- Investment funds tend to be more nimble than partnerships, but there are drawbacks.
- Partnerships require documents for each deal and may take longer.
- Funds allow quick access to capital, and you can move quickly in a time-sensitive deal.
On this episode of Weaver: Beyond the Numbers Real Estate Edition, hosts Rob Nowak, Partner, Tax Services at Weaver and Howard Altshuler, Partner-in-Charge, Real Estate Services at Weaver, talked about the pros and cons of real estate funds vs. real estate partnerships with Scott Winkler, Senior Manager, Audit Investment Funds, Weaver.
“I think the biggest advantage of an investment fund over a partnership is they’re going to be nimble,” Winkler said. “With an investment fund, you’re usually able to obtain a subscription line of credit from the bank.”
This allows investors to have quick access to capital so that you can move quickly in a time-sensitive deal. This is an advantage over a private partnership unless someone has something on the shelf, which not many folks do, according to Altshuler. If they don’t, they will have to go out, get documents ready, make sure everyone is on board in the partnership, and it is more time consuming.
This has led to a proliferation of real estate funds, according to Nowak. “Deal flow is a little constricted right now, and good deals are hard to come by. I think if you have a fund structure in place, it just enables you to move on that deal significantly faster.”
Other differences include promote and fee structures, which may provide more benefits to investment partnerships over funds.
Listen to hear more about the differences between real estate investment partnerships and real estate funds.