Real Estate Investing with Private Equity

Private Equity funds and Syndications are structured to invest funds from private investors, pooling their funds together to scale to large investment opportunities. This can be for a variety of investment types, including real estate.

The general concept for private equity funds and syndications are similar with the primary difference being Private Equity Funds may not yet have specific investments, or may include many investments, while a Real Estate Syndication is typically structure for a specific investment that is well defined in scope and money is raised for that specific investment.

We describe both here under the general description of “Private Equity” but there are differences and nuances, and legal structures can vary. Additionally, every fund and syndication will be different from others and structure based upon the goals and objectives of the fund or syndication manager.

These investments are formed and managed typically by General Partners (GP) or a Syndicator, who make all decisions and manage day-to-day operations of the fund or syndication. Individual real estate investors may then participate as a Limited Partner (LP) or Syndication Investor, participating only as a passive investor. These passive investors have no input or say in the operations and decisions made by the GP or Syndicator.

With the size and scale of a fund or syndications capital, private equity is typically involved in large scale real estate activities such as large residential development or commercial multi-family investments.

Accredited Investors

This type of passive investment may require, depending on the structure of the partnership or syndication, that investors be accredited. An accredited investor is required to provide evidence of a minimum level of net worth or annual income. The purpose of this is to ensure that the investor has some level of investment sophistication and understanding of risk. This can be a controversial topic since some argue that this limits the ability of smaller investors to participate in potentially high yielding investments.