What You Need to Know: Private Equity Commercial Real Estate Partnerships
Private equity real estate partnerships are an approach to investing that uses pooled private investments and public investments to buy specific asset classes in the real estate industry. By pooling the investment funds, these commercial properties can be purchased by private equity funds and managed to maximize profits for all investors.
The goal is to watch market timing and identify ideal properties that can be purchased at low prices. Then, specific strategies can be used to renovate or upgrade these properties, creating strong cash flow through the income that continues to flow from each property.
A variety of asset classes fall under the umbrella of private equity real estate:
Our investment firm looks at the available properties in the real estate market to find the best opportunities. We have specific tools and strategies in place to evaluate the potential for each building. Investors can participate by putting in cash for the purchase of one or more of these properties.
Are Commercial Real Estate Partnerships Right for You?
If you don’t have a lot of experience in the commercial real estate industry, then partnerships can offer an excellent solution to overcome the steep learning curve. There’s no reason for you to start from scratch when you can leverage the experience and knowledge of a team that has been working in the investment industry for many years.
If you are considering an investment in commercial real estate partnerships, then it is important to evaluate the amount of cash you will be putting into the investment. In the industry, $250,000 is a common starting point for commercial partnership investing. Commercial real estate investments were dominated by institutional investors and high net worth individuals for several years, but newer investing models make it possible for smaller investors to get started as well. For example, real estate crowdfunding is becoming more common because people want to start small with their investments.
Another aspect to consider in this investment vehicle is that your cash will be tied up in the investment for a while. Commercial real estate investing is a long-term strategy. If you are looking for liquidity, then this investment might not be the right fit for what you need. Ask questions about the commitment window for your investment so you know the length of the “lock-up” period where you won’t be able to access your cash. Every situation is unique, which is why it is essential to understand the investment terms that the private equity firms are offering on a specific deal. Real Estate Investment Trusts (REITS) can offer more liquidity, but there are cons that can come along with them. We compare private equity real estate funds vs. REITS here if you are interested in learning more.
Benefits from Real Estate Private Equity Investments
Here are a few benefits you might enjoy if you choose these investments:
Easy Entry into the Industry: Private equity commercial real estate partnerships make it possible for you to get started as soon as possible, without spending too much time learning about the industry. It’s a win-win opportunity when multiple investors (limited partners) bring the cash and partner with team members (general partners) who know the commercial real estate industry and have a track record of locating high-quality real estate assets with the potential for high returns.
Prioritization of Investors: Private equity investors don’t have to worry about shareholders. Too often, public investments prioritize shareholders over the investors, which means that your profits could potentially be impacted. In private equity, portfolio managers are focused on the ROI for investors since there is no need to consider shareholders. These managers are typically paid based on performance, so they are incentivized to make sure that it is a win-win for all parties.
Appreciation Boosts Profits: When the purchase of an investment property is right, investors benefit from the property appreciation. As the property value increases, so does the investment. This long-term strategy can offer as much as 6 – 10% when the right core investment strategies are used by the real estate firm executing the asset management.
Future Cash Flow: Even though your money will be locked up for a while, you are investing in an opportunity that can create cash flow through the dividends paid over time. Evaluate the potential ROI to see what the possible cash flow will be on the investment.
Fee Structure Management: Certain types of investments can be expensive in terms of the fees that are paid to invest. Reducing fees helps to increase the value of the investment since the upfront fees cut into profit margins. Even though the management fees can’t be avoided, private equity real estate investing deals are usually designed by the fund managers with a reasonable and sustainable fee structure.
Hard Assets: Unlike stock investments, private equity real estate gives you the benefit of having hard assets. When the property is purchased, a tangible asset is added to the portfolio. So, you don’t have to stress about the possibility of an instant loss in value. As a result, investors feel good knowing that risk-adjusted returns are available.
It is important to consider your investment goals before you decide to jump in as a real estate investor into private real estate partnerships. Each situation is different in terms of the amount of money being invested and the length of the investment. As you work with financial advisors and industry experts, it is possible to maximize your investment to build wealth over time.
If you have any questions regarding the real estate investing industry, the team at First National Realty Partners is just a phone call away. We’re here to answer your questions and provide guidance about your investment opportunities. If you would like to know more about the benefits of private equity commercial real estate investing, you’re in the right place. Our team is built with the best industry leaders, utilizing proven strategies that create great investment opportunities for you. Contact us any time when you are ready to learn more about the possibilities of investing in commercial real estate.
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