Why Private Equity Real Estate Funds Are Superior Private REITs
1. Fees to Promote funds. Private REITs have been notorious for their high feesand many sharing 10% with brokers. This upfront expense becomes almost impossible to recoup and offers no value to the properties or investors. In fact the Financial Industry Regulatory Authority (FINRA) now requires private REITs to provide statements to investors showing this drop immediately. This disclosure and public awareness apparently had a negative impact with the public with private REITs raising almost eighty percent less in funds.
Meanwhile, more cash is flowing into private equity real estate, like Cardone Capital. I refuse to pay any fees or commissions to brokers, reducing ALL the cost of middle men. My company uses social media crowd funding to create awareness of the deals we are investing. That way ALL of the investors dollars are invested in the properties.
2. We Buy Then You Invest. With a REIT you invest money upfront before the properties are purchased and most of the time you dont know what property you are invested.
With the REIT the theory is you buy a diversified pool of properties, but in practice, REITs dont start off with a pool of properties and they must start paying dividends to their investors so, REIT managers have the propensity to invest in properties to generate dividends to pay the investors.
3. Tax Advantages – With a Real Estate Investment Trust the investor is invested in a convertible stock certificate unlike the private equity investment that makes the investor a partner in the property, with the full backing of the real property. In a private equity fund you are a partner in the property rather than a holder of a piece of paper.
The tax implications (to be covered in a bit) provides a massive benefit to the investor of a private equity fund over REIT.
4) Monthly Cash Distributions. Private REITs typically pay every quarter whereas a good private equity firm who manages cash flow and is personally invested in the properties is motivated to pay investors out monthly as they are motivated to pay themselves.
As a real estate operator investing in a property I want to be paid monthly. If their is cash flow I demand we distribute monthly to the investors.
5) Private Equity Mentality vs REIT Mentality – The mindset of of private equity fund manager is about investing in real property not the day to day value of a piece of paper created by the Wall Street smarter chemist.
In REITs profits take a back seat to Fees. REITs generate most fees through transactions and the SEC warns that deals can be struck just to generate fees.
The private equity fund manager is driven by finding the right real estate assets that can produce cash flow over long periods of time and create appreciation for the fund manager and the investors. Whereas the REIT mentality is fee driven whereby they get to keep their jobs and fees are based on trades not the asset itself.
6) Taxes – One of the great benefits of real estate investing is the number of tax advantages provided through depreciation and long term capital gains.
REITs do NOT share these tax advantages with its investors and instead each year send you a 1099 form, as though you work for them.
The private equity firm passes all tax benefits on to its investors, including depreciation and capital recapitalization, while REIT payouts are taxed at an investors higher ordinary income rate and no depreciation deductions are passed on.
Our offerings under Rule 506(c) are for accredited investors only.
FOR OUR CURRENT REGULATION A OFFERING, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(D)(2)(I)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO
For our anticipated Regulation A offering, until such time that the Offering Statement is qualified by the SEC, no money or consideration is being solicited, and if sent in response prior to qualification, such money will not be accepted. No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is qualified. Any offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date. A persons indication of interest involves no obligation or commitment of any kind. Our Offering Circular, which is part of the Offering Statement, may be found at
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