Preferred Return

Preferred return is a priority return (often in the 5-10% range) that is paid to investors prior to any profit sharing or promote to the sponsor. Preferred returns are common in limited partnership structures in order to entice limited partners to invest. Since the general partner typically has the ability to earn a disproportionate share of the investment return (see Promoted Equity) it reasons that the limited partners should receive a priority return on their investment.

For example, the limited partners may receive a 7.0% preferred return on their investment prior to the general partner receiving any cash flow or profits, even if the general partner has also contributed equity to the partnership.

Learn Ways To Help Build Long-Term Real Estate Wealth

Get Tips For Managing Real Estate Wealth
Download eBook

 


Get Tips For Managing Real Estate Wealth

Learn Ways To Help Build Long-Term Real Estate Wealth

Learn new ways to use real estate to pursue your wealth goals.

By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received.