your original investment. IRR is a completely different equation that takes time into account. ( See Key Terms for definitions) 

Investment Tiers

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Typical Capital Stack: ( You are investing in Common Equity ) 

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Cumulative, Non-Compounding - preferred return means investors are entitled to receive 8% of their invested amount each year before any additional profits are split. If the full 8% isn’t paid in a given year, the unpaid portion carries over (“cumulates”) to future years. However, it’s non-compounding, so it doesn’t earn interest on the unpaid balance.

IRR vs ROI - ROI (Return on Investment) measures your overall profit as a percentage of what you initially invested. It doesn’t consider the time it took to achieve that profit.

IRR (Internal Rate of Return) also measures profit but factors in when those profits are received. It answers the question: “What average annual rate of growth did my investment earn when timing of cash flows is considered?”

• ROI = Total profit / Initial investment
• IRR = Annualized rate of return taking into account the timing of each cash flow.

Multifamily Growth Fund Investment – A real estate investment structure where multiple investors pool money to acquire several multifamily properties, aiming for both cash flow and appreciation..

Value-Add Strategy – A plan to buy underperforming or undervalued properties, then increase their income and value through renovations, operational improvements, or better management.

Net Operating Income (NOI) – The total income a property generates after subtracting operating expenses (like maintenance and utilities) but before mortgage payments and taxes.

Equity Multiple – The total amount of cash an investment returns to investors (including their initial capital) divided by the original investment amount.

Cash Flow – The net amount of money remaining after collecting rents and paying operating expenses, often distributed to investors as income.

Evergreen Reinvestment Option - Allows investors to automatically reinvest their distributions (income or profits) back into the fund, rather than taking the cash out. This creates a continuous investment cycle, potentially compounding returns over time, and is often found in open-ended or “evergreen” funds that accept new contributions on an ongoing basis.

Cost Seg & Tax Deductions - A tax deduction is an expense that reduces your taxable income, effectively lowering the total amount of taxes you owe. In real estate, these deductions can include depreciation, mortgage interest, property taxes, and operating costs. When combined with strategies like cost segregation, investors can accelerate depreciation to increase these deductions early in the ownership period, improving cash flow. Based on current cost set laws at 40%, you could deduct up 40% of your real estate investment from your total passive income. ( NOTE: not applicable to non passive unless your a real estate professional)

• Strong sensor with a history of exited above projected returns
• Target market is typically void of heavy institutional competition allowing acqustions to be less competitive
• Sponsor has a hostly of executing in the target market and an expertise in those states.
• Tiered investments for larger check writers
• relatively strong early cashflow for an add value fund at 4-5%
• Short term 3 year hold and evergreen reinvestment option.
• Target markets not subject to rent control.
• Sponsor proven experience executing large value add projects.
• Standard sponsor fees especially considering scope of projects.
• Great Cost Set Tax Benefits.

• 3 year hold period is tight to acquire update and exit properties
• Projected returns don't provide clarity on IRR vs Avg Annual Return
• Profit splits and hurdles are overly complex and complicated.
• Sponsor catchup is aggressive.
• Potentially Slower Growth: Some Midwestern markets (Iowa, Kansas, Missouri, Nebraska) may experience slower population and economic growth compared to coastal regions, limiting returns.
• Limited Liquidity: Secondary markets may have fewer buyers, making it harder to exit properties quickly if market conditions shift.

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The VonFinch Growth Fund 2 is a sophisticated multifamily value-add fund offering cash flow dividends, tax deduction benefits, and significant risk-adjusted upside. The sponsor has a proven track record and consistently outperforms projections. This investment is ideal for investors who aren’t fully dependent on dividends but want to place capital in a stable asset class while seeking above-market returns over a relatively short timeframe.