A RELP or Real Estate Limited Partnership refers to a set of general/limited partners that invest in the same set of real estate by leasing or selling assets.
The RELP is generally managed by a general partner, which can be anyone from a single property manager, experienced real estate investors, or an internationally acclaimed development firm. All external investors receive a piece of the pie through shares and are titled as limited partners in the agreement. Limited partners obtain legal shares but are unable to make managerial decisions with regards to the real estate assets. They are also kept away from any risks associated with those particular partnerships due to their limited role.
More Real Estate Limited Partnership information
For the general partner, they take up the management of assets and are also responsible for the real estate projects. All funds provided by limited partners can be used by a general partner to make informed investments. The idea is for the general partner to find good deals and help everyone make money from the resulting profits.
Most RELPs are designed with a short-term approach based on specific real estate developments and/or projects. This means no additional cash distributions are included in the agreement. With RELPs, investors are able to tap into the potential of natural appreciation making it a unique way to invest for higher returns. It’s important to note, the assigned assets cannot be liquidated until the pre-determined date. This is why a limited partner has minimal control over how the assets are managed.
To make sure everything is in line with the law, there is a set real estate limited partnership agreement. Various terms are listed based on what the RELP is all about and this solidifies the partnership and resulting titles. This is done to ensure everything is in order because the partnership is private.
While limited partners do not take up as much of the risk, they’re still affected by potential debts. If thee are losses, every partner deals with the financial setback.
Real Estate Limited Partnerships are great for property investors
There are several reasons why this is regarded as one of the premier real estate investments for investors.
In general, there are limited day-to-day requirements from a limited partner. They are able to sit back and invest money into the RELP without having to participate. As a result, it makes it easier to use RELPs as a way to generate passive income on a regular basis. As long as the Real Estate Limited Partnership is turning a profit, the limited partner is able to bring home a positive return on their funding. For the general partner, they are responsible for managing each asset.
RELPs are also noted for reducing potential tax liabilities that come with investing in real estate. Since it is a limited partnership, the tax-related onus doesn’t fall on the limited partner and there are several additional incentives for such investors.
In addition to the tax advantages associated with RELPs, it’s also possible to note specialized financial awards from each real estate asset. These are ideal long-term investments when managed by the right general partner. There is a consistent return on one’s money making it easier to see real growth from the real estate market.