What Are the Benefits of Private Real Estate Investment Trusts?

October 28, 2022

Modern office buildings

Real estate continues to remain one of the most reliable sources of investment today. A private real estate investment trust is a commercial real estate fund that provides steady income for investors. It is a secured real estate income fund that purchases and owns a wide portfolio of income-generating assets that have the potential to produce above-market returns. The fund is secured by commercial real estate holdings in the United States. 

This fund aims to provide current income for investors and has immense potential for capital gains. Most investors find it difficult to look for passive investments that can generate income. This is where our fund makes all the difference. We have a passive fund that pays investors a tax-advantaged distribution, thus, filling the gap in income investments. 

How Do Commercial Real Estate Funds Work?

A private real estate equity fund works through a partnership that is created to raise equity for ongoing real estate investments. The creator of the fund is a general partner and a sponsor. The sponsor will raise equity through the investors who will invest the capital in this partnership. This capital and the money borrowed from the lenders or banks are invested in real estate assets. 

A majority of the private REITs adhere to a semi-blind or a blind structure, which means only one of a few of the assets has been identified at the time of investment. The investor will commit capital to a fund manager who will make many small commitments to real estate investments. Their process of syndication is similar to that of an individual property, the only difference is that the investor capital which is raised through syndication will be pooled together in order to purchase different properties, thus, providing efficient diversification for investors over a larger pool of assets. 

Why Invest In Private Commercial Real Estate Funds?

Experienced managers create an investment strategy and guide the use of capital in private real estate investment trusts. They also handle all the aspects of the fund’s performance. When you invest in a real estate fund, you diversify the real estate holdings in different markets and reduce the risk associated with the investment. Here are some reasons to consider private commercial real estate funds.

High yield: With private commercial real estate, you enjoy targeted returns ranging from 12% to 14% a year with a dividend yield of 10%. 

Low leverage: The fund will not borrow more than 60% of the valuation of the asset which ensures low leverage and the investment remains backed by commercial properties. 

Tax efficiency: You can take the advantage of pass-through tax treatment, specifically, interest expense and depreciation. 

Diversification: One of the biggest advantages of investing in commercial real estate is the spread of risk since investors have shares of multiple assets. 

Pooled resources: You get to access commercial properties and large investments through professional management. 

Investing in private commercial real estate funds is a great way to enjoy consistent, stable returns in any market situation while ensuring high diversification of the portfolio.

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Investing in the commercial real estate space is a great way to enjoy passive income while watching your investments grow. In an uncertain market like today, CRE investment can bring stability to your portfolio.