Скачать или смотреть How To: Break Into Commercial Real Estate

If you keep up with Sterling CRE market analysis, you know that commercial assets are hard to come by in some of Montana’s hottest markets, like Missoula and Bozeman. So, how can you get into commercial real estate investment when direct ownership isn’t an option? How does that work?

Sometimes, limited partnership investments can be the right choice for investors.

Essentially, limited partnership entails investing in an existing CRE project that is run by a general partner, or GP. The GP takes on the financial risk for the entire project, while the limited partner only takes on risk in proportion to their investment. The flip side is, of course, that the limited partner (or LP) also reaps the rewards in proportion to their investment.

LP deals are a good way to diversify your portfolio across asset types, as well as limit your risk. Instead of putting one large down payment on a single commercial building, you can instead spread that amount across multiple deals.

A drawback to LP investing for some is that, like a mutual fund, you relinquish control of the day-to-day decision-making for the property. In that way, an LP investor is truly passive. That’s desirable for some investors, but not for others.

So what do these deals look like? Most will have a business plan and prospectus. Generally, this outlines the big picture, like a plan to build apartments, lease them up to stabilization, re-finance and then hold for 7 years. Or, maybe it’s built, stabilize, then sell within 18 months.

Some LP deals are available an existing project instead of a new build. That might look like the partnership acquiring the project, remodeling the interiors, improving management, refinancing and holding for 5 years. Then, the project would be sold.

There are numerous business plans out there. Finding an offering is actually becoming easier as more of these become available.

But how do you get out of one of these deals? We’ll cover that in our next video on limited partnerships.