When someone considers a passive real estate investment, some of the first questions are understandably: how are the sponsor and investors paid, and what fees are charged along the way? Those answers should be clear before anyone decides whether an opportunity is right for them.

At Prestige, we invest our own capital alongside our investors. Our structure includes an 8% preferred return, a 70/30 split of remaining profits after that preferred return is satisfied, and fees for acquiring and operating the property. The preferred return is a priority for distributing available funds; it is not a guaranteed payment. Each investment’s offering documents explain the exact terms specific to that opportunity.

Why fees matter in passive apartment investing

A passive investor participates in an apartment community without taking on the day-to-day work of being a landlord. The sponsor sources and evaluates opportunities and oversees the investment. At Prestige, our operating experience includes acquisitions, construction, property management, and asset management. Fees compensate the company for defined work and services; the profit split gives Prestige a share of performance after investors’ preferred return has been addressed.

That distinction matters. Fees are separate from the preferred return and profit split. They are part of the investment’s costs and can affect the funds available for distribution and the investment’s overall results. The specific offering documents describe how each fee is calculated and when it is paid.

How the preferred return and profit split work

Investors receive an 8% preferred return, with a catch-up provision for any unpaid preferred return. Available funds are distributed to investors toward that preferred return before Prestige receives a share of profits. If available funds in a given period are not enough to satisfy the full amount, the unpaid portion remains subject to the catch-up terms in the offering documents. The preferred return is not a promise that the investment will generate or distribute that amount.

After the preferred return is satisfied, remaining profits are split 70% to investors and 30% to Prestige. Each investor shares proportionally in the investor portion based on that investor’s capital relative to the total investor capital. Actual distributions depend on the property’s performance, available cash, and the governing documents.

Prestige’s stated fees

The fee schedule below summarizes the rates provided for Prestige investments. The base used to calculate a percentage fee, along with its timing and other details, is set out in the specific investment’s offering documents.

Why we invest alongside our investors

We invest our own capital alongside investors because we want our interests connected to the property’s long-term performance. Our compensation includes defined fees for acquisition and operations, and a share of profits after the preferred return. That structure does not remove investment risk or guarantee a result. Apartment values, rents, expenses, financing, and market conditions can change.

What to review before investing

Anyone evaluating apartment investments or other passive real estate investments should read the full offering documents and ask questions about fee calculations, the preferred return, distribution priorities, the profit split, the investment’s risks, and the expected hold period. A percentage by itself does not tell the full story; the calculation base and timing matter too. Investors should consider their own financial circumstances and consult their legal, tax, and financial professionals.

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Questions investors often ask

Is the 8% preferred return guaranteed?

No. It is a priority in distributing available funds, not a guaranteed payment or promised investment result. The specific offering documents explain the terms and what happens if the preferred return is not fully paid.

Are the fees taken out of the preferred return?

The fees are separate from the preferred return and cover acquiring and operating the investment. Because investment expenses affect the investment’s economics, review the offering documents for the calculation basis, timing, and treatment of each fee.

Can I invest through a self-directed IRA or 401(k)?

Some investors search for real estate IRA or real estate 401(k) investments when exploring passive real estate investing. Whether a particular investment can be held in a retirement account depends on the offering, the account custodian, and applicable rules. Investors should confirm eligibility with the custodian and qualified tax and legal professionals before proceeding.

Who may participate?

Prestige investments are offered to a select group of accredited investors when an offering is available. Eligibility, minimum investment amounts, and other terms vary by offering and are stated in the applicable materials.

Clear terms are part of a good investment conversation. If you are considering multifamily apartment investing, ask us for the materials for a specific opportunity and take the time to understand how its fees, distribution priorities, and risks apply to you.

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If you'd like to learn more about our approach, or about opportunities available to qualified investors, we'd love to connect. Reach out to Meg for a conversation about investing alongside us.