Understanding Common Real Estate Investment Structures: A Guide for Accredited Investors

Explore some of the most common real estate investment structures and how they work.

1. Syndications

Syndications are the bread and butter of our business model at Excelsior Capital. This structure allows a group of investors to pool their funds to purchase equity in a property, with the help of a sponsor like ourselves.

Key players:

• General Partner (GP): The GP (syndicator) handles the groundwork, including property identification, analysis, financing, due diligence, and closing.
• Limited Partners (LPs): The LP (investor) provides the capital and receives a share of the profits.

Benefits for investors:

• Access to institutional-grade properties
• Passive income opportunities
• Potential tax advantages through pass-through entities (usually LLCs)
• Preferred returns on investments

2. Joint Ventures (JV)

While not our primary focus, it’s worth understanding Joint Ventures as they’re common in the commercial real estate world. JVs typically involve partnerships between two or more large firms or high-net-worth individuals.

Key features:

• Collaboration between parties with different expertise (e.g., one provides capital, the other provides operational know-how)
• Governed by a Joint Venture Agreement outlining roles, responsibilities, and profit-sharing
• Often structured as Limited Liability Companies (LLCs)

3. Tenancy-in-Common (TIC) and Delaware Statutory Trusts (DST) Structures

TICs and DSTs are two important structures in real estate investing, particularly for investors looking to utilize 1031 Exchanges. At Excelsior Capital, we have experience with both structures and work closely with investors to determine which best suits their investment goals.

Key features of TIC structures:

• Allows up to 35 investors to hold fractional ownership in a property
• Each investor has equal voting rights, regardless of investment size
• All major decisions require unanimous agreement

Key features of DST structures:

• An appointed Trustee governs the investment, limiting investor control
• The trustee does have limited powers to exercise over the investment, leading many in the industry to coin the phrase “The Seven Deadly Sins” of a DST. Learn more in our blog post here.

4. Real Estate Funds

Real estate funds are investment vehicles that pool capital from multiple investors to invest in a portfolio of real estate assets. These funds are typically managed by professional investment managers and can offer investors exposure to a diverse range of properties.

Two common types of funds:

• Open-end funds: These funds continuously accept new investments and allow redemptions. They typically invest in more liquid assets and offer greater flexibility for investors to enter or exit.
• Closed-end funds: These funds have a fixed lifespan and a specific capital-raising period. Once closed, no new investments are accepted, and the fund focuses on acquiring, managing, and eventually selling its portfolio of properties.

Key features:

• Professional management: Experienced teams handle property selection, acquisition, and management.
• Diversification: Funds often invest in multiple properties across various sectors and locations, spreading risk.
• Access to larger deals: Pooled capital allows funds to pursue institutional-grade properties.
• Potential for regular income: Many funds aim to provide consistent distributions to investors.
• Varying investment minimums: Depending on the fund, minimum investments can range from relatively low to quite high.

While our firm focuses on deal-by-deal syndications, understanding real estate funds can provide valuable context for how different investment structures operate in the market.

Our Approach

At Excelsior Capital, we specialize in syndication, offering accredited investors the opportunity to participate in carefully selected, institutional-grade real estate investments. Our deal-by-deal approach allows you to choose specific properties that align with your investment goals, while our experienced team handles all aspects of the investment process. We believe that an informed investor is a successful investor, which is why we’re committed to providing you with clear, comprehensive information about our investment structures and opportunities.

If you’re an accredited investor looking to diversify your portfolio with high-quality real estate assets, we encourage you to reach out to our team. Let’s discuss how our syndication model can help you achieve your investment objectives and build long-term wealth through real estate.