Hedge Fund Investing

12 Replies

I was recently contact by a guy who works for a Hedge Fund that wants to hire me to work with him to acquire real estate.

What is the purpose for these Hedge Funds when it comes to Real Estate?

Medium bannerfans 19631991  1 Gerald Harris, Vacant Land 54 | [email protected] | 704‑996‑6472 | http://land54.com

The purpose of hedge funds is to make money for their investors.  OK, and the managers who run the fund, too.

Some hedge funds are buying residential rental properties.  They might be looking to you to help them find and acquire properties.   OTOH, this may be some daisy chain where the person you're talking to doesn't really work for the fund but is hopping to tack a fee onto anything you find.

Jon Holdman, Flying Phoenix LLC

"What is the purpose for these Hedge Funds when it comes to Real Estate?"

Returns, that's it. Hedge funds market to accredited investors by promising excess returns not available elsewhere. Then they go out and try to make those returns happen. They are most often into buy and hold properties when it comes to real estate. I've never heard of them flipping SFH's but I could be wrong.

Thank you

I have an interview with the guy at this office on Tuesday.  He is looking to hire more acquisition specialists (property locators).  

I will keep you all posted but won't hold my breathe ;)

Medium bannerfans 19631991  1 Gerald Harris, Vacant Land 54 | [email protected] | 704‑996‑6472 | http://land54.com

Make sure you get everything in writing and vet the hedge fund and ask for references.

Joe Gore

@Gerald Harris  If they are a legitimate hedge fund and solicit investors, then it should have a private placement memorandum (also known as a confidential information memorandum) (normally referred to as PPM or CIM, respectively). The PPM will contain the hedge fund's business plan--goals, disclosures, etc. I doubt the hedge fund will give you a PPM to take home and review, but they may allow you to see it while at their office. If they do that, expect them to require you to sign a confidentiality agreement. 

As general background, hedge funds are normally structured as follows:

Management Company --> oversees and manages --> Fund (a collective investment vehicle). The arrangement is analogous to the Fund being a brokerage account and the Management Company being the trader. The Management Company is generally the manager or general partner of the Fund. 

If you have any questions regarding hedge funds, contact me. I am a hedge fund attorney and deal with these entities regularly. 

I am glad to see you posted this! I know a lot of hedge funds are acquiring properties across the country and I hope to see some more information on this post about them. I am interested to see how this turns out as well. Hopefully they want to acquire more properties through your supply and and it is very beneficial. Always wondered myself.

Best of luck!

I have been contacted by a few hedge funds and when I vet them. They do not pass my test.


Joe Gore

@Joe Gore What is vet them? Please elaborate what to ask also and why? I would really like to know how you handle this.

@Gerald Harris  

@Joe Gore 

@Jared K.  

Curious what were your take-aways from the hedge fund meeting, Gerald? 

Christopher and/or Joe, how do you vet a hedge fund? 

Thanks!

@James Burch

I ask for three references, and one must be bank references, and the other two must be someone they done business with, and if they are legit, they will provide references, and I question the references seeing if they are paid to lie.


Joe Gore


@Joe Gore 

 Hey Joe. I been out of the country, so I missed your question. Can you elaborate from which stance you are approaching a hedge fund? Example: investor, service provider, etc. There are different ways to vet a fund (depending on your stance) and limitations (depending on your stance). For example, a hedge fund would be strongly discouraged by its attorney to deviate from its private placement memorandum in discussions with investors. So, the vetting process is a bit limited from that stance.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you