Real Estate Private Equity - The Perpetual Income Machine

You want to own a business where the sale you made 5 years ago still pays you today. Real estate private equity is the perfect example of this

Here’s how it works:

So let’s say that you take down your first deal - a $5MM deal. You raise $2MM of investor equity to do it. That equity raise is your first “sale”

Your expected GP profit from this first deal (sale) would be:
- Acquisition fee: 2% of purchase price
- AM fee: 2% of equity (paid yearly)
- Promote: 20%

(Since I know some moron is going to miss the point and yap about how these fees aren’t “market”, feel free to insert whatever fee load you want, the math still works)

Total expected profit across ~3 years assuming 2x return = $50k acq fee + $120k AM fee + $400k promote = $570k

That’s a great start. But you can now roll that equity into a new deal (and you’ve now doubled it from $2MM to $4MM). That new $4MM of equity gets you a $12MM deal

Second deal total expected profit = $240k acq fee + $240k AM fee + $800k promote = $1.28MM

And then you roll it again. And again. You can see how these numbers start multiplying very quickly

So not only are you getting paid 5 years later (or even 20 years later) for the first sale you made (raising the investor capital) but the payments actually get bigger. The acquisition fee grows with every new deal. AM fee grows with every new deal. The promote grows with every new deal. Each year, you get paid *more* for the initial sale you made. Think about how insane that is. Very few other businesses have this quality

Keep in mind, you have several of these “chains” going on at once. You could easily be doing this across 5+ separate deals at any given time. And just one of these initial sales could easily make you tens of millions of dollars over the course of your career

And the thing is, this is a win-win for everyone - this system only works if you’re making your investors a lot of money. If you do right by your investors, they stick with you. You make more money and they make more money. It becomes a perpetual income machine that simply gets larger and larger. It’s one of the main reasons why private equity firm owners are frequently so wealthy. The sale you made 20 years ago not only still makes you money today but it makes you magnitudes more money today than it made you initially

If you’d like to learn how to do this, I teach this process in my Acquisitions Bootcamp (apply below)