Real Estate Hedge Funds, good investment or not?

[Brian S.]

Hi BP...

I'm trying to decide if I should invest with someone I know who has their own real estate hedge fund company, but I'd like some advice first. Has anyone invested in something like this? How was the experience?

The idea sounds good, investing in a real estate machine already in place without the hassle of dealing with tenants, fixing things, dealing with city hall, etc. This person was a banker for 20+ years and intimately knows how to buy mortgages. But the fund can be rentals, fix/flips, new development, buying mortgages, or a mix of all of these. The real estate machine also includes, lawyers, banks, accountants, PM companies and so on. 

What I don't know well is the other side of the business...the hedge fund itself. Some of the questions I am going to ask are: 

How does the fund keep enough liquidity to meet allowed withdrawals? what is the level of liquidity? What is the holding period?

Are these tradeable shares or private equity? (I think its private but still want to confirm)

Is he registered with the SEC or Commodity Futures Trading Commission? Why or why not?

What kind of licenses does he have?

Is there any other important questions to ask? He has said that money invested under 250k will get a guaranteed return of 7%, no matter if its up or down. This sounds too good to be true...

If over 250k, it can be setup as a Reg S and the returns they shoot for are 10-13% but have typically been 13-18%. One of the best years they had was 43% returns and in a down market. However, on a 250k investment, it will take aprox 30k to setup the funds (about 11%), which seems extremely high to me.

The fund keeps 78% of the profits. 20% goes to the manager and 2% for costs. 

Any information would be much appreciated!

Regards,

Brian