What it is
A private real estate fund is usually a limited partnership. A general partner (GP) makes the decisions and carries management responsibility; limited partners (LPs) contribute most of the capital and, in exchange for giving up control, have liability limited to their investment.
How it works
The GP is normally itself an LLC, so the sponsor’s personal assets are shielded. The fund LP issues partnership interests to investors and owns the real estate, often through a separate single-purpose LLC for each property.
Separate property LLCs matter to LPs: a lawsuit, environmental claim or loan default at one property is generally contained to that LLC instead of reaching every asset in the fund. Lenders also commonly require single-purpose borrowers.
Example: a fund owns three properties in three LLCs. A slip-and-fall judgment above insurance limits at Property 2 can generally be satisfied only from Property 2’s assets, not Properties 1 and 3.Good for LPs vs. watch out for
✓ Good for LPs
- GP is an entity with real money committed alongside LPs (“skin in the game”)
- Each property held in its own LLC, wholly owned by the fund
- LP liability clearly capped at the commitment
- Clear written limits on what the GP can do without LP consent
⚠ Watch out for
- Properties co-mingled in one entity, so one problem can affect all
- No or token GP commitment
- Vague purpose clauses that let the GP invest in anything
- Affiliates of the GP owning pieces of deals on undisclosed terms
How Story Samurai Investments handles it
Our template uses three layers: Story Samurai Investments GP, LLC [PLACEHOLDER – final name] as general partner; Story Samurai Investments Fund I, LP [PLACEHOLDER – pending confirmation] as the fund; and one Texas LLC per property, 100% owned by the fund and managed by the GP. The GP commits [PLACEHOLDER – GP commitment] on the same terms as LPs (LPA §3.1). Purpose is limited to [PLACEHOLDER – property types] in [PLACEHOLDER – markets] (LPA §1.3).
Based on our template documents (TEMPLATE, DRAFT FOR ATTORNEY REVIEW, NOT FOR USE). The final Limited Partnership Agreement controls.
Where to find it in the documents
- LPA Art. 1, §3.1, §3.5
- PPM §3