The Accredited Investor Guide to Private Real Estate

Private real estate investing has historically been one of the most reliable paths to building and preserving wealth. For decades, it was the exclusive domain of institutions and ultra-high-net-worth families. Today, accredited investors have broader access to these opportunities — but navigating the landscape requires knowledge that most financial advisors do not provide.

This guide is written for accredited investors who are considering their first or next private real estate investment. We will cover how deals are structured, what to look for in a sponsor, how to evaluate an opportunity, and what questions to ask before committing capital.

Under SEC rules, an accredited investor is an individual who meets at least one of the following criteria:

• Income: Earned income exceeding $200,000 (or $300,000 jointly with a spouse) in each of the two most recent years, with a reasonable expectation of the same in the current year
• Net worth: Net worth exceeding $1 million, excluding the value of your primary residence
• Professional credentials: Holds a Series 7, Series 65, or Series 82 license in good standing
• Knowledgeable employee: Is a knowledgeable employee of a private fund

Accredited investor status matters because private real estate offerings are typically structured as Regulation D securities, which are exempt from SEC registration but restricted to accredited investors.

Before diving into mechanics, it is worth understanding why private real estate deserves a place in a sophisticated investor's portfolio.

Uncorrelated returns. Private real estate returns are driven by local supply and demand, renovation execution, and property-level cash flows — not by the daily movements of the stock market. During periods of equity market volatility, well-underwritten real estate tends to hold its value.

Inflation protection. Real assets — land, buildings, improvements — tend to appreciate with inflation over time. Rents typically rise with inflation as well, providing a natural hedge that bonds and cash cannot offer.

Tax efficiency. Real estate investments offer depreciation deductions, cost segregation opportunities, and — in some structures — the ability to defer capital gains through 1031 exchanges. The tax treatment of real estate income is often more favorable than ordinary income.

Yield and appreciation. Unlike stocks, which may pay a small dividend, real estate investments can generate meaningful current income (cash-on-cash yield) alongside appreciation at exit.

Most private real estate investments are structured as limited partnerships (LPs) or limited liability companies (LLCs), with the sponsor acting as the general partner (GP) or managing member.

The sponsor (also called the operator or GP) is responsible for finding the deal, securing financing, executing the business plan, and managing the asset. The sponsor typically contributes 5–20% of the equity and earns fees and a promoted interest (carry) for their work.

The investors (limited partners or passive members) contribute the majority of the equity. They receive a preferred return — typically 6–10% per year — before the sponsor participates in profits. After the preferred return is met, profits are split between investors and the sponsor according to a waterfall structure.

A typical waterfall might look like this:

1. Return of capital to all investors
2. Preferred return (e.g., 8% per year) to investors
3. Catch-up to the sponsor (e.g., 20% of profits)
4. Remaining profits split 70/30 (investors/sponsor)

This structure aligns incentives: the sponsor only profits meaningfully after investors have received their capital back plus a preferred return.

Not all private real estate is the same. The major categories differ significantly in risk, return, and time horizon.

Core: Stabilized, income-producing properties in major markets. Low risk, low return (6–9% IRR). Think Class A office buildings or fully-leased apartment complexes.

Core-Plus: Similar to core but with modest value-add potential. Slightly higher risk and return (8–12% IRR).

Value-Add: Properties that require renovation, repositioning, or improved management to reach their potential. Moderate risk, meaningful return (12–20% IRR). This is our primary focus at Spirit Realty Ventures — read our deep-dive on how value-add investing works.

Opportunistic: Ground-up development or heavily distressed assets. High risk, high potential return (20%+ IRR), but significant execution risk.

Debt: Lending to real estate operators rather than owning equity. Lower risk than equity, with returns driven by interest income (8–14% IRR).

The sponsor is the single most important variable in any private real estate investment. A great deal with a poor operator will underperform. A good operator can create value even in challenging markets.

Track record. How many deals has the sponsor completed? What were the realized returns — not projected, but actual? Ask for a full deal history, including deals that did not go as planned.

Local expertise. Real estate is hyperlocal. A sponsor who knows a market intimately — the neighborhoods, the contractors, the buyers, the lenders — has a significant edge over one parachuting in from out of town.

Alignment of interest. Does the sponsor co-invest in every deal? A sponsor who has meaningful personal capital at risk alongside yours is far more motivated to protect it.

Transparency and communication. How does the sponsor communicate with investors? Do they provide regular, detailed updates — including when things go wrong? A sponsor who only sends good news is a red flag.

Conservative underwriting. Ask to see the deal model. Are the assumptions realistic? Is there sensitivity analysis showing what happens if the project takes longer or costs more than expected?

When you receive an investment summary from a sponsor, here is a framework for evaluating it:

Step 1: Understand the business plan. What is the sponsor buying, what are they doing to it, and how are they planning to exit? The simpler and more clearly articulated the plan, the better.

Step 2: Stress-test the assumptions. What happens to the IRR if renovation costs come in 15% over budget? If the project takes 6 months longer? If the exit price is 10% below projection? A well-underwritten deal should still generate acceptable returns under these scenarios.

Step 3: Evaluate the market. Is there demand for the product the sponsor is creating? What do comparable sales and rentals look like in the area? Is the market growing, stable, or declining? For a current read on Connecticut specifically, see our Mid-2026 Market Outlook.

Step 4: Review the legal documents. The Private Placement Memorandum (PPM) and operating agreement govern your rights as an investor. Pay particular attention to the waterfall structure, the sponsor's fees, and the provisions for capital calls.

Step 5: Check references. Talk to investors who have worked with the sponsor before. Ask about communication, execution, and whether returns matched projections.

Chasing the highest projected IRR. The deal with the highest projected return is not necessarily the best deal. High projections often reflect aggressive assumptions or excessive risk. Focus on the quality of the underwriting, not the headline number.

Ignoring fees. Acquisition fees, asset management fees, disposition fees, and construction management fees can significantly erode returns. Understand the full fee structure before investing.

Not diversifying. Concentrating all your private real estate capital in a single deal or a single sponsor is risky. Consider spreading capital across multiple deals, markets, and operators.

Underestimating illiquidity. Private real estate is illiquid. Your capital will typically be locked up for 2–5 years. Only invest capital you can genuinely afford to have tied up for the full hold period.

Skipping due diligence. The pressure to move quickly on a deal is real, but it is never a reason to skip proper due diligence. A good sponsor will respect an investor who asks hard questions.

We work with accredited investors and family offices who are looking for direct access to Connecticut real estate opportunities. Our deals are typically structured as LLCs with a preferred return, and we co-invest alongside our investors on every project.

If you are interested in learning more about our current and upcoming opportunities, review our investor overview or submit an inquiry through our contact page. We will schedule a call to discuss your investment objectives and walk through our current pipeline. You can also view our completed and active projects to see our track record firsthand.

This article is for informational purposes only and does not constitute investment advice. Private real estate investments involve significant risk, including the potential loss of principal. Past performance is not indicative of future results.