FAQ page

-Frequently Asked Questions!

Frequently Asked Questions

Real Estate Investment Trusts (REITs) invest in a pool of commercial or residential real estate investments or loans secured by Real Estate

Real Estate Investment Trusts (REITs) invest in a pool of commercial or residential real estate investments or loans secured by Real Estate. Some REITs also act as property managers for property purchased within the REIT. REIT’s can be structured around an asset class such as: Multi-Tenant Office Buildings, Warehouses, or Multi-Family Buildings. To qualify as a REIT, a company must distribute at least 90% of its taxable income to shareholders.

Disclaimer: Investing in real estate and real estate investment trusts (REITs) is not suitable for all investors and involves special risks, such as illiquidity and limitations on the share redemption plan, demand for real property; changes in supply and demand for real property; change in law; tenant turnover or defaults; loss of investment; competition; casualty losses; use of leverage; real estate values may fluctuate based on economic, environmental and other factors. There is no assurance that the investment objectives of any real estate program will be obtained.

 

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Real Estate Funds are another method by which investors may pool their money to acquire real estate assets.

Real Estate Funds are another method by which investors may pool their money to acquire real estate assets. These funds generally raise smaller amounts of money than a REIT (usually up to $25 million) and will typically acquire fewer properties than a REIT. They may also look to achieve more growth opportunity and as a result may be considered a more risky investment.

Most Real Estate Funds are considered exempt offerings under Rule 506 of Regulation D. This regulation exempts the offering from registration with the SEC and requires that investors meet certain income or net worth limits. Investors must be “accredited,” which means they must have a net worth over $1 million, excluding equity in their primary residence, OR have individual annual income of $200,000 or more ($300,000 if filing jointly) in each of the two most recent years and a reasonable expectation of the same level in the current year. Different requirements apply for businesses, trusts or other entities.

Real Estate Funds will typically outline their acquisition, management and liquidation strategies in the Private Placement Memorandum (PPM). This document is intended to help investors better understand the objectives and risks associated with the investment. Investors should understand the risks associated with each investment prior to making an investment in a Real Estate Fund. These risks include, but are not limited to lack of liquidity, fees, ceasing of cash flow, market risk and the loss of principal. Representatives of Global Wealth Partners, Inc. can help potential investors understand these offerings and the benefits and risks associated with each particular investment.

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What Is a Hedge Fund?

Hedge funds are alternative investments using pooled funds that employ different strategies to earn active return, or alpha, for their investors. Hedge funds may be aggressively managed or make use of derivatives and leverage in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). It is important to note that hedge funds are generally only accessible to accredited investors as they require less SEC regulations than other funds. One aspect that has set the hedge fund industry apart is the fact that hedge funds face less regulation than mutual funds and other investment vehicles.

An alternative investment is a financial asset that does not fall into one of the conventional investment categories. Conventional categories include stocks, bonds, and cash. Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of their complex nature, lack of regulation, and degree of risk.

KEY TAKEAWAYS

  • An alternative investment is a financial asset that does not fall into one of the conventional equity/income/cash categories.
  • Private equity or venture capital, hedge funds, real property, commodities, and tangible assets are all examples of alternative investments.
  • Most alternative investments are unregulated by the SEC.
  • Alternative investments tend to be somewhat illiquid.
  • While traditionally for institutional investors and accredited investors, alternative investments have become feasible to retail investors via alt funds, ETFs and mutual funds that build portfolios of alternative assets.

Alternative investments include private equity or venture capital, hedge funds, managed futures, art and antiques, commodities, and derivatives contracts. Real estate is also often classified as an alternative investment.

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