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REAL ESTATE EDUCATION

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ADVANCED REAL ESTATE CONCEPTS

Portfolio Diversification Benefits of Real Estate

Portfolio Diversification Benefits of Real Estate By Adam Gower Ph.D. A New Approach for Your Portolio   Registered investment advisors, or RIAs, have long scoured the market for the top performing securities to invest in on behalf of their high-net-worth clients. Historically, RIAs would invest in some combination of stocks, bonds, and cash as a means of balancing a client’s portfolio. Investing in commercial real estate was never really an option, per the regulations established…

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Cap Rates: Ultimate Real Estate Investing Guide

Cap Rates: Ultimate Real Estate Investing Guide By Adam Gower Ph.D. I‘ll tell you right now this is probably one of the most used terms in real estate and it is one of the most misunderstood. As much as it’s used, it always astonishes me how little cap rates are understood. If you ask 10 brokers, ” what is a cap rate?” they might give you a basic idea of what it is. But if…

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Real Estate Sponsor Fees and the Role They Play

Real Estate Sponsor Fees and the Role They Play By Adam Gower Ph.D.   When looking at any real estate deal with a new sponsor, understanding the principals’ motivation for why they are doing a particular transaction is a key consideration. The best sponsors will be able to articulate clearly the strengths and weaknesses of the opportunity and will demonstrate to investors that real estate is their passion, that they are experts at creating value…

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Real Estate Waterfalls – The Simpler the Better

Real Estate Waterfalls – The Simpler the Better By Adam Gower Ph.D. Real estate syndications use what are called ‘waterfalls’ to structure and compensate principals and investors, and these are seldom altered once a developer creates a structure that works for them. There are, however, a vast array of ways in which waterfalls are designed and this article examines the most common, as well as looking at some of the most complex.   Simply stated…

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The Impact of Crowdfunding on Real Estate Waterfall Structures

The Impact of Crowdfunding on Real Estate Waterfall Structures By Adam Gower Ph.D. Waterfall calculations are used by real estate developers to calculate distributions to investors during the life cycle of a project and there have been some notable shifts in how they are structured since the emergence of real estate crowdfunding – with significant implications.   One trend is the way investors are driving how sponsors underwrite and present their deals, the tail wagging…

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Real Estate Waterfall Outliers

The Outliers of the Real Estate Waterfall World By Adam Gower Ph.D. When investing in a real estate project as a passive partner, cash distributions are calculated and made using what is called a ‘waterfall,’ most of which are structured according to reasonably uniform standards, and some of which are more creative.   According to Investor Management Services (IMS), the industry-leading investment management technology company for commercial real estate, commonly seen waterfalls offer an 8…

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Sponsor Fees and the Motivating Factor in Real Estate Investing

Sponsor Fees and the Motivating Factor in Real Estate Investing By Adam Gower Ph.D. When looking at any real estate deal with a sponsor, understanding the principals’ motivation for why they are doing a particular transaction is a key consideration prudent investors should keep in mind. The best sponsors will be able to articulate clearly the strengths and weaknesses of the opportunity and will demonstrate to investors that real estate is their passion, that they…

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Unwrapping Assumptions in Real Estate Analysis

Unwrapping Assumptions in Real Estate Analysis By Adam Gower Ph.D. The Promise of High Returns   It is easy for investors to be seduced by the promise of high returns on a real estate deal and while there is nothing wrong, of course, with wanting a high return it’s important for investors to understand what assumptions underpin a sponsors’ projections. Credible, professional sponsors with an eye to the future and establishing long term relationships with…

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Aspects for Evaluating a Sponsor

Aspects for Evaluating a Sponsor By Adam Gower Ph.D. Investing in an average real estate deal with a great sponsor instead of a great real estate deal with an average sponsor can be a wise investment decision. As the sponsor has such an impact on the trajectory of how the real estate is going to perform here are several criteria an investor may wish to consider. Track Record   The first consideration is track record.…

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3 Risks to Watch for in a Real Estate Recap

3 Risks to Watch for in a Real Estate Recap By Adam Gower Ph.D. A recapitalization of a project occurs when a sponsor refinances a project they already own, oftentimes bringing in new investors to provide additional equity. An obvious advantage to this scenario is the mitigation of risk that comes from the sponsor’s legacy knowledge of the building and its operating performance. However, there are three major risks that investors in such types of…

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