| My partner and I have been investing in real | | | | fund can provide the investor with an annual fiscal |
| estate, for ourselves and for others, for over 15 | | | | compass. Most funds will not stipulate to a |
| years. In that past, we created private placement | | | | projected return without having ample confidence |
| memorandums for individual projects and/or | | | | that it will meet its targeted goal. Real estate |
| properties and paid the returns created by those | | | | funds today average an annual payout between 9 |
| investments. In addition to being extremely labor | | | | and 13%. Such averages can provide stability in |
| intensive, we found that this method severely | | | | the mind of the investor, similar to the stability |
| limited our ability to move quickly on prime | | | | provided by a regular paycheck. Real estate |
| investments. After attending a seminar on | | | | investment funds can provide annualized fixed |
| mortgage pools, we decided that a real estate | | | | rates of return investors can bank on. |
| pool or fund was a more dynamic business | | | | In most cases, managers pocket the arbitrage |
| strategy, particularly when faced with ever | | | | above and beyond the targeted return. As such, |
| decreasing timeframes for acting on hot | | | | the manager obviously is motivated to not only |
| properties. The primary purpose of a real estate | | | | meet, but to exceed the targeted return. |
| investment fund is to pool resources to increase | | | | (Personally, I believe managers should split profits |
| the fund's buying power and leverage over that | | | | above the targeted return, but this is not the |
| of a single investing entity. Real estate investment | | | | industry-accepted norm.) For example, if a |
| funds have significant advantages over individual | | | | particular fund is targeting 12% returns for its |
| real estate investing for both the investor and the | | | | investors and the fund returns 18%, the fund's |
| manager. Four of the primary benefits are | | | | manager retains 6% while the investors are paid |
| outlined below. | | | | out 12%. Everybody is a winner. If a deal is win |
| 1) Ease of Doing Business - From the investor's | | | | win, then many more deals will come. Another |
| perspective, the investor simply completes a | | | | positive effect of meeting a targeted return goal |
| subscription agreement, becomes a member of | | | | is that confidence grows for the fund's |
| an LLC, and contributes an initial investment | | | | management team. This confidence usually results |
| (usually a minimum of $25,000 per fund). At that | | | | in referrals and thus more capital to be poured |
| point, the manager takes over. The investor no | | | | into the existing fund or a new one. |
| longer has to scour the market looking for | | | | 4) Higher Returns With Less Hassle - People are |
| potential investments. The investor must only | | | | busy, and have their own business and personal |
| decide whether to receive distributions paid by | | | | obligations. Investing the right way can be a full |
| the fund or to re-invest his earnings back into the | | | | time job. In the fund, the manager does the |
| fund. | | | | legwork for the investor. Any solution that |
| From the manager's perspective, the manager is | | | | promises double the returns of t-bills, bonds, cds, |
| free to target properties or projects that require | | | | and most municipals and still remains relatively |
| quick turnaround decisions and expeditious | | | | liquid is an attractive alternative in today's market. |
| underwriting. That power is derived from the | | | | Although no investment is bulletproof, real estate |
| scope of the investor's consent contained within | | | | investing offers tangible and legal protection for |
| the subscription agreement. | | | | your money. Real property is a much different |
| 2) Decreased Investment Risk - As an individual | | | | asset than paper. If a business fails and you own |
| investor, 100% of your money is potentially at | | | | its stock, you have little to no collateral to fall |
| risk with each and every investment. When the | | | | back on. A house, an apartment building, an office |
| investor invests in a pool, however, the individual | | | | or a piece of land are all tangible assets that |
| investor is sharing both risk and reward scenarios | | | | protect against potential losses. Investing in the |
| with other investors. Additionally, the investor will | | | | fund wraps up all the benefits of investing in real |
| have diversity in inventory. A competent manager | | | | estate while maximizing returns and minimizing |
| looks across different profit centers to ensure | | | | effort on the part of the investor. |
| that there is an ebb and flow of low to moderate | | | | Although there are other benefits for both |
| risk investments throughout the fund. In today's | | | | investors and managers in a real estate |
| market, there is no need to undertake high risk | | | | investment fund, these are the four primary |
| investments-there are simply too many good | | | | advantages. In today's market, there are other |
| deals out there to require any manager to take | | | | investment vehicles, but few can offer what a |
| unnecessary risks. Targeting 15%+ returns in | | | | real estate fund can. Real estate investing is the |
| today's market is not only realistic, but is a very | | | | most riveting and fluid industry in the world. Take |
| achievable goal. | | | | a look at a real estate fund the next time you |
| 3) Fixed Returns on Investments - Although no | | | | are looking to invest. |
| investment can guarantee returns, a real estate | | | | |