Sources of Capital

Numerous sources of capital are available to purchase real estate.

Equity Investors: 

Typically, equity investors are active in the operation of the investment, have an ownership interest in the property, and assume a relatively higher risk.

Trusts: 

A trust is a legal arrangement in which an individual (the trustor) gives fiduciary control of property to a person or institution (the trustee) for the benefit of beneficiaries. Trusts can be temporary, conditional, or permanent in nature. The trustee acts to benefit, and protect the interests of the person(s) called the beneficiary.  Relatively small groups of investors pool their assets in order to acquire larger properties and have successfully used Real Estate Investment Trusts (REITs). The trustee oversees management of the real estate.

Joint Ventures: 

Joint ventures are a contractual agreement joining two or more entities on a temporary basis for a specific project. These kinds of arrangements generally take the form of a partnership and are frequently used in large projects. These kinds of developments usually involve one entity providing management expertise and a financial institution that provides a bulk of the capital needed.

Syndications:

Syndications are used to raise real estate equity capital. A syndication is a public or private partnership that pools funds to purchase and develop projects. Private syndications are small and relatively free of government regulation. Public syndications tend to be large and are subject to federal rules and regulations. Syndications are often set up and promoted by a general partner who advertises the investment opportunity and assumes full financial responsibility. Other investors buy shares in the syndication and are limited partners. Syndication agreements are written so as to offer an unequal distribution of tax benefits as an enticement to investors.