Understanding Preferred Returns
Many have heard the term preferred return but I believe that it is often misunderstood.
Bruce “Apt-GuySM” Petersen Delivers Unvarnished, Authentic Real Estate Education
Many have heard the term preferred return but I believe that it is often misunderstood.
Way back when I was trying to raise money for my first deal, a guy I barely knew told me he wanted to be my first investor…and he gave me twenty-five cents. If only all my fundraising had been so simple.
Let’s assume that you’ve decided to take the leap into syndication, and you want to sponsor (lead) a deal. That means you need to find a property, assemble a team to assist you with the many complex parts of the process, and meet investors who want to come on board.
As long as you expect to do another syndication or raise money for any other endeavor, you will always need to present yourself appropriately. Sure, one day, you may reach a point where you’re completely done doing deals—as in, you’re ready to hang on until your existing properties sell, put the money in the bank, and live off of it the rest of your life.
When investing in multifamily properties everyone understands that a large reason for it is to increase value to hopefully someday pull all or at least part of your investment back out through a refinance. This is one of the biggest benefits to investing in multifamily and commercial real estate.
If you’re considering syndication, you may wonder exactly how you’ll make money. What fees will you take? How much can you expect to earn?
Don’t take your eye off the operational ball just because you’re selling it will bite you at some point.
So the toughest part of property acquisition is “be available”. That’s it. That’s the biggest headache issue. Be available.
Nothing works without the investors. Don’t do a deal without investors lined up – if you get the deal, but then you can’t raise the money, you have no deal.
It’s nice, be transparent and set expectations that you know you can hit
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