Investing in Real Estate: Equity vs. Debt
Written by Brent Carnduff | March 7, 2019
There are many options for an investor looking to invest in real estate - residential property, commercial property, REITs, and Private Funds - and depending on the selected path, they may have the additional choice between investing in equity or debt.
Both equity and debt investments can be solid opportunities, producing positive returns. However, factors such as an investor’s appetite for risk, his/her investing goals, time horizon for investment, economic circumstances, and available opportunities may make one more appealing than the other.
Investing in Equity
Equity investments represent ownership of a portion of the investment - i.e. shares of stock in a company, or “units” in the case of the Alturas Real Estate Fund - and act as a claim on the earnings or assets of the underlying business.
Returns on equity investments are dependent on the performance of the underlying business, and can vary over time.
Investing in Debt
Debt investments act as a loan, paying a fixed interest rate at preset intervals, and are typically considered to be less risky than equity investments - i.e. bonds, or “notes” in the case of the Alturas Real Estate Fund. This is evidenced by the fact that debt investments usually have a priority collateral position ahead of equity investments. Thus, should a corporation or investment fund be liquidated, note holders are paid before equity investors.
Investing in Equity or Debt with the Alturas Real Estate Fund
Alturas offers investors the opportunity to invest in either equity or debt (or both).
An investor can purchase equity “units” which fluctuate in price based on the Fund’s performance. This option requires a minimum investment of $250,000 and investors can choose to have their distributions paid in cash quarterly or reinvested as new units in the Fund.
Alternatively, we also accept investments in debt. Our typical notes are for 24-36 months, pay 6-8% annually, and require a minimum of a $100,000 investment.
If you are interested in learning more about the Alturas Real Estate Fund, download our most recent quarterly report.
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This does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment fund and may not be relied upon by you in evaluating the merits of investing in the proposed investment fund described herein. An offer to invest in Alturas Real Estate Fund LL (the “Fund”) will only be made only by means of a Confidential Private Placement Memorandum dated January 2018 (“PPM”) to be furnished to prospective qualified investors, which will contain a description of the material terms (including risk factors, conflicts interests, fees and expenses, and tax aspects) relating to the Fund. Prospective investors should review the PPM, including the risk factors, before making a decision to invest. In addition, prospective investors should rely only on the PPM in making a decision to invest.