Limited Partners (LPs): what should you pay to be an investor in a private Real Estate deal?

General Partners (GPs): what should you charge for your work?

A thread on fees ---> Fees vary based on the risk profile of a deal.

More risk, higher fees; lower risk, lower fees.

Why?

There is more work and expertise involved in higher risk deals. The more difficult tasks you need to do, the more that can go wrong and take LP's hard earned $ to zero. But,

What is creative office?

Lots of chatter, but no one defines it.

Despite work from home & the "office is dead" narrative, developers are building it like crazy in LA.

Here's what creative office is & why investors are betting on it (1/10) 👇 1. One feature is outdoor space.

Below is a Gensler designed building in El Segundo, which recently landed Beyond Meat and Loreal USA HQs. The idea is employees take a break and connect with other departments outside. Obviously a big draw with the LA weather.

When you buy an asset, someone is selling.

Understand the other side of any trade you make.

Below are the 6 primary risks I see in LA Multifamily & how I am thinking about them / mitigating the risk 👇 1. Homelessness.

In 2020, City of LA had 42k homeless, up 16% from 2019.

Encampments make properties really hard to rent & hurt value. They come with trash, smells, & crime. Just the perception of homelessness makes LA less attractive for prospective newcomers.

I'm putting >90% of my $$ into LA Multifamily RE.

These are my Top 10 reasons why 👇 1. I've built a business that generates double digit returns in this niche with a comfortable level of risk.

I've done 10 deals and operated through a pandemic & 20%+ unemployment; I believe the return levels are sustainable through the inevitable challenges.

I recommend that you do your 1st real estate deal using your own capital - FHA route, house hack, etc.

HOWEVER, this is not the path I took. I raised outside capital for my 1st deal, which was a ~$1mm 4Plex.

Below on why & how + the results 👇 Why?

1. I didn't have the $$. I found a very profitable niche in LA & I live here; but even small deals here require significant upfront capital.
2. My entrepreneurship itch was too strong, I simply couldn't wait any longer.
3. I had enough confidence given I had worked in RE.

Below is a list of RE entrepreneurs from $200k to $1.6bn in AUM.

Each leap forward in your RE career brings massive changes to your lifestyle & responsibilities that are critical to understand.

Follow people 1 or 2 steps ahead of you so you know what it takes to get there. Before I dive into this thread, some notes:

1. This is not an appendage measuring contest. Founders build co's to a size that works for them.

2. The #'s here shouldn't be taken as fact. I did my best to compile via public info + founder convos.

Reach out to them for exact #'s.