There is no organized market for real estate limited partnerships. Finding good deals could be difficult unless you're well connected. To find an opportunity, you may need to ask around, check for real estate investment firms in your area, or talk to your financial advisor. Sometimes brokers have access to limited partnerships or may be able to point you in the right direction, although most would probably try to steer you to a real estate investment trust (REIT). But a REIT does not offer the same tax advantages that limited partnerships provide. If you want the benefits of a limited partnership, you need to find a company that's in the business.
Your biggest concern with a real estate limited partnership is the strength of the commercial real estate market. If the market is strong, your investment should do well, but if the bottom drops out of the market, you could see a sharp drop in your income as well as in the value of the properties your partnership owns.
Timing
Timing is a difficult issue for real estate limited partnerships, in part because they span such a long period of years. Your partnership may own a property for 10 to 15 years, during which real estate goes through two or three economic cycles. These are long-term investments in the truest sense. However, in an ideal world, the best time to become involved in a real estate property is when real estate is in a down market so property prices are depressed. That way, the partnership can buy the property at a discount, and once the market returns, occupancy should go up - along with rent fees - providing investors with an increasing flow of income. The worst time to buy - although generally impossible to recognize at the time - is the tail end of a boom market when real estate prices are at record highs. Once the market begins to decline, vacancies increase and your income declines.
Monitor your real estate limited partnerships
You won't find your partnership's price listed in the newspaper or at any web site. You must rely on the partnership managers to keep you up-to-date on the status of your investment. Typically, partnerships send out statements to investors periodically. If you need more information on your partnership's performance, you would have to call the partnership manager directly.
Asset allocation for real estate limited partnerships
As with all types of investments, the amount of your savings that you allocate for real estate limited partnerships would depend on your tax situation, your financial situation, your investment goals, and tolerance for risk. Generally speaking, however, you should put no more than 15 to 25 percent of your assets in a real estate partnership. That should be a fair representation of commercial real estate in a balanced investment portfolio.
