Preferred Equity is a type of equity investment in real estate that combines the best of both the debt and equity worlds. While it is subordinate to the debt, it is senior to the common equity and developer’s profit share. Generally, credit risk associated with preferred equity is lower than common equity. Since preferred equity pays out a deferred return at the time the property sells, there are no monthly cash flow payments to investors. This makes the 18% preferred return investors receive similar to accrued interest. What is the Advantage of Preferred Equity? While there are many advantages to preferred equity, here are a few of the key advantages: Higher returns, more control through direct ownership, more information and transparency, institutionally underwritten high quality investments, no foreclosure expense, and more! Sample Project Scenario Our current project started construction on this week. Located within a gated community in Monterey, California.  During the 10-month construction period, preferred […]