A real estate fund manager pools capital from investors creating the fund. Then they go and purchase properties using those funds, manage them, and sells them later for a profit.
Pros: – Your capital is put to work right away. – You’re guaranteed to have the opportunity to invest in the fund.
Cons: - You don’t get to see the properties that they’ve already purchased–or at least, not many of them. - You just don’t have much info such as to how the properties are running so far or how much money they think they will raise.
Pros: – You’re able to see how well their operations are running. – It allows for a more tangible analysis of the sponsor, rather than just hypotheticals.
Cons: - Many times, you might commit to investing in the fund, but your capital may not be needed for a while because they’re still using capital that was committed earlier.