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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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The Benefits of Investing in Institutional Quality Real Estate

The Benefits of Investing in Institutional Quality Real Estate By Adam Gower Ph.D. Investing in commercial real estate can take many forms. An individual investor might dip their toes in the waters by purchasing a duplex or small apartment building. Someone else might invest with others in a small retail strip center. Those with significantly more money to allocate, the institutional investors such as insurance companies, endowments, pension funds, and ultra-high-net-worth individuals and families, often…

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Real Estate Investing Explained – Preferred Return

Real Estate Investing Explained With Support from SmallChange PREFERRED RETURN   There are a couple key things that real estate developers offer to entice you to invest with them; one is a share of the profits of a project, and the other is what is called the ‘preferred return,’ the ‘pref.’ You can think of the pref being similar to the interest that you get with your bank deposits, except that in a bank it’s…

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Real Estate Investing Explained – Accredited Investor

Real Estate Investing Explained With Support from SmallChange ACCREDITED INVESTOR   Some real estate crowdfunding opportunities require that you are an ACCREDITED INVESTOR to participate and this episode looks at what that is exactly. Technically it means anyone that has earned $200,000 or more for each of the last two consecutive years with a reasonable chance of earning the same this year, or $300,000 if you are filing as a married couple, or $1 million…

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Real Estate Investing Explained – Opportunity Zones

Real Estate Investing Explained With Support from SmallChange OPPORTUNITY ZONES   In the Tax Cuts and Jobs Act of 2017 there was a bipartisan section that created ‘Opportunity Zones.’ Opportunity Zones provide for incentives to investors to invest in economically distressed areas around the country by permitting them to defer or completely avoid capital gains tax no matter where those capital gains taxes come from. Watch this episode to learn how you can benefit from…

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Real Estate Investing Explained – LTV vs. LTC

Real Estate Investing Explained With Support from SmallChange LOAN TO VALUE vs. LOAN TO COST   When a sponsor goes out and buys a piece of real estate they will be financing it with two key components of capital. One is going to be debt that they’re going to get from the bank and the other is going to be equity that they’re going to be asking you for. Debt, when it is placed on…

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Real Estate Investing Explained – Main Project Costs

Real Estate Investing Explained With Support from SmallChange MAIN PROJECT COSTS   In this episode talk about the TOTAL COSTS that are inherent in any real estate project. There are basically three main categories; acquisition costs, hard costs, and soft costs. Acquisition costs would be the purchase of a piece of land or an existing building, hard costs include the physical costs of construction or renovation, and soft costs are costs like design services, architectural,…

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Real Estate Investing Explained – Internal Rate of Return I

Real Estate Investing Explained With Support from SmallChange INTERNAL RATE OF RETURN I   In real estate, the acronym ‘IRR’ stands for the Internal Rate of Return and it is commonly used by sponsors to illustrate how strong their project is going to be by projecting out in time how much they predict the project is going to make. But what is the IRR exactly and what are the pros and cons of using it?…

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Real Estate Investing Explained – Internal Rate of Return II

Real Estate Investing Explained With Support from SmallChange INTERNAL RATE OF RETURN II   In this episode on IRR, you are going to learn how to use this incredibly complicated and difficult to understand concept really easily in order to be able to compare one deal against another and, also how to compare one sponsor against another. You will see how to understand how much a sponsor is taking out of the project and how…

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Real Estate Investing Explained – NOI

Real Estate Investing Explained With Support from SmallChange NET OPERATING INCOME – NOI   In this episode you will learn about the NET OPERATING INCOME which is probably the most important number of any that you’re going to find in a real estate deal. Why? Because it effectively defines ongoing profits that come from a building and in so doing drives everything else. Be sure to click the link below where you can get a…

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