Easy real estate investing through a fund
There are several ways to invest in real estate with other investors or as a large group. Updated laws and the advent of crowdfunding opens the doors for many to the potential of making small investments in large institutional properties. Joint ventures, syndications, and blind pool funds are examples of private equity groups that give investors more opportunities than they can find investing on their own.
Below are three investment structures to consider.
Joint ventures
For the more active investor, a joint venture can be as small as two investors purchasing a fixer-upper house and sharing in all aspects of the investment.
A good ownership structure for a joint venture is a member-managed LLC with an operating agreement that clearly states who is responsible for each part of the company. Each investor, called a member, can share in the duties and responsibilities based on their skill or cash available.
A joint venture could be for a specific project property or can grow into multiple properties. Depending on the skills and resources of the investors, the group could move into the development of larger, higher-value real estate.
It is vital to understand the operating agreement clearly so that no one investor-member is doing all the work or contributing more of the funds.
Syndications
Syndications, also called special offerings, allow passive investors to be a part of a larger project with no effort.
The sponsor identifies the project property and secures it with a purchase agreement. The sponsor then assembles the group of investors to raise the money, which is usually on a tight timeline before the purchase agreement contingencies expire.
Syndications require certain disclosures and filings with the Securities and Exchange Commission (SEC). Hence, a sponsor usually needs to act quickly or have investors and a property in mind before starting the process.
Depending on how the sponsor registers with the SEC, they could allow only accredited investors in the syndication or include non-accredited. An accredited investor has specific criteria to meet, such as a net worth of $1 million or more (not including their personal residence) or income over $200,000.
Blind pool funds
A blind pool fund is similar to a syndication where you assemble a group of accredited investors, are passive, and must register with the SEC. The difference is that a blind pool fund secures the capital from the investors before the real estate.
Securing funds first allows a sponsor the time to pursue investors while keeping an eye for potential deals. There usually is a timeline that must be followed with an end date for securing investors and a minimum fund investment level to start operations.
Though this could be an arduous way to raise capital, it allows for the sponsor to be at the ready when the right deal that matches the criteria in the operating agreement is found.
Stone Marker Investments is a sponsor that I created, and I have a current offering for accredited investors. My conservative fund, Napa Valley Fund One, is a blind pool fund to acquire commercial real estate in the Napa Valley and beyond.
This fund is different because I will be using 100 percent cash — no financing. This allows me to act quickly, secure good deals, and provide a secure and stable investment. Contact me if you’re interested.
Burt M. Polson is the CEO of ACRESinfo.com, a commercial real estate brokerage company, and CEO of StoneMarkerInvestments.com, a private equity real estate fund. Call him at (707) 254–8000 or email burt@acresinfo.com and burt@stonemarkerinvestments.com.
