RE Fund Question/Poll

5 Replies

Investors - I am gearing up for my first Real Estate Fund and have a quick question that will influence how I proceed. Would you be more or less likely to invest in a pooled fund with no control over hand picking particular properties in which to invest? I am interested in the psychology behind this and if I need to consider my target audience differently. First fund will be with those with a pre-existing relationship. 

About me - Experienced investor with residential and commercial projects. Strong historical returns to investors (20%+ avg). Team and prospective projects in place. In the process of setting up LLC, PPM and related documentation.


Marshall Downs

In general, I dis-prefer funds for the following reasons:

* Some GPs offer both individual investments and funds. My perception is that the funds will invest in the leftover slack when an investment doesn't fill.

* Prefer to diversify among management teams.

* Prefer to control location for state tax planning. If the GP invests in a broad region like "southeastern US", I generally avoid just due to tax complexity.

* Lack of control around timing. For example, let's say a fund fills $10MM. They are likely unable to invest the $10MM immediately, reducing the final IRR.

Whether any of this is actually true, I don't know, and probably varies on a case by case basis.

Thanks for the detailed answer @Bryant Fong . Couple notes on your responses:

  • Don't plan to offer individual investments and fund participation, however I see how a manager could fall into that
  • Great tip on state tax implications
  • We're starting small so hopefully hit subscription minimum early

Thanks again!