Pacific West Realty Group has been involved in equity investments and participating loans.

Equity Investments - Ownership

Equity investment in real estate is another way of describing ownership in a property.  Whether an individual purchases a home or makes an investment in a limited partnership that intends to build an apartment building, that individual has become an equity participant.

Equity investments can be made in both residential and commercial properties. Types of residential equity investments include the purchase of single family homes, the acquisition and operation of apartment complexes, the purchase of developable or developed land for the construction of single family homes, condominiums or apartments and the acquisition of existing apartments for conversion to condominiums.

Commercial equity investments involve manufacturing plants, light industrial buildings, office complexes, strip shopping centers, major shopping malls, hotels and resort complexes, ranches, fruit farms, other types of agricultural properties, golf courses and a variety of other "non-residential" uses.

In evaluating a limited partnership or limited liability company as an equity investment, two factors are equally important to the investor.  One is the quality of the property and the other is the quality of the developer, contractor, and/or the management company operating the property.

Equity investments vary in their degrees of risk.  The most significant component of evaluating risk is the type of transaction.  Generally, land development and new construction are considered to have more risk than the acquisition and operation of an existing income-producing property.

Rates of Return

Rates of return for equity investments should exceed those of fixed income investments.  Income producing properties have two components of return; cash flow and appreciation. Investors should expect to see an annualized overall rate of return in excess of 13% on income producing properties.

New construction and Condominium Conversion projects are considered “For Sale” investments which do not generate cash flow. These investments typically last two to four years. Therefore, changes in market conditions can dramatically affect the final return on investment. Consequently, rates of return should exceed those on income producing properties.

None of the expected rates of return are guaranteed in equity investing.  As such, equity investments are generally considered to have greater risk than debt investments.

Participating Loans

A participating loan describes a "hybrid" investment that includes a debt component and an equity component of investment.  For example, a short term loan might be made to a developer of a new construction project that has a fixed 10% interest rate, and a 20% participation in profits.

Other Real Property Investments

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