Illiquid Asset
"Anytime someone purchases real estate they have to understand they are buying an illiquid asset," said Jeff Sica, president of Sica Wealth Management in Morristown, New Jersey. Sica said he helped in real estate deals with a combined value of $200 million for four families in the last year with an average holding period of 10 years. He seeks apartment buildings with a cap rate of 6% to 9% annually.
Families should compare what they may be charged in "promotes," which are similar to carried interest fees paid to private equity and hedge funds, to other investments, said Wayne Heicklen, an attorney and chairman of the real estate department at the law firm Pryor Cashman LLP. Heicklen said he has worked on deals including Parekh's purchase in TriBeCa.
Investors should also investigate the sponsor and inspect the property, said Heicklen. "They were offering great yields yet the tenant wasn't there for the full time and the location was bad," he said of one property his clients were evaluating.