Private equity real estate allows high-net-worth (HNW) individuals to invest in privately structured equity and debt holdings related to real estate assets. This article will discuss the contemporary structure of these funds and how they work.

Private equity (PE) real estate investing involves acquiring, financing, and owning a property (or properties) using an investment fund. It is an alternative asset class comprising private investments in the real estate markets, unlike real estate investment trusts (REITs), which are publicly traded (excluding private REITs). PE firms can be structured as limited liability companies (LLCs) or limited partnerships (LPs). Private equity takes a diversified approach to real estate investment. It employs an asset management strategy wherein passive investors, led by a general partner (GP) or sponsor, are not responsible for identifying the property, facilitating the transaction, or managing the property after it is purchased. Instead, these are the sponsor’s objectives.

WHAT IS A PRIVATE EQUITY FUND AND HOW DOES IT WORK?

A real estate private equity (REPE) fund is a real estate investment vehicle where multiple investors pool their money to purchase, develop, operate, value-add, and sell property to generate returns for investors. At its simplest, real estate private equity is a partnership created to raise capital for a real estate investment. GPs typically create the fund and seek LPs or passive investors who will financially contribute to the partnership. [1] Sponsors provide a portion of the capital and might earn fees based on their performance.

There are many types of private equity real estate investments. Office buildings, industrial properties, retail properties, shopping centers, and multifamily apartments are among the most common private equity real estate assets. Others include more niche property investments, such as student or senior housing, self-storage, medical offices, hotels, manufacturing and industrial space, and undeveloped land. [2]

Private equity generally refers to an ownership stake in a company or property, where investors share the potential returns and losses, depending on the deal. [3][4] Private placements, on the other hand,  refer to raising capital in offerings exclusive to accredited investors.

HOW DO PRIVATE EQUITY INVESTORS MAKE MONEY?

A general partner (GP) or sponsor puts together the offering in a private placement deal. They identify an investment property, secure financing, and partner with passive investors, known as limited partners (LPs), to participate in the deal. Passive investors will then provide a portion of the capital and earn money from the cash flow and the equity, depending on the deal structure. [5] One major benefit of this setup is that LPs have no active management responsibilities. The GP oversees property management directly or via a third party. Once the property or properties are acquired and investor capital is committed, the GP executes the business plan. This includes managing construction or renovation projects, overseeing daily operations, monitoring financial performance, ensuring compliance with lender requirements and government regulations, sending regular investor updates and reporting, managing distributions and tax documents, and preparing the property for exit.

Limited partners must meet accredited investor requirements to participate in most private placements. An accredited investor is an individual with an annual income of at least $200,000 (or $300,000 for joint income) or a net worth of at least $1 million (for both individual and joint net worth), excluding the value of their primary residence. However, requirements can vary depending on whether the investor is an individual or an entity investor. According to the SEC, an accredited investor can also be a general partner, executive officer, or director of the company issuing the unregistered securities. [6]

An accredited investor is considered “financially sophisticated” enough to buy unregistered securities. Unregistered securities are generally considered riskier because they don’t require the typical disclosures with offerings registered with the SEC. [6]

However, since accredited investors tend to be more knowledgeable and financially secure, they can better manage the risks associated with buying these unregistered securities. The SEC believes these accredited investors have a reduced need for the protection provided by regulatory disclosures. [6] If an individual meets the financial requirements set by the SEC, they are considered accredited. No government agency or independent body reviews an investor’s credentials, and no certification exam or legally binding document shows someone is an accredited investor. [6] Simply put, there is no specific “process” that individuals or entities must go through to become accredited.

The responsibility of determining whether someone is qualified to buy unregistered securities lies with the companies that issue them. Issuers must execute varying levels of due diligence before allowing investors to participate in an offering. [6][7]

In REPE funds, depending on the deal structure, limited partners earn income throughout the hold period or realize equity growth once the deal is done and the property is resold. The sponsor undertakes all aspects of the work, from locating the investment property to assembling the deal, securing financing, negotiating with the seller, conducting due diligence, collecting rental income, and managing distributions among investors. [8]

The capital stack in private placement represents the financial structure of a commercial real estate deal. It visualizes the various types of capital used to finance the project, showing the order in which investors and lenders are repaid, as well as the risk and reward associated with each layer of the capital stack. Below is a breakdown of the capital stack from lowest to highest risk. Although the size of each section of the capital stack can vary, the debt-to-equity combination is a crucial component of its structure. If compared to a ladder, debt would be on the bottom half (most secure), and equity would sit at the top (riskiest). The debt half would split into senior debt (mortgage) and maybe mezzanine debt (junior debt/small bridge loans to fill the gap between debt and equity). Each position in the capital stack receives a priority rating, with debt being prioritized over equity if the fund underperforms. [9] 

Visit BAM Capital’s Insights page to view what a capital stack can look like.

HOW LONG DOES A PRIVATE EQUITY FUND LAST?

A private equity fund can have a tenure of 5 to 10 years. BAM Capital’s target hold period and return structure are examples of a fund’s potential investment horizon:

BAM Multifamily Growth Fund V offers a sophisticated investment opportunity exclusively for accredited investors, with a targeted return of 15-20% IRR and a 2.0-2.5x equity multiple in 5-7 years.

Crossing 5 Towns & Flats is a joint venture ground-up development project with J.C. Hart, bringing a premier garden-style asset to Plainfield, Indiana, with a targeted return of 20-23% IRR and a 1.9x-2.3x equity multiple in 3-4 years.

The BAM Preferred Credit Fund is an evergreen fund that reflects BAM Capital’s dedication to providing income-producing investment opportunities. This fund offers an 8% preferred return that can be reinvested monthly or distributed to achieve a targeted return of 10-12% while ensuring a strong focus on principal preservation. Note that the BAM Preferred Credit Fund is only open to Qualified Purchasers.

WORK WITH BAM CAPITAL FOR MULTIFAMILY PRIVATE PLACEMENT DEALS

A multifamily private placement is a real estate investment in which multiple investors pool their resources to purchase a property or portfolio. Like private equity real estate, a sponsor locates the deal and finds investors who will participate. This sponsor is usually the general partner who coordinates the transaction throughout the process. [5] In exchange for equity in the fund, passive investors provide a portion of the required capital.

If you are interested in private equity real estate, BAM Capital partners with accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital has been focusing on buying assets targeted as having strong profitability potential and staying disciplined in its investment thesis. BAM Capital’s investment strategy aims to create forced appreciation while seeking to mitigate investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units. [10]

For additional multifamily real estate insights, visit Pathways to Passive Wealth, BAM Capital’s new platform designed to make real estate investing more accessible, transparent, and achievable for aspiring and experienced investors.

Remember that no investment is risk-free. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.

Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect BAM Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. BAM Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment.

© 2025 BAM Capital. All rights reserved.

SOURCES:

[1]: NAIOP. (2018). “How to Set Up a Private Equity Real Estate Fund.” https://www.naiop.org/Research-and-Publications/Magazine/2018/Spring-2018/Finance/How-to-Set-Up-a-Private-Equity-Real-Estate-Fund

[2]: Investopedia. (2022). “Private Equity Real Estate: Definition in Investing and Returns.” https://www.investopedia.com/terms/p/private-equity-real-estate.asp

[3]: BAM Capital. (2024). “Understanding private equity in multifamily real estate.” https://bamcapital.com/understanding-private-credit-in-multifamily-real-estate/#:~:text=4%5D-,PRIVATE%20CREDIT%20IN%20MULTIFAMILY%20REAL%20ESTATE,ground%20on%20a%20multifamily%20community. 

[4]: Investopedia. (24 May 2024). “Private Credit vs. Private Equity: What’s the Difference?” https://www.investopedia.com/private-credit-vs-private-equity-7565530

[5]: The Motley Fool. (2024). “How to Start Investing in Real Estate: The Basics.” https://www.fool.com/investing/stock-market/market-sectors/real-estate-investing/basics/

[6]: BAM Capital. (2025). “Accredited investor requirements & what you need to know.” https://bamcapital.com/what-is-an-accredited-investor/  

[7]: Investopedia. (n.d.). “How to Become an Accredited Investor.” https://www.sec.gov/education/smallbusiness/exemptofferings/rule506c

[8]: Goodegg Investments. (2024). “Multifamily Syndication In 2024 And Beyond.” https://goodegginvestments.com/blog/multifamily-syndication-2024/ 

[9]: Smartland. (19 May 2021). “Top 10 Risks to Consider Before Investing in Private Equity Real Estate.” https://smartland.com/resources/private-equity-risks/

[10]: BAM Capital. (2025). “Current portfolio.” https://bamcapital.com/