Here are a few definitions of terms that you may need to know on this journey of investing passively. Most of these terms will be used interchangeably.
Limited Partner (LP), Passive Investor, Equity Partner
Real estate limited partnerships (RELPs) are LPs organized to invest primarily in real estate. Limited partners are generally hands-off investors while the general manager takes on day-to-day responsibilities. RELPs can offer high returns, with correspondingly high risks.
A limited partner’s responsibility is contributing capital to the deal. These investors are often interested in investing in real estate but lack the experience or operational expertise to oversee a project on their own. They are often considered silent partners.
General partner (GP), sponsor, sponsorship team, manager.
General partners, often known as sponsors or GPs, participate actively in real estate transactions. They manage all aspects of the transaction and operations, and they own the property.
The GP team is a group of individuals who jointly own the real estate that is structured as a partnership and who assume the day-to-day role of managing it.
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