Considering High Cost Private Equity Investments

Private equity is among the few real estate investment strategies that have been on the “upswing” regardless of the 2008 crisis, and it continues to grow on a gradual basis.

With a lengthy history of both pooled investments and direct property ownership, the diverse and often high-stake/high return nature of private equity investments has attracted many individuals and companies throughout the years.

About Private Equity Investments

If you are a wealthy investor looking for a viable way of becoming more successful while investing in a worthwhile industry, private equity investments may be the best choice for you. This is mainly because private equity real estate is an asset class that focuses on larger projects involving equity and debt investments in private property.

The size and popularity of this real estate investment branch is extensive, especially in the US, where, in 2007 alone, almost 50% of the global private equity capital was raised. Florida itself is a place where private equity investments are thriving and you may often find Florida businesses which owe their success to capital obtained from private equity investments.

Main Strategies

Depending on the risk and return of an investment opportunity, it can be classified under one of four main private equity investment strategies:

• Core strategies – which usually focus on low-return, long term investment in multi-tenant rental properties, while obtaining predictable cash flow over a long term period.
• Core Plus strategies focus more on core properties that require some enhancement and can provide higher returns. The potential return and the risk factor are both more pronounced because of this.
• Value Added strategies have to do with properties that require extensive enhancement or operational improvement and may also include capital constraints. Value added properties have an even higher level of risk than those purchased under Core Plus investments.
• Finally, Opportunistic high risk strategies can present some of the highest potentials for large returns of all private equity investment plans. These include tactical investments involving properties that are being developed from nothing, focusing on raw land and niche property sector investments.

 Becoming an Investor

The private equity real estate investment market is definitely not for beginners. Those who want to become private equity investors will usually need a minimum of about $250,000, while many developers and private equity firms look for people who are willing to invest more than $5-10 million.

Also, even though minimum investments have been dropped lately to allow more investors to apply, there are additional fees and costs associated with investing your money in a fund of funds (a fund that holds the shares of a number of private equity investors) or in other private investment opportunities.

Despite all this, the potential of making a fortune from private equity is probably greater than that of any other large scale investment solutions, including stocks, bonds or even REITs.