What is "buying limited partnership interests"

Question

I was reading The Millionaire Investor by Gary Keller and made it to " The Inspirational Story of Investor 34."  It states the investor and his wife would buy limited partnership interests. I am unfamiliar with what this means and was curious if anyone could tell me what that "niche" is.

Barry Ruby · Answer

@Todd Dexheimer

Indeed!

No pun intended

Todd Dexheimer · Answer

Greg, this is an extremely common legal structure that is still in use today.

Todd Dexheimer · Answer

This is investing passively in a syndication. This is very common among purchases of large multifamily, self storage, retail, industrial, etc.

What happens is you have a general partner that finds and runs the deal and then you have limited partners who fund the down payment, reserves, etc. The limited partner is not involved in the operations and has not risk besides their capital. They are paid a percentage of the monthly cash flow, as well as profits upon a sale. They also get to take depreciation benefits.

I had several blog articles on biggerpockets about this, but it looks like BP has changed their website. If you want to learn more feel free to reach out or check out my website or podcast.

Greg Scott · Answer

They are talking about a syndication.In the past, most syndications were put together by a General Partner who ran the deal, and Limited Partners who put up the money.  While this legal structure is now rarely used, people still use the terminology in conversation, because it is easier to say "Limited Partner" (or LP) than something that is more technically correct, such as "non-managing Class A members of the LLC".