Anyone here raised or invested through an equity fund for real estate deals?

Question

Hey everyone,

I’ve been exploring the idea of raising capital through an equity fund structure instead of doing individual syndications deal by deal. The goal would be to have more flexibility and be able to move faster on acquisitions without needing to line up investors every time.

Curious if anyone here has gone that route — either as a sponsor or investor?

A few things I’m wondering:

• What kind of structure did you use? (LLC vs LP, open-ended vs closed fund, etc.)
• How did you handle the capital raise — friends and family, accredited investors, crowdfunding?
• Any challenges with compliance, reporting, or investor communications once the fund was live?
• Did you find that investors preferred the fund model over one-off deals? Or vice versa?
• Any software or tools you’d recommend for managing a fund and reporting to investors?

What kind of structure did you use? (LLC vs LP, open-ended vs closed fund, etc.)

How did you handle the capital raise — friends and family, accredited investors, crowdfunding?

Any challenges with compliance, reporting, or investor communications once the fund was live?

Did you find that investors preferred the fund model over one-off deals? Or vice versa?

Any software or tools you’d recommend for managing a fund and reporting to investors?

If you’ve done this or are considering it, I’d love to hear how you approached it and what you’d do differently. Appreciate any insights you’re willing to share!

Chris Seveney · Answer

Take a debt fund with no leverage - returns will be 8-10% and you are in prime position on capital stack.

Take a MF deal that has 65% bank debt, 25% investor in a pref then 10% investors in pref + big upside. The last 10% in this deal could get 25% returns (or zero). During boom years people loved this play because they were getting it until they were not.

Both offerings are very different and even the investment in the MF deal is different.

Dylan Brown · Answer

@Chris Seveney Your line:"There are a lot of compliance issues therefore we engaged a broker dealer and a legit company to perform our annual audits"Amen to that - well worth the cost I am sure.  If you invest with OPM (Other people's money) you really need air tight books and more than one set of eyes on everything.

Chris Seveney · Answer

We did an equity fund:

1. We did a C corporation to allow us to issue shares vs. having to do dreaded K-1's, but just understand the implications as there are many.

2. Capital raise started through a regulation A+ offering and a Reg D

3. There are a lot of compliance issues therefore we engaged a broker dealer and a legit company to perform our annual audits

4. This is an investor specific issue, equity deals are typically an income play whereas a syndication leans more toward a growth play for the investor  - two very different investor personas.

5. This depends on how you are raising money - as it goes back to compliance depending on offering type how you can raise the money. There are tons of platforms out there that make it easy to manage investors

Dylan Brown · Answer

Hey Robert — I’ve structured a couple dozen real estate funds ranging from simple single-asset vehicles to highly complex multi-asset platforms, so this is right in my wheelhouse.

Structure:
I almost always use LLCs with a closed-end structure. Closed funds come with significantly less admin burden down the road and help avoid tension between early and late investors around who’s entitled to what upside. If you do go the open-ended route, make sure you’re working closely with your CPA on periodic revaluations and 704(c) compliance to keep things equitable across investor tranches — this area can get complicated quickly.

Capital Raise:
Most funds I’ve worked with raise under 506(b) or 506(c) exemptions with minimums in the $100K range. I’ve seen as low as $25K–$50K, but the admin load of managing a fund that size can start to erode investor returns. If you’re considering a crowdfunded raise, you may want to look at a REIT structure instead — though personally, I steer clear of those and leave them to the larger firms with the legal horsepower to handle the regulatory complexity.

Legal Docs:
As a CPA, I help with logistics like drafting the OA and reviewing the PPM/sub docs, but you'll definitely want a syndication attorney to finalize everything. Drafting legal docs is considered UPL (unauthorized practice of law) for us CPAs.

Tax Reporting & Admin:
The biggest pain point is typically the capital account tracking and K-1 allocations — this needs to be handled by a CPA, not a generalist bookkeeper. A solid CPA-managed capital ledger is critical. Property-level books can be handled by a bookkeeper, but fund-level books should be CPA-controlled to avoid costly surprises at year-end.

Investor Preferences:
In my experience, most LPs like the simplicity and diversification of a fund model. And as a sponsor, having committed capital upfront can make deal execution far easier. That said, some sophisticated investors still prefer deal-by-deal opportunities. In those cases, it’s common to structure sidecar entities to co-invest alongside the fund. My clients usually reserve this for larger check writers (typically $500K–$1M+).

Tools:

• Investor portals: InvestNext and Cash Flow Portal are both solid and widely used in the space.
• Bookkeeping: Start with QBO if you’re early-stage. As you scale, consider moving into Yardi, AppFolio, or NetSuite for more advanced fund accounting features.

Investor portals: InvestNext and Cash Flow Portal are both solid and widely used in the space.

Bookkeeping: Start with QBO if you’re early-stage. As you scale, consider moving into Yardi, AppFolio, or NetSuite for more advanced fund accounting features.

Happy to chat further if you want to dive deeper into structure, tax mechanics, or investor messaging — feel free to DM me anytime.

—Dylan

Mike Klarman · Answer

I actually looked into this very recently.  I discovered that if you plan to take on passive investors and plan on putting their money into RE, that action is highly regulated.  You need a promissory note, you need a subscription agreement, if the investor is unaccredited (which means their net worth is under 1 million) then that will be another form that will be needed and they'll need to be cleared to invest this way, and an attorney I spoke to also added that if investing in RE this way, you should notify the SEC.

If the investor is not helping to facilitate their return, then they are considered passive.  If they are helping in the process then they can be a JV partner.

But to co-mingle monies from passive investors into a single RE deal, that is heavily regulated.  The investors would need to be sent an entire packet with all forms and contracts needed and then you would need a new bank account for every project.  Each project is called a series.  A series can have one investor or 10 or more.  But each series contains one house and if anything goes sideways in the one series, the other series' going on are not affected or are not libel because you need to protect yourself and also your other investors.

A Much better way to do this is with debt and give the investor first lien position on the house, at the time of exit the investor submits a payoff to title that encompasses all that they are owed.  All payments and origination can be rolled in the back.

JM Edward · Answer

"equity deals are typically an income play whereas a syndication leans more toward a growth play for the investor  - two very different investor personas"

Can you say more about that? As an investor, these kind of real estate offerings don't feel quite as different to me than making the choice between a value and growth stock, which can have massively different characteristics including risk profile. While real estate can certainly carry risk too, I don't find a 5-year hold is that much of a long-term vision as you should have buying a growth stock(?), and the risk in these real estate deals can be all over the map and not correlate very well to the distinction you've made? I'd love to hear you flesh this point out more.

Anyone here raised or invested through an equity fund for real estate deals?

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