Welcome to our in-depth guide on Preferred Returns - the most commonly misunderstood term by newer investors in commercial real estate.
Preferred returns play a critical role in bridging trust and safeguarding smaller investors interests.
In real estate syndications, Preferred Returns are designed to balance protection for investors while offering sponsor upside.
Preferred Returns commonly appear in both Preferred Equity and Common Equity.
No - they are very different. Unfortunately, some investors get mixed up between how they work.
The model below shows how a $100,000 equity investment would evolve over time as the preferred return compounds and as distributions are made to the investor.
You can create a copy of this model here.
Beware, in the world of private real estate syndications, not all preferred returns are created equal.
You now understand preferred returns and their role in investment strategy.
We hope this knowledge helps you make more informed and confident decisions.
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