What is private equity?

Blog March 2024

Private Equity refers to the collective capital investment made into companies that aren’t publicly traded. Investors often find themselves going for Private Equity funds to get better returns than they would in public equity markets while also diversifying their portfolio.

The entire foundation of a Private Equity is based on a significant amount of collective capital. Individuals with a high net-worth will invest for a positive Return-On-Investment (ROI) in different Private Equities to make long-term profit.

One of the many reasons investors go for Private Equity firms is the fact that they have connections with Mergers and Acquisitions (M&A) intermediaries, transaction professionals and investment banks. In other words, they know where to invest and how to get you profit.

Private equity investment strategies

The two most commonly discussed investment strategies for Private Equities are:

Leveraged buyouts (LBOs)

Private Equity firms will finance their purchase of a company through debt that is then collateralized by the purchased company’s assets. Since the debt-to-equity ratio is high, in order to push through and eventually make profit, the company has to be revamped for a better cash flow.

Through Leveraged Buyouts, Private Equities assume control of entire companies by having to pay only a percentage of the purchase price. With the right tactics, Private Equities will then attempt to leverage their investment and hope to maximize the return on their investment.

Venture capital (VC)

Venture Capital is a form of private equity that goes for startup companies and smaller businesses that have long-term growth potential. The capital is provided by high net-worth investors, financial institutions and investment banks.

While monetary resources are always welcome, what can also be provided are technical expertise that can help said companies with growth.

As they continue to guide the management of the company they’ve invested into, they hope to grow alongside them and add value to their own firm.

Venture Capital has become a dependent source of money for newer companies and ventures, however investors will get equity in the company and they will be able to drive decisions within the company with their power.

Real Estate private equity (REPE)

The capital for Real Estate Private Equity is acquired through different investors and is pooled into both public and private investments into the real estate market.

REPE involves acquiring, financing and owning different properties through an investment fund that eventually benefits everyone involved in the long-term.

REPE funds invest into all kinds of real estate opportunities they might see potential in. They will often buy undervalued office buildings, shopping centers, multifamily apartments etc. and renovate them to later sell them off at a higher price.

GCG Real Estate operates transparently. Through our years of accumulated experience in the Real Estate market, we purchase, renovate, rent and know exactly when to exit an investment to provide our clients with short-term gains.

Compared to others, what makes our Private Equity so successful is that we buy in volume, AND we go for undervalued areas that have suffered a considerable economic hit; both of these factors allow us to buy properties at a cheaper rate. Once the purchase has been made, we move towards finally renovating our acquired property. Renovating and decorating the properties add great value to the neighborhood, which finally brings us to the final stage i.e. selling for profit.

GCG Real Estate private equity investment methodology

GCG Real Estate’s General Partners will start based on their market research to buy undervalued properties with potential for growth. Through our hands-on experience within the local market, our process of purchase and sale works in favor of maximum profit. We will then invest into undervalued properties from private sellers, auctions or institutional sellers.

We thoroughly conduct a set of audits, property background checks as well as any past transactions and contracts that might otherwise flag the property.

GCG’s Real Estate Private Equity adds value to undervalued properties and aims to bring a minimum of 25% ROI per year to its investors. Our purchase cycle and resale cycle reset every 3 to 6 months and our objective is to go for four cycles in one year.

Our network spans across Michigan, California and Florida, where we have built a close relationship with our dedicated and trusted partners.

Structure of Real Estate private equity firms

GCG’s Real Estate Private Equity is based on the General Partnership/Liability Partnership model.

Firms like ours go about obtaining capital from Limited Partners, which is then used to invest into different companies or real estate. While Limited Partners are the source of capital, they do not directly intervene in any decisions.

Did you know? GCG Real Estate has opportunities like the following; buy and renovate a 3-bedroom house in Sacramento for $414,040 and sell it off for $525,000; netting its investors a gross profit of $110,960! There are case studies all about, with profits ranging up to even $400,000!

Our short term offers provide investors a fixed return (7%) which is paid quarterly to them as well as a bonus at term.

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Any questions

What is affordable housing?

Affordable housing refers to housing units designed to be accessible to low- and moderate-income families, typically costing no more than 30% of their gross income.

The definition of “affordable” typically varies depending on location and income levels but generally encompasses rent or purchase prices that don’t exceed a certain percentage of a household’s income.

What is Section 8 housing in the US?

Section 8 is a federal rental assistance program in the US run by the Department of Housing and Urban Development (HUD) that helps low-income families and individuals afford decent and safe housing in the private market. 

The program provides eligible households housing choice vouchers that cover a portion of the rent directly to the landlord, with the tenant paying the remaining amount. Property owners who participate in Section 8 agree to rent units to qualified individuals and families at a rate approved by the program.

How can I invest in Section 8 housing?

There are several ways to invest in Section 8 housing:

  1. Direct ownership: You can purchase a property approved for Section 8 and rent it to a qualified tenant using a voucher and receive rent subsidized by the government.
  2. Real estate investment trusts (REITs): REITs pool investor funds to purchase and manage income-producing real estate, including affordable housing.
  3. Limited partnerships: Limited Liability Companies (LLCs) offer another option for investors to pool resources and invest in affordable housing projects.
What is the difference between multi-family and single-family properties?

Single-family property: This refers to a standalone house or unit designed for and rented to one household.

Multi-family property: This refers to a property containing multiple dwelling units, such as a duplex, apartment building, or condominium complex. Multi-family properties offer the potential for higher rental income but typically require different management strategies and considerations compared to single-family homes.

What is the difference between buying and flipping houses?

Buying and holding: This involves purchasing a property to keep it as a long-term investment, generating rental income and potentially appreciating in value over time.

Flipping: This involves buying a property, renovating it to increase its value, and then selling it quickly for a profit. This is a more hands-on strategy with higher risks and rewards compared to buying and holding.

How much do I need to start investing in affordable housing real estate?

The minimum investment required varies depending on the chosen method. Direct ownership typically requires a higher initial investment for the property purchase, and renovation up to Section 8 standards, while other options like REITs might have lower minimum investment amounts.

Do I need to be a US citizen to invest and own the property?

No, US citizenship is not a mandatory requirement for investing in affordable housing in the US. However, specific restrictions or regulations might apply depending on the investment method and your residency status.

It’s crucial to consult with a professional to understand the legal and tax implications for non-citizens.

Do I need to pay US tax as an overseas investor?

This depends on the type of investment, your residency status, and any applicable tax treaties between your home country and the US.

Consulting with a tax professional specializing in international investments is highly recommended.