Category: Terms

What’s a Preferred Return?

The term preferred return is a return that puts you, an investor, in a preferred position when it comes to profit distribution of a project’s cash flow. Money goes to you first when there is a distribution, and until the hurdle of the preferred return is totally met, the syndicator gets nothing. If a project doesn’t make any money, chances are that you will not receive a return. A preferred position is first in line. This preference offers a bit of comfort to investors because it subordinates the sponsor’s profits (sometimes called the ‘promote’) to yours. The profits can come from the operation of a project (rents) and even from the sale or refinance of the property.

Continue reading “Preferred Return vs. Non-Preferred Return – Which One Should You Pick?”

First of all, let’s address the alphabet soup in understanding returns. CoC stands for Cash-on-Cash Return, IRR means Internal Rate of Return, and AAR is Average Annual Return. They are all various measures of how profitable an investment might be, though have their own characteristics. The different metrics are used to help compare apples to apples.

Continue reading “Understanding Returns – What Are CoC, IRR and AAR and How Do They Differ?”