The Nick Huber Show

Ep 176: Real Estate Private Equity 101

Jan 6, 2025

Dive into the fascinating world of real estate private equity! Discover how these firms are structured and the intricate dynamics between general and limited partners. Learn essential terms like operating agreements and profit distribution that shape successful deals. Plus, hear personal anecdotes about recruitment challenges in the industry. Explore how risk assessments and market conditions play a crucial role in deal structuring. It's an enlightening journey into wealth-building through real estate!

15:38

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Quick takeaways

Real estate private equity deals involve general partners managing investments and limited partners providing capital, impacting profit distribution intricacies.

Understanding the various fees charged by firms, such as acquisition and management fees, is essential for evaluating overall investment returns.

Deep dives

Structure of Real Estate Private Equity

Real estate private equity firms typically consist of general partners (GPs) and limited partners (LPs), where GPs handle the investment and management responsibilities while LPs provide the capital. The GP raises funds from LPs to purchase real estate, often investing alongside them, which is known as co-investment. The key elements of profit distribution include preferred returns, or 'prefs', which dictate that a specified return percentage is paid to LPs before GPs receive any profits. For instance, in a deal with an 8% pref, LPs would receive the first $8,000 on a $100,000 investment before GPs earn any return.

Understanding Real Estate Private Equity Structures

2min

Understanding Real Estate Private Equity Structures

14min

Is real estate a good investment? The short answer is, yes! Now, when it comes to structuring a real estate private equity deal, there are some details that need to be considered. Here, I talk about how a real estate private equity firm is structured and give you some more good, need-to-know terminology.

This episode was originally posted on July 16, 2021

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