{"id":172941,"date":"2024-06-03T12:16:15","date_gmt":"2024-06-03T18:16:15","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=172941"},"modified":"2024-06-27T11:15:28","modified_gmt":"2024-06-27T17:15:28","slug":"four-types-of-preferred-equity-and-how-to-evaluate-each","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/four-types-of-preferred-equity-and-how-to-evaluate-each","title":{"rendered":"Preferred Equity is an Alternative Asset Class You Can Buy in Real Estate Right Now\u2014These Are the Four Types"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC5689401288\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">\u201cYou\u2019re investing in preferred equity? No thanks\u2014I don\u2019t invest in rescue capital!\u201d<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I\u2019ve heard this comment from prospective investors in different forms more than a few times in the past 18 months. My company, Wellings Capital, added preferred equity to our income fund in 2023. Seeing the power and limited time horizon for this opportunity, we\u2019ve recently added stand-alone sidecar pref equity investments as well.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Here, I\u2019ll attempt to <\/span><span data-preserver-spaces=\"true\">clear up<\/span><span data-preserver-spaces=\"true\"> some confusion about the types of preferred equity available. My goal is to help investors understand this investment <\/span><span data-preserver-spaces=\"true\">in order to<\/span><span data-preserver-spaces=\"true\"> make an informed decision about whether to invest.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I\u2019ve authored quite a few articles on this topic, which you can check out if preferred equity is new to you:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/preferred-equity-can-improve-your-returns-in-this-environment\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Preferred Equity is One of the Best Ways to Earn Double-Digit Returns in This Economic Climate<\/span><\/a><\/li>\n\n\n\n<li><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/why-preferred-equity-is-so-compelling-right-now\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Why Is Preferred Equity So Compelling Right Now?&nbsp; And Why It Will Be Gone Fast<\/span><\/a><\/li>\n\n\n\n<li><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/how-investors-are-buying-into-preferred-equity-to-lower-risk-and-raise-returns\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">How Investors Are Buying Into Preferred Equity to Lower Risk and Raise Returns<\/span><\/a><\/li>\n\n\n\n<li><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/getting-into-the-nitty-gritty-of-preferred-equity\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">A Deep Dive Into the Nitty-Gritty Details of Preferred Equity<\/span><\/a><\/li>\n\n\n\n<li><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/how-we-pulled-off-a-multifamily-deal-with-preferred-equity\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Here\u2019s How We Pulled off a Surprising Multifamily Deal Using Preferred Equity<\/span><\/a><\/li>\n\n\n\n<li><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/why-im-bullish-on-preferred-equity-right-now\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">I\u2019m Bullish on Preferred Equity Right Now\u2014Here\u2019s Why<\/span><\/a><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">What Preferred Equity Is <\/span>Not<\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Some investors say, \u201cMy CRE investment includes preferred equity. I get a preferred return before profits <\/span><span data-preserver-spaces=\"true\">are split<\/span><span data-preserver-spaces=\"true\"> with the syndicator.\u201d&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">A preferred return is <\/span><span data-preserver-spaces=\"true\">great<\/span><span data-preserver-spaces=\"true\">. Almost every <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/finding-multifamily-properties\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">multifamily<\/span><\/a><span data-preserver-spaces=\"true\"> and other <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/commercial-real-estate-fundamentals\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">CRE<\/span><\/a><span data-preserver-spaces=\"true\"> investment offers one. But that\u2019s not the same as investing in preferred equity.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">A preferred return means <\/span><span data-preserver-spaces=\"true\">that <\/span><span data-preserver-spaces=\"true\">common<\/span><span data-preserver-spaces=\"true\"> equity LP investors receive preferential cash flow and appreciation up to a certain level before these proceeds <\/span><span data-preserver-spaces=\"true\">are shared<\/span><span data-preserver-spaces=\"true\"> with the syndicator.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">For example, an operator\/syndicator may offer LP investors the first 8% <\/span><span data-preserver-spaces=\"true\">of<\/span><span data-preserver-spaces=\"true\"> cash flow from operations before splitting additional cash flow and profits 80\/20. If cash flow is below the 8% level in this example, investors typically accumulate deferred returns, <\/span><span data-preserver-spaces=\"true\">which <\/span><span data-preserver-spaces=\"true\">are<\/span><span data-preserver-spaces=\"true\"> paid up<\/span><span data-preserver-spaces=\"true\"> to that level before splits.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">To reiterate:<\/span><span data-preserver-spaces=\"true\"> What I\u2019m discussing is not that.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">What Preferred Equity Is<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Preferred equity <\/span><span data-preserver-spaces=\"true\">is positioned<\/span><span data-preserver-spaces=\"true\"> between senior debt and common equity in the <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/multifamily-capital-stack\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">capital stack<\/span><\/a><span data-preserver-spaces=\"true\">. It shares some of the features and downsides of <\/span><span data-preserver-spaces=\"true\">both<\/span><span data-preserver-spaces=\"true\"> debt and equity and is sometimes referred to as gap financing since it may fill a gap in the capital stack in turbulent (and other) times.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Preferred equity often has a current payment component (like debt) plus accrued and compounding upside (like equity). It is <\/span><span data-preserver-spaces=\"true\">quite<\/span><span data-preserver-spaces=\"true\"> expensive right now, <\/span><span data-preserver-spaces=\"true\">often<\/span><span data-preserver-spaces=\"true\"> costing syndicators in the mid-teens or above. <\/span><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> can provide <\/span><span data-preserver-spaces=\"true\">unusually strong<\/span><span data-preserver-spaces=\"true\"> returns for investors with limited risk. We <\/span><span data-preserver-spaces=\"true\">are <\/span><span data-preserver-spaces=\"true\">often<\/span><span data-preserver-spaces=\"true\"> funding<\/span><span data-preserver-spaces=\"true\"> preferred equity with <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/internal-rate-return-irr\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">IRRs<\/span><\/a><span data-preserver-spaces=\"true\"> in the 16% to 18% range right now.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Ironically, today\u2019s higher interest rates <\/span><span data-preserver-spaces=\"true\">that are<\/span><span data-preserver-spaces=\"true\"> compressing <\/span><span data-preserver-spaces=\"true\">common<\/span><span data-preserver-spaces=\"true\"> equity returns provide a need and context for more preferred equity, in addition to much higher returns for preferred equity investors.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Four Types of Preferred Equity<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">As I mentioned, our team has been seeking preferred equity investments for <\/span><span data-preserver-spaces=\"true\">well over a year now<\/span><span data-preserver-spaces=\"true\">.<\/span><span data-preserver-spaces=\"true\"> We\u2019ve developed a small but effective network of debt and equity brokers who bring us deals weekly. (We say no to almost every opportunity.) <\/span><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> gives us a broad window into the various <\/span><span data-preserver-spaces=\"true\">types of deals that are<\/span><span data-preserver-spaces=\"true\"> happening in this space right now.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Let\u2019s take a closer look at four common types of deals.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">1. Rescue <\/span><span data-preserver-spaces=\"true\">capital<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> is <\/span><span data-preserver-spaces=\"true\">probably<\/span><span data-preserver-spaces=\"true\"> the most widely known type of preferred equity <\/span><span data-preserver-spaces=\"true\">being marketed<\/span><span data-preserver-spaces=\"true\"> right now<\/span><span data-preserver-spaces=\"true\">.<\/span> <span data-preserver-spaces=\"true\">Rescue pref equity is used to <\/span><span data-preserver-spaces=\"true\">rescue<\/span><span data-preserver-spaces=\"true\"> a struggling deal. Unfortunately, <\/span><span data-preserver-spaces=\"true\">there are a lot of CRE deals<\/span><span data-preserver-spaces=\"true\"> in trouble right now, especially in the multifamily realm.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Many of today\u2019s struggling deals <\/span><span data-preserver-spaces=\"true\">were <\/span><span data-preserver-spaces=\"true\">originally<\/span><span data-preserver-spaces=\"true\"> financed<\/span><span data-preserver-spaces=\"true\"> using floating-rate debt. <\/span><span data-preserver-spaces=\"true\">These loans were more affordable than fixed-rate debt and often offered no defeasance (prepayment penalties)<\/span><span data-preserver-spaces=\"true\">. This gave<\/span><span data-preserver-spaces=\"true\"> syndicators a well-needed edge when acquiring often overpriced deals.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Floating-rate debt was quite popular during the bubble-like years leading up to the Federal Reserve\u2019s rate hike binge starting in spring 2022. <\/span><span data-preserver-spaces=\"true\">This debt was often acquired<\/span><span data-preserver-spaces=\"true\"> with a protective rate cap, which guaranteed <\/span><span data-preserver-spaces=\"true\">that rates<\/span><span data-preserver-spaces=\"true\"> couldn\u2019t rise above a certain level. Unfortunately, these caps have a limited time frame and must <\/span><span data-preserver-spaces=\"true\">be renewed<\/span><span data-preserver-spaces=\"true\"> at some point.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The sharp interest rate hikes, <\/span><span data-preserver-spaces=\"true\">coupled with<\/span><span data-preserver-spaces=\"true\"> cooling rents <\/span><span data-preserver-spaces=\"true\">and burgeoning operating costs,<\/span><span data-preserver-spaces=\"true\"> have caused significant distress for operators who assumed this type of debt.<\/span><span data-preserver-spaces=\"true\"> Rate caps, which cost tens of thousands or a few hundred thousand dollars at inception, are priced in the millions for renewals.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Many operators have paused distributions, and some are facing foreclosure. Their options include investor capital calls or an injection of preferred equity. Some are doing both.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">These syndicators are raising preferred equity to place in front of existing common equity. The source of this rescue capital is typically a third party, though some operators invite current investors to provide this rescue pref equity first.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I believe this<\/span><span data-preserver-spaces=\"true\"> can be the riskiest type of preferred equity.<\/span> <span data-preserver-spaces=\"true\">The deal is already in trouble<\/span><span data-preserver-spaces=\"true\">. There<\/span><span data-preserver-spaces=\"true\"> is no guarantee that floating rates will drop this year or next.<\/span><span data-preserver-spaces=\"true\"> Multiple factors could cause these deals to go south, and investors need to <\/span><span data-preserver-spaces=\"true\">be aware of<\/span><span data-preserver-spaces=\"true\"> this.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Though preferred equity <\/span><span data-preserver-spaces=\"true\">resides in a much safer position<\/span><span data-preserver-spaces=\"true\"> in the capital stack, a foreclosed deal could still wipe out investors\u2019 principal.<\/span><span data-preserver-spaces=\"true\"> Thankfully, preferred equity often has forced sale rights and management controls, giving investors some opportunity to save a struggling deal.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">My firm thinks rescue capital is a legitimate use of preferred equity. But our risk tolerance is quite conservative, and we haven\u2019t seriously considered a deal like this yet.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">(Note: Though I don\u2019t know of any examples of this happening now, rescue preferred equity may provide a <\/span><span data-preserver-spaces=\"true\">sort of<\/span><span data-preserver-spaces=\"true\"> predatory opportunity for its funders. By rescuing a struggling deal and negotiating takeover rights, the preferred provider may attempt to acquire the asset in the event of operator default. <\/span><span data-preserver-spaces=\"true\">By wiping out the <\/span><span data-preserver-spaces=\"true\">common<\/span><span data-preserver-spaces=\"true\"> and GP equity,<\/span><span data-preserver-spaces=\"true\"> the acquiring party may get the deal at a bargain price.)<\/span><span data-preserver-spaces=\"true\">&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">2. Development capital<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Real estate developers often use preferred equity to provide a portion of the capital in a ground-up development. The development process typically results in a significant asset value increase, which can provide the operator with the high value needed to refinance the debt, paying off expensive preferred equity <\/span><span data-preserver-spaces=\"true\">in the process<\/span><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This strategic move can be <\/span><span data-preserver-spaces=\"true\">quite<\/span><span data-preserver-spaces=\"true\"> accretive to the developer, who <\/span><span data-preserver-spaces=\"true\">will have to<\/span><span data-preserver-spaces=\"true\"> share a smaller portion of ownership with <\/span><span data-preserver-spaces=\"true\">common<\/span><span data-preserver-spaces=\"true\"> equity investors. <\/span><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> should also be accretive to the (resulting smaller number of) <\/span><span data-preserver-spaces=\"true\">common<\/span><span data-preserver-spaces=\"true\"> equity investors, who will own a larger proportional share of the deal individually.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Our firm loves the fact that developers successfully use preferred equity. <\/span><span data-preserver-spaces=\"true\">But like rescue capital<\/span><span data-preserver-spaces=\"true\">, for us, at least<\/span><span data-preserver-spaces=\"true\">, the risk is outside our tolerance level.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">3. Acquisition capital<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">Real estate syndicators increasingly utilize preferred equity to acquire existing CRE assets. As with development deals, <\/span><span data-preserver-spaces=\"true\">this preferred equity may <\/span><span data-preserver-spaces=\"true\">be used<\/span><span data-preserver-spaces=\"true\"> to<\/span><span data-preserver-spaces=\"true\"> fill a gap between debt and common equity.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The high cost of preferred equity makes it untenable for most stabilized \u201ccoupon-clipper\u201d deals. <\/span><span data-preserver-spaces=\"true\">It can be ideal, however, for <\/span><span data-preserver-spaces=\"true\">value-add<\/span><span data-preserver-spaces=\"true\"> deals that have<\/span><span data-preserver-spaces=\"true\"> significant potential upside.<\/span><span data-preserver-spaces=\"true\"> The higher appraised value resulting from value-adds should allow the syndicator to refinance <\/span><span data-preserver-spaces=\"true\">out<\/span><span data-preserver-spaces=\"true\"> preferred equity, giving GP and common equity investors a higher stake in successful projects.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Our firm believes that many <\/span><span data-preserver-spaces=\"true\">value-add<\/span><span data-preserver-spaces=\"true\"> acquisitions provide an ideal risk-reward ratio for investors. We have done <\/span><span data-preserver-spaces=\"true\">a number of<\/span><span data-preserver-spaces=\"true\"> deals in this arena and are eagerly pursuing more.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">4. Recapitalization<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">I mentioned that preferred equity is generally inappropriate for acquiring stabilized assets. However, owners sometimes use preferred equity to recapitalize <\/span><span data-preserver-spaces=\"true\">existing<\/span><span data-preserver-spaces=\"true\"> stabilized assets to provide capital for other uses. These uses could range from making improvements to raise revenue, acquiring other assets, or <\/span><span data-preserver-spaces=\"true\">just<\/span><span data-preserver-spaces=\"true\"> extracting profit for the owners without refinancing senior debt.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> can be <\/span><span data-preserver-spaces=\"true\">an especially<\/span><span data-preserver-spaces=\"true\"> low-risk use of preferred equity since the asset should have existing cash flow to support preferred equity payments. All things being equal, our firm believes this is an optimal use of preferred equity, and we have funded <\/span><span data-preserver-spaces=\"true\">a number<\/span><span data-preserver-spaces=\"true\"> of these investments.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Is Preferred Equity an Investment Opportunity for You?<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Why might you want to consider preferred equity? There are several potential reasons:<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">1. You\u2019ve invested in common equity but are concerned about returns and safety in this uncertain environment.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">2. You\u2019ve invested in debt<\/span><span data-preserver-spaces=\"true\">, <\/span><span data-preserver-spaces=\"true\">and <\/span><span data-preserver-spaces=\"true\">you<\/span><span data-preserver-spaces=\"true\"> recognize that pref equity offers a much higher potential return.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">3. You are looking for an equity investment with management control rights, forced sale provisions, and (often) a personal guarantee from the sponsor.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">4. You want higher initial cash flow than most common equity offerings <\/span><span data-preserver-spaces=\"true\">right now<\/span><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">5. You <\/span><span data-preserver-spaces=\"true\">are seeking<\/span><span data-preserver-spaces=\"true\"> a shorter hold time than many <\/span><span data-preserver-spaces=\"true\">common<\/span><span data-preserver-spaces=\"true\"> equity investments.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">6. You\u2019ve considered a diversified fund but opt for the clarity <\/span><span data-preserver-spaces=\"true\">offered by<\/span><span data-preserver-spaces=\"true\"> investing in a single asset.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Interested in learning more? Let\u2019s start a conversation here. Or feel free to reach out to me directly.<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_cff982c83dbc2e5862abf896f9ddd9d5\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_1709705b2c7520e28e4a38aaa3a5516b\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-theme-gold-light-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-gold-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Get the Best Loan Today<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Find trusted, <em><strong>investor-friendly<\/strong><\/em> lenders who specialize in your strategy. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<div id=button-custom-event-block_7adeee7c4876c03149968d9149c7c9dd class='button-custom-event'>\n      <a\n    href=\"https:\/\/www.biggerpockets.com\/business\/finder\/lenders\"\n        x-on:click=\"window.analytics.track('Blog Block | B2C Marketplace Lender Finder', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/four-types-of-preferred-equity-and-how-to-evaluate-each',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Find a Lender<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Marketplace-Blog-Blocks-Lender-v3.png\" alt=\"investor friendly lender, investor friendly real estate loans\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a\n    href=\"https:\/\/www.biggerpockets.com\/signup\"\n        x-on:click=\"window.analytics.track('Blog Block | Acquisition | Free Membership Signup', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/four-types-of-preferred-equity-and-how-to-evaluate-each',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n\n\n\n<p><em>Mr. Moore is a partner of <a href=\"http:\/\/www.wellingscapital.com\/\" target=\"_blank\" rel=\"noopener\">Wellings Capital Management<\/a>, LLC, the investment advisor of the Wellings Real Estate Income Fund (WREIF), which is available to accredited investors. Investors should consider the investment objectives, risks, charges, and expenses before investing. For a Private Placement Memorandum (\u201cPPM\u201d) with this and other information about the Wellings Real Estate Income Fund, please call 800-844-2188 or email invest@wellingscapital.com. Read the PPM carefully before investing. Past performance is no guarantee of futurebresults. The information contained in this communication is for information purposes, does not constitute a recommendation, and should not be regarded as an offer to sell or a solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be in violation of any local laws. All investing involves the risk of loss, including a loss of principal. We do not provide tax, accounting, or legal advice, and all investors are advised to consult with their tax, accounting, or legal advisers before investing.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u201cYou\u2019re investing in preferred equity? No thanks\u2014I don\u2019t invest in rescue capital!\u201d I\u2019ve heard this comment from prospective investors in different forms more than a few times in the past [&hellip;]<\/p>\n","protected":false},"author":214608,"featured_media":172945,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5527,7119],"tags":[],"class_list":["post-172941","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-commercial-real-estate-investing","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/172941","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/214608"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=172941"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/172941\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/172945"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=172941"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=172941"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=172941"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}