What has been discussed in this forum is mainly residential real estate. However, the concept should be expanded. Public REITS include: office, shopping centers, industrial, storage, hotel, healthcare, regional malls, residential, etc.

Currently, large investors avoid REITS especially residential sector. Actually, a lot of them think US, UK, Aussie are overvalued including REITS money managers. Large institutions have reallocated their assets and they are preparing for a correction for US REITS. In the mean time, people move money to Asia, particularly Japan, Macau, Taiwan, and Hong Kong. They think the price of those places has been depressed long enough.

I read some of the guys talked about form a Chinese real estate team. By chance I know a little about private real estate investment. I can share my knowledge on this topic.

First, downside protection, which calls risk management, is the key in any investment. The large private real estate investors do not use their own money to invest. Normally they only contribute 1-2% of the total funds. They need market to others, either large institutions or wealthy individual to invest with him. Therefore, a manager’s credibility is very important in the process. Of course, the investors need risk management also. So they will spread their investment to different managers, sectors, regions, countries. Depending on the size of a fund, there are a lot of investors in a particular fund.

Second, managers and investors need negotiate fees and profit sharing. Normally, investors pay 1.5 2% of their commitment amount each year as managing fee to managers. However, managers would not receive any profit sharing until they return all the money invested and 7-9% preferred return to the investors. The rest profit is split 80/20. Investors get 80%, managers get 20%.

This normally is a long process, about 10 12 years but this is where the big money is made. Current the size of a private real estate fund ranges from several hundred million to several billion dollars. You can calculate how much money could be made by the managers.

If you dream to be a tycoon in real estate, you really need consider form a team and spread risk.