Important Considerations for LP Investing in Real Estate Deals

The three key pillars for LP investing in real estate deals are first, evaluating the sponsor's ability to execute and alignment of interest with the LP; second, assessing the alignment of interest through understanding the waterfall, fees, and coin vests; and third, analyzing the property, location, rent comps, and overall deal structure. Many LPs lack familiarity with digging into marketing materials, deal books, and data rooms, often requiring guidance. LPs need to be aware of feeder funds and understand the fees, the entity they are dealing with, and the actual GP behind the investment. The reasons for investing through a feeder fund should be clear, and the incentives of the intermediary must be thoroughly understood to make informed investment decisions.