real estate fund Archives - Cherif Medawar

7 Ways Commercial Real Estate Investors Can Prepare for 2023

January 24, 2023January 24, 2023 by devteam

Commercial Real estate investing can be a lucrative and long-term strategy for growing and preserving wealth. The real estate market is cyclical. It goes up and down, but it always comes back up. While the current year has been challenging for many investors, savvy buyers still have plenty of opportunities to make money in real estate. Here are five tips for investing in commercial real estate in 2023: Diversify Your Portfolio: Diversifying your portfolio means spreading your investments across different types of properties and locations to reduce risk. This can include investing in different types of commercial real estate, such as office buildings, retail centers, and apartments, or investing in properties in different regions or markets. By diversifying, you can minimize your exposure to any one particular market or asset class, which can help protect your investments from market fluctuations and unexpected events. Additionally, by diversifying, you can also spread out your income streams and improve the overall performance of your portfolio. Stay Up to Date with Market Trends: Staying up to date with market trends is important for commercial real estate investors because it allows them to make informed decisions about their investments. This includes keeping an eye on economic indicators, such as interest rates and inflation, as well as industry-specific trends, such as changes in tenant demand or new construction projects. Keeping abreast of these trends allows investors to identify opportunities and potential risks in the market, and make adjustments to their portfolio as needed. This could include investing in areas that are expected to experience growth, or divesting from areas that are at risk of decline. Additionally, it also allows investors to prepare for any potential changes in the market and adjust their strategies accordingly. Look for Opportunities in Emerging Markets: Emerging markets, such as second-tier cities and suburbs, may offer opportunities for investors willing to take on a bit more risk. These markets can be less competitive and offer higher potential returns. Related: COMMERCIAL REAL ESTATE INVESTING: HOW TO GET STARTED Consider Alternative Investment Options: It’s important to have an investment strategy that includes more than just traditional commercial real estate assets. Investing in alternative assets such as syndications or real estate funds can provide a more diversified portfolio while still providing attractive returns over time on your personal projects. Partner With Other Investors: When you partner with other investors, it makes sense financially as well as lowering risk. You can pool your resources together to purchase larger properties or bring more capital into your deals. This also helps spread out risk so that each investor is only putting up a portion of their own money while still benefiting from all of their combined efforts. Consider forming a syndicate or real estate fund. (Regulation D) Invest in Your Education: Continuously learning and improving your skills as a real estate investor can help you stay ahead of the game. Attend training with experts whom you have verified are actually investing in the current market and read books and articles on the latest trends and strategies in real estate investing. Be Prepared for Challenges: The commercial real estate market can be volatile, and 2023 may bring challenges, such as economic uncertainty, changing consumer preferences, or increased competition. Be prepared to adapt and adjust your investment strategies as needed. And only work with investors, experts, teachers, mentors who have skin in the game and fully understand the current market. Final Thought In the end, your strategy is going to depend on your goals and ability to manage the money. In general, it’s important to have a target market in mind before you start investing. But don’t be afraid to branch out if need be; this is still a business based on real estate, after all. So there are plenty of opportunities for you to explore—you need to know where to look. There will be many opportunities in 2023 for people to break into commercial real estate. But there will also be challenges. Know how to FIND, ANANYLE, CONTROL, TIME & STRUCTURE the deals. Get the training you need. The money is in the structure.

Hedge Fund vs. Private Equity Fund: What’s the Difference?

December 28, 2022April 1, 2022 by devteam

key difference between hedge fund and private equity fund

Investors are often confused between the similarities and differences of hedge fund and private equity funds. In modern financial markets, many institutional investors allocate a substantial portion of their portfolios to alternative investments. It is often the case that hedge funds and private equity funds are included in the same alternative investment allocation. A hedge fund is an investment vehicle that uses both types of investments to achieve its goals. A private equity fund is a professionally managed investment partnership that pools money from other investors and invests in, or lends money to companies that the managers believe have growth potential. Through due diligence and research, Real Estate Fund Managers invest in specific segments of a company in hopes of adding value through operational improvements and restructure. Hedge funds A hedge fund is an investment fund that pools capital from accredited investors or institutional investors and invests in a variety of assets, often with complex portfolio-construction and risk-management techniques. It is administered by a professional investment management firm, and often structured as a limited partnership, limited liability company, or similar vehicle. Hedge funds are generally distinct from mutual funds, as their use of leverage is not capped by regulators, and distinct from private equity funds, as the majority of hedge funds invest in relatively liquid assets. Hedge funds can be classified according to certain criteria; for example: Investment strategy (directional/non-directional) Investment objective (absolute return/relative return) Net asset value (single-manager vehicles/funds of hedge funds) Investor type (institutional/high net worth) Hedge funds are an alternative asset class. That means they don’t trade on public exchanges like stocks and bonds do. Instead, hedge funds are usually private investment vehicles that sell shares only to accredited investors (people with a net worth greater than $1 million or annual income of more than $200,000 for individuals and $300,000 annual income for a couple). The value of hedge fund shares can be based on the value of the securities owned, plus or minus any cash or other assets held by the fund, minus any liabilities it has. Since many Real Estate Fund Managers use leverage (borrowed money) to amplify their returns, this can mean that just a small decline in asset values can wipe out the entire value of shareholders’ equity in the fund. Private Equity Fund Private equity funds are a type of investment vehicle that pools together money from various institutions and investors in order to invest in the private equity of startup or operating companies through a variety of loosely-affiliated investment strategies including leveraged buyout, venture capital, and growth capital. Typically, a private equity fund has a fixed life of 10 years, with the possibility of two 1 year extensions. Private equity funds are often classified by their stage of development (early-stage venture capital or growth capital), their geographical location (regional, national/multi-national), or their stage of maturity (opportunistic, value-added, distressed debt). Private Equity Fund Structure Private equity funds are organized as partnerships and structured in two parts: the Limited Partnership (or “LP”) and the General Partner (or “GP”). The LP is composed primarily of institutional investors and accredited investors who provide the bulk of the capital for the fund. The GP is composed of professional fund managers who make investment decisions on behalf of the LP. GP’s typically receive management fees as well as performance compensation through carried interest. There are many different types of funds that exist within private equity; some focus on acquiring certain types of companies while others focus on certain industries or regions. There are even funds that specialize in certain stages of financing (e.g., early-stage venture capital). Some funds will invest across multiple asset classes such as real estate, commodities, etc., which can make them more diversified than other types of funds. Key Difference between Hedge Fund and Private Equity Fund Hedge funds and private equity funds are two of the most significant investment vehicles available to investors. These funds differ from each other in many aspects. Some of the key differences between hedge fund and private equity fund include: Investment Strategy – The major difference between a hedge fund and a private equity fund is their investment strategy. A hedge fund invests in liquid assets, while a private equity fund invests in illiquid assets. Hedge funds invest in stocks, bonds, derivatives, currencies, etc. Private equity funds generally invest in private companies, real estate or infrastructure projects. Fund Size – Hedge funds are smaller than private equity funds. The typical hedge fund manages around US$100 million to US$300 million in assets under management (AUM). On the other hand, the typical private equity firm manages around US$2 billion to US$20 billion AUM. Moreover, large hedge funds can also manage more than $10 billion AUM as well. However, it is comparatively easier for a small hedge fund to raise capital than a small private equity firm. Investment Targets – The main difference between hedge funds and private equity is what they invest in. Hedge funds generally invest in financial instruments that can be bought and sold quickly on public stock exchanges, while private equity firms tend to focus on acquiring entire companies or large portions of specific businesses through leveraged buyouts (LBOs). Investment Risk – The private equity fund takes on more investment risk compared to the hedge funds. The investment of the private equity fund is highly illiquid. But the hedge funds can easily liquidate their investments. So, the hedge funds take low risk compared to the private equity fund. Lock-up and Liquidity – A hedge fund normally does not have a lock-up period or waiting period for investors to redeem their investments. However, a private equity fund has a lock-up period ranging from three to five years which is called an “illiquidity premium” or “time premium”. In other words, investors cannot redeem their investments during the lockup period. Similarities between Hedge Fund and Private Equity Fund Both hedge funds and private equity funds are types of alternative investments. A typical investor in a private equity fund is … Read more

How to Setup Your Own Real Estate Fund: Key Strategies and Structures

December 28, 2022February 3, 2022 by devteam

In its simplest form, a real estate fund is a structure established to raise equity for real estate projects. It can be set up as a debt or equity investment vehicle with multiple investors who jointly contribute capital to the fund in exchange for limited liability company (LLC) interests or as a limited partnership (LP) with a single general partner and several usually passive limited partners. In some cases, the fund may be established as an additional layer of ownership, but not a separate legal entity, where investors contribute capital directly to the underlying properties. Real estate funds have been growing rapidly in recent years as investors are looking for uncorrelated asset classes offering handsome returns. The increase in availability started with the JOBS Act for small business, but the structure also allowed real estate investors to use the strategy to get into bigger deals and provide a safe vehicle to protect their investors. Essentially, a real estate fund is a partnership, established by experienced investors, to raise money (also known as “equity”) for real estate projects. Similar to other pooled investments such as mutual funds and exchange-traded funds, private real estate funds provide investors with the opportunity to spread their risk by investing in a variety of different real estate assets rather than single properties. However, unlike investing in publicly traded securities, private equity funds are not required to disclose their holdings or financial performance so long as they raise under a specific amount of capital. These types of funds are focused on marketing to accredited investors. How does one go about creating a structure, blessed by the Securities and Exchange Commission (SEC) to raise equity for ongoing real estate investment? Funds are a reality in the world of real estate investing for those who find the right people to work with and to legally structure and file or register the structure. In its simplest form, a fund is a legal entity formed by people coming together with the desire to earn money through real estate investments. The purpose of this post is to go over some of the key strategies and structures you can use when forming a partnership to fundraise or raise equity for ongoing deals. Entity Types Private equity or debt real estate funds are investment vehicles that are created and organized to invest in a single specific sector or industry. The two most common private equity real estate funds and the structures that they utilize include a limited liability company (LLC) or a limited partnership (LP). Only IRS regulations can accurately dictate which structure is required by your specific situation, but in both cases, it is best to work with a CPA who can guide you through the entities that are best for you. A proper fund is also filed or registered with the SEC, and the sponsor or fund manager is responsible to follow strict guidelines enforced by the SEC. These rules and regulations protect the investor, the fund manager and the investment itself. A private equity/debt real estate fund can be structured as a portfolio of income-producing real estate that is owned by a fund OR it can be structured for one project at a time. The purpose of these funds is to yield returns for investors, typically through the purchase of distressed properties, affordable housing or other income-producing properties, like stand alone commercial buildings, land or even industrial. When establishing a private equity/debt real estate fund, there are several strategies and structures to consider before making a final decision. Admission and Withdrawal of Investors One of the basic considerations with private real estate funds is whether the fund should be an open- or closed-end fund structure. Both of these structures have their advantages, and the right choice will depend on multiple factors (such as liquidity needed, investor base, etc.). The open-end structure of a real estate fund allows investors to enter and exit the fund at regular intervals which also allows the sponsor to raise capital from a broad base of investors. It doesn’t allow investors to reimburse the fund or invest additional funds if they want to increase their exposure. it also exposes investors to greater tax risk. The closed-end structure, on the other hand, allows investors to increase their exposure by reinvesting distributions as well as receive returns of capital, which reduces an investor’s overall equity in the fund, which is a tax advantage. The third option is to create “side pockets” for the fund. This structure can also help manage some of the conflicts investors may have with one another by allowing them to participate in investments according to their preferences for risk or return. What is the difference between General Partners and Limited Partners? A general partner (GP), often called “Sponsor” limited partners (LPs) referred to as “Investors”. General Partners are responsible for managing and controlling the risks, taking care of day-to-day matters and approving decisions while Limited Partners make all investment decisions but usually have no responsibility for the management of the partnership. What roles do sponsors and investors play in the real estate private fund? The first step in forming a real estate private equity/debt fund is identifying the key roles to be played by all the participants involved. These include the sponsors or fund managers and their investors. You can structure your real estate fund as complicated or as simple as you like. Sponsors: The sponsor is a person/company that provides the legal structure of the fund, hiring an investment manager to run it, raising capital from investors, and providing ongoing support and project management. Investors: Investors provide capital to the fund, expecting that they will get their money back (plus interest) when they sell their shares. The sponsor is a firm/or individual which set up the fund. It is also known as an investment adviser, or a fund manager. The sponsor looks for potential deals and performs due diligence on them to determine if they are worth investing in. The sponsor has the … Read more