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How Profitable Is Investing In Private Equity Real Estate

Ownership of property assets has many forms and shapes. One of those is private equity real estate funds, an asset class that brings together pooled private and public investments within the global property market.

By Flora MayerPublished 4 years ago 3 min read

Ownership of property assets has many forms and shapes. One of those is private equity real estate funds, an asset class that brings together pooled private and public investments within the global property market. This form of ownership gives high-net-worth investors to own property through equity and debt holdings. These investors are actively involved in the management of the property assets they invest in, but they are free to invest in as many assets and in as varied locations as they wish. Partnerships, as well as institutions like endowments, can also make these kinds of investments.

Private equity real estate funds invest in raw land holdings, existing property, or new developments. They inject cash to outdated or underdeveloped property and redevelop or modernize it for easier monetization. And in case an existing property is struggling, private equity revitalizes its potential for optimal profitability. The acquisition and financing of this kind of investment can either be direct or indirect.

Although private equity real estate has been in existence for about 3 decades now, it is in the 2010s that investors started seeing the great potential that this kind of investment carries. People initially invested only in core assets via private equity. Renowned real estate investors such as Asher Zamir, the founding CEO and Chairman of Zamir Equities, have contributed greatly in the fund’s transition from core assets only to investing in literally all properties in the entire real estate sector. This has brought in tons of profits in the industry, including:

1. Private equity real estate isn’t tied to stock market fluctuations

Many people compare and contrast real estate and stock markets when deciding the investment venture to pursue. They are both lucrative and fairly stable, but they definitely are not equal. For stock markets, economic events that aren’t primarily correlated to the market can cause unexpected fall and eventual losses. Private equity real estate is different in that it isn’t affected by market fluctuations that have nothing or little to do with real estate fundamentals.

2. Superior risk-adjusted returns

All you need is a workable strategy and a reputable private equity fund manager to create an exponential growth trajectory. A good fund will profit you immensely with great acquisition prices and a low probability of risk. Such firms diversify investments by running each one of the funds as separate businesses, such that if one property doesn’t bring enough business, the performing ones are not negatively affected by that. Most investment options do not offer this same benefit. The lower the risk and the higher the growth potential, the more superior that fund’s risk-adjustment returns are.

3. Straightforward profits

Monetary profits are more straightforward in private equity real estate than most people imagine. The cash distribution among partners is transparent and the payments are channeled directly to the investors’ accounts. A reputable real estate private equity firm will even return invested capital to the private equity investors in the event that the firm gets money through property sale or refinance.

4. They put investment partners first

Unlike other funds, real estate private equity only pays managers and other stakeholders after all investors are sufficiently compensated. Investment partners are the priority here. When it comes to long-term gains, these funds do not deduct taxes from the payments they make to their investors.

5. Returns for value-added can be considerably higher

Price appreciation is impressively good when it comes to private equity real estate. Annual returns can be up to 10% for core-plus strategies and even for core strategies, the returns never drop below 6%. These funds might not have a reputation in regards to flexibility and liquidity, but they sure have a strong price appreciation for value-added strategies.

6. They have an impressively long life cycle

Like we mentioned earlier, these finds are somehow immune to marketplace conditions and prevailing economic problems. That means that they have a longer life cycle than alternative investments such as traditional stock. They can keep drifting upwards for more than a decade and when the investor accumulates profits, he can always recycle them in the market.

Conclusion

We have established that real estate investment is among the most profitable wealth-building venture anyone can pursue. If you are looking for favorable ways to invest in real estate, methods that don’t require you to manage actively, then this is an ideal method to pursue. Choose to diversify your investment portfolios with private equity real estate.

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About the Creator

Flora Mayer

Flora is a young and ambitious who has been researching self-development for the past two years and is now off traveling the world. She helps tourists with free walking tours in London - so get in touch with her if you want a special tour.

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    FMWritten by Flora Mayer

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