Editor’s Note: The following was written by Laurie Thomas Vass, a registered investment advisor, and regional economist. Vass manages The Private Capital Market, a crowdfunding platform. Guest contributors’ opinions are their own and do not necessarily represent the views of Crowdsourcing.org
Seeing The Reg D Offering From Your Company’s Perspective as an Issuer of Private Securities
The reason that terms like “cap rate” and IRR are used in many investment documents related to real estate is that these terms have much more significance to real estate professionals than they do to investors.
Real estate professionals usually begin their analysis by trying to figure out:
- How to put as little of their own capital into the deal as possible,
- How to receive the same preferred return as investors on the firm’s own invested capital in the deal,
- How to structure the deal to receive a “promote” (carry) share of the remaining cash flow and profits,
- How to receive a commission related to property acquisition, plus fees related to loan financing and property management,
- How to receive some share of the tax benefits related to the real estate deal.