Private Equity Real Estate Funds Are Alternative To Private REITs

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Private Equity Real Estate Funds Are Alternative To Private REITs

Tom Ott
Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

Hello All,

I am just trying to gather some information from other investors out here. I am wondering how many of you currently, or plan to, invest in a Private Equity Fund. It looks like they are becoming a better option than investing in a REIT. Some are even doing it to diversify their portfolios.

Call it Private Equity, Equity Funds, Syndication, or Crowdfunding, etc., these deals do not seem to be going away. With the SEC regulations that changed a few years ago, some of these deals can even be open to non-accredited investors as well. 

Are any of you looking into these, have you found many? What do you think so far? Forbes seems to think they are safer than REITs.

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Ian IppolitoBusiness Member
Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
7y

@Tom Ott , I invest in both publicly traded REITs and private real estate (private equity, syndication/crowdfunding). However, I should point out that some private real estate is actually structured as a REIT (Broadstone, Fundrise, etc). So if you want to compare contrast them you should really be comparing private real estate to "publicly traded REITs".

To answer question: you can find thousands of these kinds of private real estate deals, if you are interested in them. Personally I look at over a hundred a month. The more aggressive you are, the more potential choices there are (and the more conservative, the less).

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  • Account Closed
    Developer · Dallas, TX · Member since 2016 · 42 posts · 69 votes
    7y

    Hi Tom,

    Lots to unpack here but there are several ways to invest "privately" with real estate companies. REPE shops can have "funds" that you invest in prior to their beginning to deploy that capital. These funds can vary from value-add product to more core, stabilized assets. Obviously, the value-add funds have higher potential upside but more risk. The core funds are more of a guarantee but lower returns. You can also partner with smaller REPE shops by being an equity partner in an individual property. Some shops require accreditation because less partners equals easier disbursement of funds, models, etc but it's not a must. It's all a matter of how you want to diversify. Just have to do your homework on the company you're giving your money to. I work for a real estate private equity firm so can answer any other questions you might have. 

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  • Tom Ott
    OP
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    7y
    Originally posted by @Account Closed:

    Hi Tom,

    Lots to unpack here but there are several ways to invest "privately" with real estate companies. REPE shops can have "funds" that you invest in prior to their beginning to deploy that capital. These funds can vary from value-add product to more core, stabilized assets. Obviously, the value-add funds have higher potential upside but more risk. The core funds are more of a guarantee but lower returns. You can also partner with smaller REPE shops by being an equity partner in an individual property. Some shops require accreditation because less partners equals easier disbursement of funds, models, etc but it's not a must. It's all a matter of how you want to diversify. Just have to do your homework on the company you're giving your money to. I work for a real estate private equity firm so can answer any other questions you might have. 

     Thank you! Yes, I also am a part of a Private Equity Firm. I am just trying to see what others have thought of these kinds of investments and how many are actually doing it on here. 

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  • Account Closed
    Developer · Dallas, TX · Member since 2016 · 42 posts · 69 votes
    7y

    Ahh. I see. In that case, I can see the coming uncertainty in the economy in the next few years causing a move of powder, institutional/HNW/family money, from REITs to more "private" equity RE investments. There's a large access gap between the syndication/crowdfunding space and funds/private equity. That'll narrow as opportunity arises in secondary and tertiary markets in a slowing economy. 

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  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Tom Ott , I invest in both publicly traded REITs and private real estate (private equity, syndication/crowdfunding). However, I should point out that some private real estate is actually structured as a REIT (Broadstone, Fundrise, etc). So if you want to compare contrast them you should really be comparing private real estate to "publicly traded REITs".

    To answer question: you can find thousands of these kinds of private real estate deals, if you are interested in them. Personally I look at over a hundred a month. The more aggressive you are, the more potential choices there are (and the more conservative, the less).

    The Real Estate Crowdfunding Review
    View Page
    1Reply
  • Tom Ott
    OP
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    7y
    Originally posted by @Account Closed:

    Hi @Tom Ott - Great question for the group.

    Would be interested to hear your rationale for investing passively in a fund rather than in a syndication. In my opinion, investing in a fund provides a level of blind pool risk that you're otherwise not taking in a syndicated deal. In a syndication, you can evaluate the merits and underwriting of each opportunity presented to you, whereas in a fund context, there is no choice.

     Maybe it just depends on the funds. I have seen some funds where, if requested, you can get more background on the underwriting of the deal. Funds can also be much larger. I like/work with funds more since they allow for smaller projects (maybe just one building) or larger project (multiple buildings) 

    1Reply
  • Tom Ott
    OP
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    7y
    Originally posted by @Ian Ippolito:

    @Tom Ott , I invest in both publicly traded REITs and private real estate (private equity, syndication/crowdfunding). However, I should point out that some private real estate is actually structured as a REIT (Broadstone, Fundrise, etc). So if you want to compare contrast them you should really be comparing private real estate to "publicly traded REITs".

    To answer question: you can find thousands of these kinds of private real estate deals, if you are interested in them. Personally I look at over a hundred a month. The more aggressive you are, the more potential choices there are (and the more conservative, the less).

     Also a good point. So many of these are so similar (REITs, Private Equity, Syndications, Crowdfunding, etc) I guess it may just be best of investors to look at them case-by-case or fund manager by fund manager! 

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  • Michael Bishop
    United States · Member since 2015 · 401 posts · 394 votes
    7y

    @Account Closed agreed taht there is a "blind pool" aspect, but funds are a nice choice if you know and trust the Operators. If you've invested in or looked at a number of deals from the Operators, you know their underwriting principals and that they're conservative, like all or most of their past deals, etc.. then a fund can be a nice way to diversify say $50K or $100K investments across a number of assets instead of just one and actually lower risk that way.

    All depends on the fund structure and Operators though.

    1Reply
  • Nate Marshall
    Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 738 votes
    7y

    No matter what you are looking at you should make sure they're compliant with the SEC as well as Blue Sky laws when applicable. 506(C), CF and Reg A Tier 2's are becoming popular and they can be expedited and affordable for even startup funds. 

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  • Tom Ott
    OP
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    6y

    It looks like given all of the changes in the market lately, private equity deals are still a great way to get invested in real estate! 

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