How to Find Cap Rate: A Clear Guide for Real Estate Investors

Reading Time: 7 min | Good for: Novice (A), Informed (B)

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TL;DR: Key Takeaways on Finding Cap Rate

• The Formula: To find a property's cap rate, divide its Net Operating Income (NOI) by its Current Market Value ().

• Why It Matters: This simple calculation provides a crucial, unlevered snapshot of a property's potential annual return, allowing for quick, apples-to-apples comparisons between investment opportunities.

• The "Good" Rate Myth: A "good" cap rate is relative. Lower rates (e.g., 4-5%) typically signal lower risk and higher quality assets, while higher rates (e.g., 8%+) suggest higher risk but potentially greater returns.

• Next Step: Mastering the cap rate is the first step. The next is understanding how it fits into a broader due diligence process to identify resilient, institutional-quality real estate investments.

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The Core Formula for Valuing Property

For any serious real estate investor—from a family office principal to someone making their first passive allocation—the capitalization rate, or cap rate, is a fundamental tool. It cuts through the noise to offer a clear look at a property's profitability relative to its price. While it's just one piece of the puzzle, it’s often the first question asked when a deal hits the table.

To use it effectively, you must get the two main ingredients right. The formula, Cap Rate = NOI / Market Value, is only as good as the numbers you plug into it.

• Net Operating Income (NOI): This is all the cash the property generates from rents and other fees after you subtract all necessary operating expenses like taxes, insurance, and routine maintenance. Crucially, NOI excludes debt payments (mortgage) and major capital projects.

• Current Market Value: This is straightforward—it’s either the property’s asking price or what it’s estimated to be worth today based on what similar properties ("comps") have recently sold for.

To get the NOI right, you need a clear-eyed view of the property's income and expenses. Here’s a quick breakdown of what goes into that calculation.

Net Operating Income (NOI) at a Glance

Component	Description	Example Item
Gross Potential Income	The total rent you could collect if the property were 100% occupied.	Scheduled monthly rent x 12
Vacancy & Credit Loss	An allowance for periods when units are empty or tenants don't pay.	A percentage of Gross Income (e.g., 5%)
Effective Gross Income	The realistic income after accounting for vacancies.	Gross Income - Vacancy Allowance
Operating Expenses	The day-to-day costs of running the property (excluding debt).	Property taxes, insurance, utilities, repairs
Net Operating Income	The property's total profit before mortgage payments.	Effective Gross Income - Operating Expenses

Once you have a credible NOI, you're ready to see how it relates to the property's value.

The Inverse Relationship

The calculation itself is direct, but its implications are what really matter. Cap rates and property values move in opposite directions—it's an inverse relationship.

For example, a property with a $500,000 NOI that’s valued at $10 million has a 5% cap rate. But if market sentiment shifts and similar properties start trading at an 8% cap rate, that same $500,000 NOI now suggests a market value of only $6.25 million. This dynamic is at the very heart of real estate valuation.

Novice Lens: Why It MattersA lower cap rate usually points to a higher-quality, lower-risk asset in a prime location. Investors are willing to pay a premium for stability. Conversely, a higher cap rate often signals more perceived risk or a less desirable market—but it could also mean a bigger potential payoff for those willing to take on the challenge.

For a foundational understanding of this crucial metric, check out this detailed guide on What Is Cap Rate in Real Estate. Getting this concept down is the first step toward disciplined underwriting and spotting true value in the market.

Nailing Your Net Operating Income

The cap rate formula is simple, but its results are only as reliable as the numbers you use. This is where Net Operating Income (NOI) comes in, and frankly, it's everything. NOI tells the true financial story of a property, and it's where an undisciplined seller can easily make a deal look much better on paper than it is in reality.

Getting this number right is the most critical part of the entire process. An accurate NOI starts with the property’s total potential revenue.

From Gross Income to Effective Income

First, you determine the Gross Potential Income (GPI). Think of this as the perfect-world scenario—it’s the total annual rent you'd pocket if every unit was occupied and every single tenant paid on time, all year long.

But we don't invest in a perfect world. The next step is to bring that GPI down to earth by subtracting an allowance for vacancy and credit loss. This accounts for the inevitable empty units or tenants who don't pay. What you're left with is the Effective Gross Income (EGI), a much more honest picture of the cash that actually hits the bank.

This flow from pie-in-the-sky potential to real-world income is a foundational concept you have to master.

The infographic above breaks it down visually, showing how you methodically peel away the property's costs from its income to get to that all-important number: the NOI.

Subtracting the Right Operating Expenses

Once you have your EGI, it's time to subtract the legitimate operating expenses. These are the recurring, necessary costs of keeping the property running. Your typical list will include:

• Property Taxes

• Insurance Premiums

• Property Management Fees

• Utilities (if paid by owner)

• Routine Repairs & Maintenance

• Admin and Marketing Costs

Knowing what not to include is just as important. New investors often make the mistake of subtracting costs that aren't true operating expenses. Make sure you exclude debt service (your mortgage payments), major capital expenditures (like a new roof), and depreciation. If you want to dive deeper into this crucial step, check out our guide on how to find net operating income.

Advanced Lens: Pro Forma vs. Trailing Twelve (T12)A seller will often present a "pro forma" NOI. This is a forward-looking forecast that usually bakes in optimistic assumptions, like immediate rent hikes or magically lower expenses. A sophisticated investor or family office will always demand the "trailing twelve" (T12) financial statement. The T12 shows the actual, verifiable income and expenses over the last 12 months. Always underwrite your deal based on the T12, not the seller's pro forma fantasy.

To really get a handle on metrics like cap rate, you first have to master the inputs. For another great resource on this, take a look at this guide on how to calculate income from operations.

Alright, you’ve got your Net Operating Income nailed down. You’re halfway there.

The final piece of the puzzle is the property's market value—the denominator in our cap rate formula. In simple terms, this is what a willing buyer would realistically pay a willing seller on the open market.

If you're in the process of buying a property, this part is easy. The market value is your purchase price. But what about a potential deal you're sizing up, or an asset you already own? That’s when you have to determine its value based on what the market is paying for similar properties right now.

Using Comps to Find a Market Cap Rate

This is where comparable sales—or "comps," as they are known in the business—are absolutely essential. You cannot value a property in a vacuum. You must dig in and research recent sales of similar assets: same property type, class, and size, all within the same local submarket.

This research uncovers the prevailing market cap rate, which is the rate investors are currently willing to accept for that specific level of risk and return in that area. It's more than just finding one number; it’s about analyzing several deals to get a solid benchmark. For a deeper dive, check out our complete guide to real estate property valuation methods for investors.

Deal Lens Example: Multifamily AcquisitionLet's say you're analyzing a 100-unit multifamily property with a verified T12 NOI of $600,000. To pin down its value, your team finds three recent, comparable sales in the submarket:* Comp A: Sold for $11.5M at a 5.2% cap rate.* Comp B: Sold for $12.2M at a 5.0% cap rate.* Comp C: Sold for $10.8M at a 5.4% cap rate.This data tells you the market is trading around a 5.2% cap rate for this asset quality. By applying this to your target property’s NOI ($600,000 / 0.052), you can estimate its market value at $11.54 million. If the seller is asking for significantly more, you now have the data to back up a lower offer—or to know when it’s time to walk away.

Recent market shifts drive home why this analysis is so critical. According to Statista, U.S. multifamily cap rates climbed from a low of about 3.82% in 2021 to around 5.96% in 2023, largely because borrowing costs shot up. You can find more insights on these multifamily property cap rate trends on Statista.com. This kind of movement directly impacts property valuations, making up-to-date comp analysis a non-negotiable part of any serious deal underwriting.

How to Interpret a "Good" Cap Rate

Figuring out the cap rate is just math. Understanding what it means is the real skill. There's no magic number for a "good" cap rate—it all comes down to your investment objectives, risk tolerance, and the specifics of the market you're targeting.

The most important concept to grasp is the relationship between cap rates and risk. A low cap rate means a high price relative to the income it generates. Investors are only willing to pay such a premium for assets they see as rock-solid: safe, stable properties in prime locations with strong credit tenants. Think of a brand-new apartment building in a major gateway city.

On the flip side, a high cap rate is a signal that investors demand a bigger payday for taking on more risk. That risk could come from a property in a tertiary market, an older building needing significant capital improvements, or a local economy with shaky fundamentals.

Benchmarking Across Asset Classes

You can't compare apples to oranges, and the same goes for property types. Different assets trade at different cap rates because their risk profiles are fundamentally different. A shiny, new multifamily complex filled with tenants on long-term leases is a world away from a hotel that depends on nightly bookings and seasonal tourism.

Your strategy plays a huge role, too. A stabilized, "Core" property will always have a lower cap rate than an opportunistic "Value-Add" deal that needs a complete overhaul and a risky lease-up period.

Investor Takeaway: Don't just chase the highest cap rate. Instead, ask what that number is really telling you about the property's underlying risk. A 4.5% cap might be a fantastic return for a trophy asset in a supply-constrained market, while an 8% cap on a poorly located building could be a major red flag.

The table below lays out some general cap rate ranges you might see across different property types. It's a useful starting point for when you're analyzing deals.

Illustrative Cap Rate Ranges by Property Type

This table gives a ballpark idea of how cap rates can differ based on the type of commercial property. Keep in mind these are for illustrative purposes—actual rates will always depend on the specific market, asset quality, and the prevailing economic climate.

Property Type	Typical Risk Profile	Illustrative Cap Rate Range
Multifamily	Low to Moderate	4.5% – 6.0%
Industrial / Logistics	Low to Moderate	5.0% – 6.5%
Retail (Grocery-Anchored)	Low to Moderate	5.5% – 7.0%
Office (Class A)	Moderate	6.0% – 7.5%
Self-Storage	Moderate	5.5% – 7.0%
Medical Office	Low to Moderate	5.5% - 7.0%
Hospitality (Hotel)	High	7.5% – 9.0%+

Ultimately, these ranges show how the market prices risk. A lower-risk asset like a well-located multifamily building commands a premium (and thus a lower cap rate), while a higher-risk hotel needs to offer a better potential return to attract investors. Use this as a guide, but always perform your own deep-dive analysis.

Beyond the Formula: The Forces That Move Cap Rates

Any seasoned investor will tell you that the cap rate isn't a static number calculated in a vacuum. The real art is understanding the powerful market forces constantly pushing it up or down. It’s a perpetual tug-of-war between capital markets and on-the-ground property performance.

Often, the single biggest influence is the cost and availability of debt. When interest rates climb, borrowing becomes more expensive. This almost always puts upward pressure on cap rates because investors demand higher yields to make their deals pencil out. This intricate dance between borrowing costs and property yields is a core concept, and you can dive deeper into how lower interest rates can be a catalyst for commercial real estate investment.

Local Market Dynamics

But it’s not all about national interest rate trends. What’s happening on the street corner matters just as much. Strong local job growth, for instance, can fuel massive demand for apartments or office space, leading to expectations of higher rent growth.

When investors are optimistic, cap rates can compress (go down) because they’re willing to pay more today for the promise of more cash flow tomorrow. On the flip side, if a flood of new construction hits a submarket, vacancy rates can creep up and put a ceiling on rents. That perceived risk can cause cap rates to expand (go up).

These forces have created cycles for decades. As NAIOP has reported, back in the mid-1980s, you’d typically see commercial property cap rates floating between 5.5% and 8.0%. More recently, institutional-grade real estate cap rates have tended to hover around a long-term average near 7.6%. You can discover more insights on these historical trends on NAIOP.org.

Myth vs. Reality: Cap Rate as a Total Return MetricMyth: A property's cap rate is its total return.Reality: This is one of the most common and costly mistakes new investors make. A cap rate is a one-year snapshot of your unlevered yield. It tells you nothing about future rent growth, appreciation, or the powerful impact of leverage. An investor's true total return—often measured by the Internal Rate of Return (IRR) or Equity Multiple—accounts for all these factors over the entire hold period.

Unpacking the Nuances: Your Cap Rate Questions Answered

Even sophisticated investors get hung up on the details when a deal is on the line. Let's clear up a few common questions that arise when calculating and using cap rates in the real world.

Is a Cap Rate the Same as a Cash-on-Cash Return?

No, and confusing the two can completely skew your analysis. Think of it this way: a cap rate is an unlevered metric. It shows a property's earning power in a vacuum, ignoring any financing.

A cash-on-cash return, on the other hand, is a levered metric. It tells you the return you’re making on the actual cash you invested, after you’ve made your mortgage payments. Both are crucial, but they paint very different pictures of a deal's performance.

How Should I Factor Capital Expenditures into the NOI?

This is a classic debate. By the book, true Net Operating Income (NOI) excludes major capital expenditures (CapEx) like replacing a roof or HVAC system. But simply ignoring these big-ticket items is a rookie mistake.

Disciplined investors account for this by deducting a "replacement reserve" from their NOI. This is an annualized estimate set aside for future CapEx. It’s a simple move that produces a more honest, long-term picture of the property's true cash flow potential.

Is a Higher Cap Rate Always Better?

Not at all. A high cap rate might catch your eye, but more often than not, it's a red flag signaling higher risk. A juicy cap rate can be a sign of trouble—perhaps the property is in a declining market, has significant deferred maintenance, or is filled with non-credit tenants. A lower cap rate, while less exciting upfront, usually points to a safer, more stable asset in a desirable location. The "best" cap rate is the one that aligns with your risk tolerance and overall investment strategy.

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Questions to Ask a Sponsor About Cap Rates

Before investing in a deal, here are five crucial questions to ask the sponsor about their cap rate assumptions:

1. Is the entry cap rate based on T12 actuals or a pro forma budget?

2. What comparable sales were used to determine the market cap rate, and how similar are they?

3. What is the assumed exit cap rate, and how does it compare to the entry cap rate?

4. What are the key drivers (rent growth, expense reduction) that are projected to lower the effective cap rate over the hold period?

5. What macroeconomic factors (interest rate changes, local job growth) could cause the exit cap rate to be higher than projected?

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Ready to move beyond theory and see how these principles apply to institutional-grade deals? The team at Stiltsville Capital can help you analyze real-world opportunities in today's most promising markets. We believe that well-structured real assets can be a prudent, resilient component of any long-term wealth strategy.

Schedule a confidential call with Stiltsville Capital

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Information presented is for educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy securities. Any offering is made only through definitive offering documents (e.g., private placement memorandum, subscription agreement) and is available solely to investors who meet applicable suitability standards, including “Accredited Investor” status under Rule 501 of Regulation D. Investments in private real estate involve risk, including loss of capital, illiquidity, and no guarantee of distributions. Past performance is not indicative of future results. Verification of accredited status is required for participation in Rule 506(c) offerings.

The Institutional Investor's Guide to Real Estate Due Diligence

Reading Time 7 min | Good for: A, B

When you're dealing with institutional-quality real estate, fortunes aren't made on gut feelings. They’re built on the solid foundation of meticulous, data-driven verification. Real estate investment due diligence is far more than a pre-closing checklist—it's the strategic discipline that separates savvy investors from speculators. It’s about converting a compelling story into a verified financial asset, ensuring your capital is both protected and positioned for growth.

TL;DR: Your Due Diligence Edge

• Defense & Offense: Due diligence shields your capital from hidden risks (title defects, deferred maintenance) and uncovers opportunities others might miss (untapped upside, operational efficiencies).

• Systematic Approach: A rigorous process systematically vets four key areas—Financial, Physical, Legal, and Market—to ensure no stone is left unturned before committing capital.

• Beyond the Numbers: Modern diligence integrates Environmental, Social, and Governance (ESG) criteria and technology (like AI and drones) to assess long-term resilience and gain a competitive edge.

Why Due Diligence Is Your Most Critical Investment

For family offices and sophisticated investors, the due diligence process serves two essential purposes.

First, it’s a defensive shield. It’s your best tool for uncovering hidden risks that could erode your capital—things like undisclosed deferred maintenance, defects in the title, or a sponsor's overly optimistic income projections.

Second, it's an offensive tool. This is where you can find the real value others might have overlooked, confirm the sponsor's business plan holds water, or even spot new upside potential that wasn't part of the original pitch.

The Modern Diligence Mandate

Market Signal BoxThe global real estate market was valued at an estimated $4.2 trillion in 2023 and is projected to grow at a compound annual growth rate (CAGR) of 5.8% through 2030, according to reports from Grand View Research. In a market this massive and competitive, due diligence has become the strategic backbone of any serious investment decision.Investor Take: With more capital chasing fewer deals, the margin for error is shrinking. A disciplined, institutional-grade diligence process is no longer optional—it's the primary way to secure a durable competitive advantage.

It’s no longer just a compliance exercise. The modern approach weaves together rigorous financial validation, up-to-date valuation standards, and forward-looking environmental checks, including new frameworks for climate resilience. You can learn more about the strategic evolution of due diligence in real estate investing.

The Four Pillars of the Process

Any institutional-grade analysis boils down to four distinct but deeply interconnected pillars. Each step builds on the last, creating a logical funnel for vetting opportunities without wasting time or money on a deal that was flawed from the start.

This infographic lays out the core flow beautifully, showing how a deal must first pass financial muster before you ever spend a dime on physical inspections or legal deep dives.

This process is designed to be a cost-effective filter. Why pay for an expensive property condition report if the numbers don't even work?

Let's break down these pillars into a more structured view.

The Four Pillars of Real Estate Due Diligence

A comprehensive due diligence process covers four core components. Here are the goals and key documents for each area.

• Pillar 1: Financial * Goal: Verify the property's economic performance and validate the investment thesis. * Documents: Rent rolls, P&L statements, lease abstracts, bank statements, utility bills, CAM reconciliations.

• Pillar 2: Physical * Goal: Assess the building’s condition, identify immediate repairs, and forecast future capital expenditures. * Documents: Property condition report (PCR), environmental site assessment (ESA), zoning report, surveys, appraisals.

• Pillar 3: Legal * Goal: Confirm clear ownership, uncover liabilities, and ensure compliance with all regulations. * Documents: Title report, ALTA survey, service contracts, permits, corporate documents, loan agreements.

• Pillar 4: Market * Goal: Analyze market trends, competition, and demographic shifts to confirm demand and growth potential. * Documents: Market studies, competitor analysis (comps), demographic reports, submarket vacancy/rent data.

An investment without rigorous due diligence is not an investment at all; it’s a gamble. The goal is to leave no stone unturned, transforming assumptions into certainties and ensuring every risk is identified, quantified, and mitigated.

A successful outcome isn't just about closing the deal. It's about closing the right deal on the right terms, with total clarity on the asset you're acquiring. This guide is your roadmap to executing that process with institutional precision.

Deconstructing the Deal’s Financials and Market Fit

A deal’s narrative might be compelling, but the numbers tell the real story. This is where we move past the sales pitch and into the rigorous financial and market analysis that either proves an investment thesis or exposes its fatal flaws. An institutional-grade due diligence process is forensic, detailed, and frankly, skeptical by nature.

The first document to tear apart is the rent roll. Don't just see it as a list of tenants and their rents; it’s the absolute lifeblood of the property's income. Your job is to audit it for inconsistencies, cross-reference the data with actual lease agreements, and get a true feel for the quality and stability of that income stream.

Auditing the Rent Roll: Looking Beyond the Surface

A quick glance at the rent roll just won't cut it. A seasoned investor knows to hunt for the subtle clues and potential red flags that could derail future cash flow.

Here’s what to focus on:

• Lease Expiration Schedule: Do you see a huge chunk of leases expiring in the same year? That’s a massive rollover risk waiting to happen. What you want to see is a staggered schedule, which creates a much more predictable and stable income.

• Tenant Concentrations: Is one big tenant responsible for a disproportionate amount of the income? If that anchor tenant leaves, it could be catastrophic for your returns.

• Rent Concessions and Abatements: Does the rent roll truly reflect periods of free rent or other perks given to tenants? The gross rent figures can look fantastic until you realize significant abatements are hiding in the fine print.

• Security Deposits: This is a small but telling detail. Are security deposits collected consistently and recorded properly? It’s often a good indicator of the sponsor's overall management discipline.

Scrutinizing Expenses and Leases

Once you have a solid handle on the income, it’s time to challenge every single expense line item. The operating statements provided by the seller are just a starting point—never the final word. You have to verify these numbers against actual utility bills, tax statements, and service contracts.

Novice Lens: Why This MattersThe most dangerous assumption in real estate is that the past equals the future. Your job during due diligence is to verify past performance while building a forward-looking model based on realistic, market-supported assumptions—not the seller's pro-forma.

The lease agreements themselves are a goldmine of information and potential risks. You need to read them carefully, looking for clauses that could dramatically alter the property's financial outlook. Think early termination options, co-tenancy requirements (where one tenant can break their lease if a key neighbor leaves), or caps on how much of the expenses you can pass through to tenants. I’ve seen a retail center’s value plummet after an anchor grocery store left and triggered a cascade of co-tenancy clauses for the smaller tenants.

Stress-Testing the Sponsor’s Pro-Forma

For the sophisticated investor, the real work begins when you start stress-testing the sponsor’s financial model, often called the pro-forma. This is where you push back on their core assumptions to see how the deal holds up when things don't go perfectly.

Key Levers to Test:

• Rent Growth: Is their projected rent growth of 5% a year actually supported by historical data and third-party market reports for that specific submarket? Or is it an overly optimistic hockey-stick projection?

• Vacancy Rates: Does the model assume a constant 5% vacancy when the submarket average is closer to 8%? A seemingly small tweak here can have a major impact on the Net Operating Income (NOI).

• Exit Capitalization (Cap) Rate: A sponsor might project a sale at a 5.0% cap rate in five years. What happens to your Internal Rate of Return (IRR) if rising interest rates push exit cap rates to 6.0%? This single assumption is one of the most powerful drivers of a deal’s projected success.

By running these downside scenarios, you begin to understand the deal's true risk profile. This process is fundamental to building a robust discounted cash flow (DCF) model. If you want to dive deeper, we have a detailed guide on how to calculate a discounted cash flow for real estate success.

A thorough financial and market analysis isn't about finding reasons to say "no." It's about gaining the clarity and confidence to say "yes" to the right deals, armed with a complete picture of the risks and a verified understanding of the potential rewards.

Uncovering a Property's Physical Story

Every property has a story that spreadsheets and financial models just can't tell. This is where the real work begins—moving from the theoretical to the tactile to uncover the building’s true history and, more importantly, its future needs.

The physical condition of an asset is where so many hidden risks and costs lie dormant. For any serious investor, bringing in third-party experts isn't just a good idea; it's non-negotiable. This is a forensic investigation into the building's core systems and structural integrity, giving you an unbiased, professional opinion on what you're really buying.

Commissioning Key Third-Party Reports

Two reports are foundational to any physical due diligence process: the Property Condition Assessment (PCA) and the Phase I Environmental Site Assessment (ESA). Think of them as a comprehensive health check-up for the property.

• Property Condition Assessment (PCA): Conducted by a specialized engineering firm, this report digs into the building's major systems—roof, foundation, HVAC, electrical, and plumbing. A solid PCA gives you a detailed list of immediate repair needs and, crucially, a forecast of future capital expenditures (CapEx).

• Phase I Environmental Site Assessment (ESA): This is all about investigating the property's current and past uses to flag any potential environmental contamination. You absolutely want to avoid acquiring a property with a costly cleanup liability. A clean Phase I is essential for securing financing and dodging a massive long-term risk.

These reports aren't just about finding problems; they're about putting a price tag on them. A leaky roof on that industrial warehouse isn't just a maintenance task; it's a potential $250,000 capital expense that has to go directly into your financial model, impacting everything from cash flow to your final returns.

Translating Physical Risks into Financial Impacts

A cracked parking lot or an aging HVAC unit—every physical defect has a specific cost. The real skill here is translating these findings into hard numbers for your underwriting.

An experienced sponsor will take the PCA and immediately use it to refine their CapEx budget. If the report says the roof only has three years of life left, the model needs to show a full replacement in year three, not year ten. This kind of discipline prevents those nasty surprises that can completely derail an investment.

The most expensive mistake in real estate is underestimating future capital expenditures. A thorough PCA isn't an expense; it's an investment in certainty that pays for itself by preventing unforeseen cash calls and protecting your IRR.

This process also gives you powerful negotiating leverage. If your diligence uncovers $500,000 in immediate, critical repairs the seller never mentioned, that becomes a very clear point of discussion to adjust the purchase price.

Investor Checklist: Questions to Ask Your Inspector

Just getting a 200-page report isn't enough. You have to engage with your inspectors to truly understand the asset. For a more exhaustive list, check out our ultimate commercial property inspection checklist.

• Beyond immediate needs, what are the top three "ticking time bombs" in this building that will require attention in the next 5-7 years?

• Based on similar properties, are the utility systems adequate for modern tenant demands?

• Is there any evidence of major structural issues, like significant foundation settling or water intrusion?

• How do your repair cost estimates compare to local labor and material costs? Are these conservative?

• Are there any compliance issues with current building codes, ADA standards, or fire safety regulations?

Ultimately, physical due diligence is about building a complete picture. It's about understanding the asset's past, assessing its present, and accurately forecasting the capital needed to secure its future. It’s how you make sure the story the numbers tell aligns perfectly with the reality of the brick and mortar.

Diving Into the Legal and Regulatory Weeds

Once you've stress-tested the financial model and kicked the tires on the physical building, it's time for the legal and regulatory deep dive. This is where deals can truly fall apart. A clean title and the right zoning aren't just checkboxes; they are the absolute foundation of a solid investment.

If you cut corners, you could inherit problems that are expensive, time-consuming, or impossible to fix after closing. This stage is about getting comfortable with dense legal documents, ideally with an experienced attorney by your side, to uncover any hidden claims, restrictions, or obligations that could derail your plan for the property.

Uncovering Title and Survey Surprises

First, you need a meticulous review of the title report and the ALTA survey. These two documents provide a complete picture of the property's legal boundaries and any baggage that comes with it.

The title report answers, "Who really owns this, and who has a claim on it?" You’re looking for a "clean" title, but it’s common to find issues like a mechanic's lien from an unpaid contractor or an old mortgage that wasn’t properly removed. These usually just need to be cleared up before closing.

The ALTA survey is the detailed map. It shows you things the paper trail can't, like:

• Easements: Does the utility company have the right to dig up your parking lot? Is there a shared driveway agreement with the neighboring property?

• Encroachments: Is the neighbor's fence a foot over your property line? Does that new awning extend over the public sidewalk?

These might sound like small details, but they can grow into massive headaches. An unknown easement could kill your plans for future expansion.

Making Sure Your Plan Fits the Zoning Rules

Just because the building is a thriving medical office today doesn't automatically mean you can keep it that way—or execute your value-add plan. Every city has its own rulebook, and zoning dictates exactly how a property can be used. Confirming zoning compliance is a non-negotiable part of any serious real estate investment due diligence.

Your legal team needs to get a zoning report or talk directly with the local planning department. You need straight answers. Can you add that second story you were planning? Is the property "under-parked" according to current code? The answers directly impact the property's value.

Insight Edge: The Entitlement TrapA classic mistake investors make on value-add deals is assuming special permits or zoning variances—"entitlements"—automatically transfer to the new owner. Bad assumption. A previous owner might have gotten a permit for a specific project that has since expired or was tied only to them. You have to verify that any special permissions critical to your business plan are still valid and fully transferable.

Digging Into Existing Contracts and Agreements

Finally, your due diligence must cover every single contract that comes with the building: service agreements, vendor contracts, property management agreements, etc. You need to know precisely what you’re inheriting.

Go through every contract and look for red flags. Are you about to be stuck in a long-term, overpriced contract with a lazy landscaping company? Is there an automatic renewal clause in the property management agreement that’s almost impossible to break? A bad contract can directly chip away at your Net Operating Income (NOI).

The goal is to spot these potential landmines early and make their termination a condition of the sale. A little proactive legal work now can save you from inheriting someone else's expensive mistakes later.

Blending ESG and Tech Into Modern Due Diligence

The future of real estate investment due diligence is already here, and it's smarter, faster, and more conscious than ever. While the fundamentals haven't changed, the sharpest sponsors are weaving two powerful forces into their process: Environmental, Social, and Governance (ESG) criteria and cutting-edge tech.

This isn't just a passing trend. It’s a genuine shift in how we measure and protect long-term value. For any serious investor, understanding this evolution is crucial for ensuring your portfolio is built to withstand risks that don't show up on a typical P&L.

Why ESG Diligence Matters More Than Ever

ESG has moved from the "nice-to-have" column to a non-negotiable part of institutional underwriting. Think of it as a practical framework for spotting hidden risks and opportunities tied to a property’s environmental footprint, its role in the community, and how it’s managed.

This shift is grounded in real-world financial consequences. According to a PwC and Urban Land Institute report, by 2025, climate and ESG factors are expected to have a significant impact on real estate investment decisions, with a growing risk of certain properties becoming "stranded assets"—impossible to sell without major green upgrades.

Investor TakeawayA building with sky-high energy bills, a location prone to flooding, or a sour relationship with the local community carries very real financial liabilities. On the flip side, a property with LEED certification, high-efficiency systems, and a positive community presence can command premium rents and attract the best tenants, significantly boosting its long-term value.

Understanding how a sponsor bakes these factors into their analysis is critical. For a closer look, check out our guide on sustainable real estate development and building future-proof portfolios.

Tech: The Diligence Accelerator

If ESG provides a new lens for seeing risk, technology gives us the tools to do it faster and with more precision. The days of sifting through bankers' boxes of paperwork are gone. Today's best sponsors lean on a tech stack that gives them a clear competitive edge.

A dedicated data room for due diligence is the foundation for this efficiency. It’s a secure, central hub where legal teams, inspectors, and partners can all work from the same up-to-the-minute information, drastically cutting down on errors and delays.

But it goes way beyond just managing files. Sponsors now deploy advanced tools like:

• AI-Powered Lease Abstraction: Instead of a junior analyst spending days reading hundreds of pages of legalese, AI can scan lease documents in minutes to pull out critical dates, financial terms, and non-standard clauses.

• Drone-Based Site Inspections: For a sprawling industrial park, drones can capture high-res images and create 3D models of roofs, facades, and land contours, spotting problems you’d miss from the ground.

• Geospatial Data Analysis: Imagine overlaying demographic shifts, traffic patterns, and climate risk maps onto a single property. Sophisticated mapping tools do just that, giving a much richer picture of a property's market position.

When vetting a sponsor, ask them about their tech stack. A team that invests in modern tools is usually more disciplined, efficient, and better equipped to find the subtle insights that separate a good deal from a great one.

Your Top Real Estate Due Diligence Questions Answered

When you’re deep in the weeds of a potential deal, a lot of practical questions pop up. Here are some straight answers to the questions we hear most often from investors.

How Long Should Due Diligence Take for a Commercial Property?

You should plan for a due diligence period of 30 to 90 days. The exact timeline hinges on the complexity of the property and the deal. A straightforward, single-tenant building with a clean history might wrap up on the shorter end. But for a large multifamily complex, a value-add project that needs a zoning change, or a portfolio of properties, you’ll easily need the full 90 days—and maybe an extension.

What’s the Biggest Mistake Investors Make in Due Diligence?

The single costliest mistake is blindly trusting the seller's numbers and documents without independent verification. It’s tempting to accept the pro-forma at face value or rely on reports neatly packaged in the deal room, but you simply can’t.

Always operate with a healthy dose of professional skepticism. You must stress-test the numbers, question every assumption, and bring in your own independent experts to get a true picture of the property's physical, financial, and legal condition.

How Much Should I Budget for Due Diligence?

As a general rule of thumb, set aside 0.5% to 2% of the purchase price for your due diligence costs. This will cover essentials like legal fees, the appraisal, and crucial third-party engineering and environmental reports. On a multi-million dollar property, these costs can quickly climb into the tens of thousands. Think of this as an investment in protecting your capital. A great way to organize the process is by referencing some good due diligence checklist templates to guide your review.

What’s a "Fatal Flaw" That Means I Should Walk Away?

A "fatal flaw" is a deal-breaker—an issue you can’t fix that completely torpedoes your original investment plan. Think of things like incurable title defects, significant environmental contamination where the cleanup costs more than the property is worth, or zoning that flat-out prohibits what you want to do with the site. Finding a fatal flaw is a successful outcome of due diligence. It just saved you from a disastrous investment.

Take the Next Step

A disciplined due diligence process is the bedrock of any successful real estate investment. It transforms uncertainty into calculated risk and ensures that every decision is backed by data, not just a good story. Well-structured real assets can be a prudent, resilient component of a long-term wealth strategy, and it all starts with getting the diligence right.

If you are an accredited investor interested in learning more about institutional-grade real estate opportunities, we invite you to schedule a confidential call with Stiltsville Capital.

Information presented is for educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy securities. Any offering is made only through definitive offering documents (e.g., private placement memorandum, subscription agreement) and is available solely to investors who meet applicable suitability standards, including “Accredited Investor” status under Rule 501 of Regulation D. Investments in private real estate involve risk, including loss of capital, illiquidity, and no guarantee of distributions. Past performance is not indicative of future results. Verification of accredited status is required for participation in Rule 506(c) offerings.

A Guide to Real Estate Private Equity: Unlocking Institutional-Grade Deals

Reading Time: 8 min | Good for: Novice (A), Informed (B), Sophisticated (C)

You've likely heard the term real estate private equity, but what does it actually mean? Put simply, it’s the practice of pooling capital from private investors to acquire, improve, and ultimately sell real estate assets that aren't listed on a public stock exchange. This approach allows investors to partner with expert sponsors on substantial projects—like developing a new multifamily community or overhauling an underperforming office complex—opening the door to opportunities typically out of reach for individual buyers.

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TL;DR: Key Takeaways

• What It Is: Real estate private equity (REPE) is a direct investment model where a professional sponsor (General Partner) uses capital from passive investors (Limited Partners) to execute a value-creation strategy on a specific property or portfolio.

• Who It's For: Ideal for accredited investors, family offices, and institutions seeking portfolio diversification, inflation hedging, and higher potential returns than public markets may offer, in exchange for lower liquidity.

• Why It Matters Now: Following a period of price discovery, transaction volumes are rebounding. This creates a window for well-capitalized sponsors to acquire quality assets at reset valuations and create value through operational expertise, not just market lift.

• Next Step: Understand the key strategies—Core, Value-Add, and Opportunistic—to align a REPE allocation with your specific risk tolerance and return objectives.

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Unpacking Real Estate Private Equity

At its heart, real estate private equity (REPE) is a hands-on, direct way to invest in property. It all happens outside the public stock market, which is what makes it fundamentally different from buying shares in a Real Estate Investment Trust (REIT).

Think of it this way: buying a REIT is like buying stock in a huge, diversified landlord. Your money is spread thin across a massive portfolio. But investing in a private equity deal is more like becoming a silent partner with a world-class developer on one specific, high-potential project. Your capital is put to work to actively create value, not just sit back and collect rent checks.

The Key Players and Structure

This partnership model is built on a clear division of labor. Understanding who does what is key to seeing how REPE works. You have two main players:

• General Partners (GPs): These are the sponsors or fund managers—the seasoned real estate pros who are deep in the trenches. The GP is responsible for everything from sourcing the deal and conducting due diligence to securing financing, managing the property, and executing the business plan.

• Limited Partners (LPs): These are the passive investors, which could be high-net-worth individuals, family offices, or even institutions. LPs provide most of the equity, but they hand off all the day-to-day decisions to the GP. This limits their liability to the amount of money they put in.

This GP/LP structure is the engine that drives private equity real estate. It marries the sponsor's operational know-how with the investor's capital, creating a powerful team ready to tackle complex projects. We dive deeper into this structure in our guide to limited partnership real estate investing.

Novice Lens: Why It MattersReal estate private equity provides a structured way for passive investors (LPs) to access institutional-grade properties by partnering with an experienced operator (the GP) who manages the asset from start to finish. This structure aligns interests, as the GP typically invests their own capital and earns their largest reward only after investors have received their initial capital and a preferred return.

Why Choose Private Equity Over Other Options?

So, why go this route? For savvy investors, the real appeal of REPE is getting access to deals and strategies you just can't find in public markets or through direct ownership. These funds take on ambitious projects like ground-up construction, major turnarounds of underperforming buildings, or building portfolios in niche sectors like medical offices or data centers.

This active management approach is all about generating returns by making the property better, not just by hoping the market goes up. The financial structures are also more sophisticated. You’ll see terms like a preferred return, which ensures LPs get paid a certain return before the GP takes a performance fee. The waterfall model then dictates how the rest of the profits are split. This setup creates a powerful alignment—the sponsor’s big payday is directly tied to delivering great results for investors. Learn more about the waterfall in private equity.

The "Why Now" Market Landscape for Real Estate

Knowing the "what" of real estate private equity is one thing, but understanding "why now" is where the real opportunity lies. The commercial real estate market is in a fascinating spot, navigating the ripple effects of changing interest rate policies and fundamental shifts in supply and demand. After a stretch where the market was largely frozen, we are entering a new cycle, creating clear openings for disciplined investors.

For a period, a wide bid-ask spread—the gap between what sellers wanted and what buyers were willing to pay—stalled transaction activity. That's changing. As clarity emerges around inflation and borrowing costs, buyers and sellers are starting to align on pricing. This is thawing the freeze on transactions, allowing well-capitalized sponsors to acquire top-tier assets at reset valuations.

A Rebound in Investor Confidence

This isn't just a feeling; the numbers tell the same story. After a challenging fundraising period, the real estate private equity world showed renewed vigor in 2025. Data from Alter Domus (as of mid-2025) shows that global private real estate fundraising shot back up to $110.54 billion in the first half of 2025. That's a 16% jump from the same period in 2024, a powerful signal that investor confidence is returning.

This was driven by several mega-funds closing and a pickup in direct investment. Global real estate deals hit $185 billion in Q1 2025 alone—a 34% increase from the year before. This flood of capital indicates that experienced investors see a prime moment of opportunity.

Market Signal Box (Data as of Q2 2025)* The Data: Global real estate transactions jumped 34% year-over-year in Q1 2025, reaching $185 billion.* Interpretation: The market is moving past the price discovery phase that sidelined capital. Transaction velocity is increasing as quality properties begin to trade more freely.* Investor Take: The window to acquire assets at reset pricing is open now but likely won't last indefinitely. Sponsors with ready capital and operational expertise are best positioned to act before increased competition drives prices up.

Positioning for the Next Cycle

In this new environment, success is less about financial engineering or relying on cheap debt. It is now centered on operational excellence and creating value at the property level.

This means focusing on:

• Acquiring underperforming assets: Finding properties suffering from mismanagement or deferred maintenance.

• Executing smart capital improvements: Renovating units, adding modern amenities, or improving energy efficiency to justify higher rents and lower operating costs.

• Solving complex capital situations: Targeting deals where current owners face maturing debt and need a new capital partner or an outright sale.

Simply put, the market is shifting from one that rewards financial leverage to one that rewards genuine real estate skill. For passive investors, this makes it crucial to partner with sponsors who have a proven history of navigating these cycles and creating tangible value through hands-on management.

How Sponsors Create Value in Real Estate

In real estate private equity, you don't just buy a building and hope the market goes up. Instead, the sponsors (General Partners) actively work to create value through deliberate, strategic moves. This hands-on approach is the secret sauce that separates REPE from passive ownership.

Sponsors typically run one of three main playbooks: Core, Value-Add, and Opportunistic. Each strategy lives on a different part of the risk-return spectrum, akin to choosing between a low-risk bond, a steady growth stock, or a high-potential venture startup.

The chart below shows how a return of investor confidence is breathing new life into the real estate private equity market, opening up doors for all three types of strategies.

As you can see, confidence is the foundation. It leads to more capital being raised, which in turn fuels more deals for sponsors putting these value-creation strategies to work.

Core Strategy: The Foundation

Core investing is the most conservative play. Picture a new, fully leased Class A office tower in a major city, with a creditworthy tenant on a long-term lease. That's a Core asset. The goal isn't a dramatic makeover; it's generating stable, predictable cash flow. Value is created through excellent property management, minor operational tweaks, and contractual rent escalations. A key part of this is knowing strategies for negotiating commercial leases.

• Risk Profile: Low

• Leverage: Typically low (under 40%)

• Primary Goal: Capital preservation and consistent income.

Value-Add Strategy: The Renovation Play

This is where many real estate private equity sponsors shine. A Value-Add strategy involves finding a property with correctable flaws and executing a plan to fix them. A classic example is buying an older apartment complex with dated units and below-market rents. The sponsor invests capital to renovate apartments, upgrade common areas, and improve management. This justifies higher rents, increases the Net Operating Income (NOI), and ultimately boosts the property's value.

Novice Lens: Think of it as a "fix-and-flip" on a massive, commercial scale. The sponsor is forcing the property's value to go up through sweat equity and smart upgrades, not just riding a market wave.

Success here boils down to execution. The sponsor must deliver the renovation on time and on budget to transform the underperforming asset into a stabilized, cash-flowing property.

Opportunistic Strategy: The Visionary Build

Opportunistic deals are the riskiest but also offer the highest potential returns. These projects often involve ground-up development, converting a property's use (like turning an old warehouse into loft apartments), or taking on a completely vacant building. For instance, a sponsor might buy a plot of land, navigate zoning and entitlements, and build a state-of-the-art data center from scratch to meet surging demand. These complex projects require deep expertise in development, construction, and leasing. The value is created entirely from the sponsor's vision and ability to execute.

Real Estate Private Equity Strategies at a Glance

Strategy	Risk Profile	Target IRR (Net to LP)	Leverage	Primary Value Driver
Core	Low	8% - 10%	30% - 40%	Stable cash flow & minor rent growth.
Value-Add	Moderate	12% - 18%	60% - 75%	Renovations, operational improvements, and re-leasing.
Opportunistic	High	20%+	>70%	Development, major repositioning, and entitlement.

Ultimately, there is no single "best" strategy. The right choice depends on an investor's goals and risk tolerance. Whether it’s the steady income of a Core property or the home-run potential of an Opportunistic development, the common thread in real estate private equity is that value is never an accident—it's actively and intentionally created by a skilled sponsor.

Deal Lens: A Value-Add Multifamily Example

Theory is great, but a practical example makes it all click. Let's walk through a simplified "value-add" play to see how a sponsor turns an overlooked property into a significant win for investors.

Our target is a 200-unit, 1990s-vintage apartment complex in a growing Sunbelt city. The property is well-located but physically tired. The current owner has deferred maintenance, and average rents are 15% below market for renovated properties nearby. This is a perfect value-add candidate.

1. Identifying and Acquiring the Asset

The sponsor's team sources this property, "Vista Gardens," through their network. Their underwriting model shows that with strategic renovations, they can significantly boost its Net Operating Income (NOI). After due diligence, they negotiate a purchase price of $20 million.

To fund the deal, they assemble a capital stack:

• Senior Debt: $14 million (70% of purchase price) from a bank.

• LP Equity: $5.4 million raised from accredited investors and family offices.

• GP Equity: $600,000 (10% of total equity) contributed by the sponsor, ensuring "skin in the game."

• Renovation & Reserve Capital: An additional $2 million in equity is raised to fund the improvements and provide a contingency budget, making the all-in project cost $22 million.

2. The Value Creation Phase

With the property acquired, the three-year business plan begins. The sponsor executes a $10,000-per-unit renovation program, upgrading kitchens, flooring, and bathrooms as units turn over. They also enhance common areas by adding a dog park, refreshing the gym, and modernizing the leasing office.

These improvements make the property more desirable, justifying higher rents. Within two years, 85% of the units are renovated, and the average rent has increased from $1,200 to $1,500 per month. This directly boosts the property's NOI from $1 million at purchase to $1.4 million.

3. The Profitable Exit

By year three, Vista Gardens is a stabilized, cash-flowing asset, essentially transformed into a "Core" property. The sponsor determines it is the optimal time to sell. A new buyer, perhaps an insurance company seeking stable, long-term returns, acquires it for $28 million.

The sale proceeds first repay the bank loan, and the remaining profit is distributed to equity investors according to the waterfall structure. This deal generated a strong return, demonstrating how active management in private equity creates value far beyond market appreciation.

Navigating Risks and Performing Due Diligence

While the returns in real estate private equity can be compelling, a clear-eyed view of the risks is essential. Success isn't just about picking good properties; it's about partnering with sponsors who are masters of risk mitigation and transparency.

The market moves in cycles, and performance varies significantly by geography and property type. For example, a recent global commercial real estate outlook from Deloitte (as of mid-2025) shows that while some markets are recovering, others face headwinds, highlighting the need for careful selection.

Risk & Mitigation Table

Every investment has risks. In private real estate, the best sponsors identify, price, and manage them head-on. A huge part of this is knowing how to conduct risk assessment on any potential deal.

• Risk: Illiquidity * Your capital is typically locked up for a 5 to 10-year period. You cannot easily sell your stake. * Mitigation: The sponsor clearly defines the fund's timeline and business plan upfront. Ensure this timeline aligns with your personal liquidity needs.

• Risk: Execution * Value-add and opportunistic strategies depend on the sponsor's ability to complete a complex plan on time and on budget. * Mitigation: Vet the sponsor's track record. Have they successfully executed similar projects before? A proven history is your best defense.

• Risk: Market & Cyclical Downturn * An economic recession, rising interest rates, or shifts in tenant demand can negatively impact property values and cash flow. * Mitigation: Prudent sponsors use conservative underwriting assumptions (e.g., modest rent growth) and focus on markets with diverse, resilient economies.

• Risk: Leverage * Excessive debt magnifies risk. If the property underperforms, foreclosure becomes a real threat. * Mitigation: Disciplined sponsors use moderate leverage (typically 60-70% Loan-to-Cost) and seek favorable terms like fixed interest rates to hedge against volatility.

Actionable Investor Checklist: Questions to Ask a Sponsor

Before investing, you must conduct a deep dive on the General Partner (GP). You are investing in a team as much as you are in a building.

1. Track Record: Can you provide your full, deal-by-deal track record, including both successes and failures?

2. Alignment of Interests: How much of your own capital is invested in this deal? Is the GP co-investment significant (e.g., 5-10% of total equity)?

3. Strategy & Underwriting: What are the key assumptions in your financial model, and how did you stress-test them? What has to go right for this deal to work?

4. Fee Structure: Can you provide a clear, comprehensive breakdown of all fees, including acquisition, asset management, and disposition fees?

5. Reporting & Transparency: What is your investor reporting cadence and format? Will I receive detailed financial statements and progress updates regularly?

For a deeper dive, review our complete guide to commercial real estate due diligence.

How REPE Can Fit Within Your Portfolio

When building a durable portfolio, any new asset class must serve a strategic purpose. Real estate private equity is not a speculative bet; it's a strategic allocation intended to help build resilient, multi-generational wealth.

For sophisticated investors like UHNWIs and Family Offices, REPE is a powerful diversifier. Because private real estate is not publicly traded, its valuation has a low correlation to the daily volatility of stock and bond markets. This can act as a stabilizing force, particularly during periods of public market turbulence.

A Hedge Against Inflation and a Source of Tax Efficiency

Private real estate also plays a powerful defensive role, particularly as an inflation hedge. When the cost of living rises, so do construction costs and, crucially, rental rates. Real assets, like the buildings in a REPE fund, tend to appreciate in value alongside inflation, protecting your capital's purchasing power.

Furthermore, direct ownership offers significant tax advantages. Investors can benefit from depreciation, a non-cash expense that can shield a significant portion of the income generated by the properties. This often results in highly tax-efficient distributions, a critical benefit for high-net-worth portfolios.

The Institutional Shift Toward Private Markets

This strategy is why many global family offices and institutions are steadily increasing their allocations to private markets. The entire private asset space has grown significantly as large investors seek long-term, return-generating assets to match their long-term liabilities. Real estate has firmly established itself as a core holding in these portfolios. You can discover more insights about the future of private markets at BlackRock.com.

The Stiltsville Capital Perspective: We believe that disciplined underwriting, conservative leverage, and true alignment of interests are the keys to long-term success in real estate. We view each asset as an operating business, not a financial instrument. We invest significant capital alongside our partners because we succeed only when you do. By partnering with specialist operators, investors can add a durable, income-producing, and tax-efficient engine to their wealth strategy.

Common Questions from Investors

It’s natural to have questions when exploring a complex asset class. Here are straightforward answers to what we hear most often.

What’s the Typical Buy-in?

Minimum investments vary widely. For a smaller, single-asset syndication, minimums might start around $250,000. For larger, institutional-quality funds, the minimum commitment is often $1 million or more. These investments are structured for accredited investors who have the capital and sophistication for long-term, illiquid opportunities.

How Is This Different from a REIT?

While both invest in real estate, REPE and a Real Estate Investment Trust (REIT) are fundamentally different in structure, strategy, and liquidity.

• Liquidity: REITs are publicly traded securities you can buy and sell daily on a stock exchange. A REPE investment is private and illiquid; your capital is locked in for the project's duration.

• Strategy: REITs typically own and operate large portfolios of stabilized properties, acting as a landlord. REPE sponsors are operators focused on actively creating value through development or repositioning.

• Access & Control: Anyone can buy a REIT. REPE is limited to accredited investors who gain more direct exposure to a specific asset and business plan.

What Kind of Fees Should I Expect?

The fee structure is designed to align the interests of the sponsor (GP) and the investors (LPs). The classic model is often referred to as “2 and 20.”

1. Management Fee: An annual fee, typically 1-2% of committed capital, that covers the sponsor’s operational overhead for sourcing, underwriting, and managing the assets.

2. Performance Fee (Carried Interest): Typically 20% of the profits, but—critically—it is paid to the sponsor only after investors have received 100% of their initial capital back, plus a pre-agreed minimum return (the "preferred return"), often in the 6-8% range. This ensures the sponsor is highly motivated to deliver strong performance.

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At Stiltsville Capital, we believe a disciplined, transparent approach to real estate private equity can be a powerful component of a long-term wealth strategy. We partner with family offices and accredited investors to provide access to institutional-quality deals.

Schedule a confidential call with our team to explore how our strategy can help you reach your portfolio goals.

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Information presented is for educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy securities. Any offering is made only through definitive offering documents (e.g., private placement memorandum, subscription agreement) and is available solely to investors who meet applicable suitability standards, including “Accredited Investor” status under Rule 501 of Regulation D. Investments in private real estate involve risk, including loss of capital, illiquidity, and no guarantee of distributions. Past performance is not indicative of future results.