For investors in California who are looking to make the largest possible return on their capital, it may be worthwhile to look into real estate interval funds. These are a type of mutual fund that allow for larger returns because investors hold them for a longer period of time. Instead of being able to cash out on a daily basis, investors can only make one redemption per quarter.
This restriction gives fund managers the ability to look for investments that offer higher rates of return instead of those that offer the most liquidity. Examples of investment opportunities include private real estate debt or commercial real estate credit. These are considered to be premium grade investments that may not be found through a publicly-traded REIT or other investment vehicle that has daily liquidity.
Another benefit of having to hold an investment for a relatively long period of time is that human emotion doesn’t influence investment decisions. With quarterly redemption periods, it generally isn’t possible to buy or sell based on what the market may be doing on a particular day or during a particular week. This may also act to help investors obtain larger returns on their capital as there is little motivation to time markets, which is often a losing proposition.
The primary goal of an investor is typically to make a profit. Therefore, it may be a good idea to talk about any type of alternate investment deal with an attorney prior to investing. Doing so may make it easier to understand the deal’s terms, how the investment will lead to a return on capital and what the rate of return may be. Legal counsel may also be able to point out any red flags that could put an investor’s capital at risk.