Questions to ask before you invest in a private fund.

Private real estate funds are illiquid, lightly regulated compared with public markets, and sold through long documents. Before committing, it helps to work through a short list of questions and get the answers in writing.

About the strategy

• What exactly will the fund buy, and where? How is a deal approved?
• How much debt will each property carry, and what happens if rates or rents move against the plan?
• What is the expected hold period, and how will the fund exit?

About the people

• Who makes decisions, and what is their track record running a fund? (Ours: this is a first-time fund manager.)
• How much of their own money is in the fund?
• What conflicts of interest exist, and how are they handled?

About the money

• What fees are charged: management fees, acquisition fees, carried interest? How is the preferred return calculated?
• How are capital calls made, and what happens if you can't meet one?
• Can you get your money out early? Usually not. See liquidity & transfers.

About reporting

• How often will you receive reports, and what will they include?
• When will your K-1 arrive?

Read the private placement memorandum and operating agreement, and review them with your own legal, tax and financial advisors. Our summary of proposed terms is on the Terms & risks page. Final terms are set only by the fund's offering documents. You could lose your entire investment.