Portugal GV Investment Fund - Real Estate Hybrid Ideas

As I review the myriad of funds, there are few I like but none are perfect.

Has anyone heard of or explored something like a hybrid option?
I have two ideas in mind but not sure if they would qualify or if anyone would sponsor such.

  1. This is something like a fund that builds one or two buildings in locations with the intent to sell them as apartments. The GV investor would get an option to purchase one of the units on completion for a specific price and would own the underlying interest in the real estate. Upon completion of the project, if the investor buys the apartment his capital would be applied to the purchase. Otherwise, the apartment would sell on the open market.

  2. Idea two is a real estate trust that would invest directly in something like undeveloped land or agricultural land or possibly even an improved lot . The investor might be pooled with a few other investors. So its not really private equity, more a direct ownership of a fractional share of real estate. GV investor gets something like a % of income from the RE and at the end of the 6 years, sell back to the owner at more or less the purchase price adjusted based on appraised value. This is similar to the Mercan Group projects but there I am not sure there is any ownership there by GV investors and those projects don’t totally appeal to me being American branded hotels in a historic city center. I might look at those a little further though.

Is anything like this even feasible?

Michael, first a disclaimer in that I’m early in my GV planning process and haven’t executed on anything yet. Both of your options seem to kind of fall into the category of first “have a pool of people get together” and second “have a pool of people break apart and get something individually at a set time”.

I think the big challenge with this is that you need a group of folks that are on the same time horizon and have the same motivation. That’s not impossible to do, but I think the added dimension of everyone needing to be on the same schedule will make these kinds of options difficult (if not impossible). Add the overhead that whoever is managing this is going to want to make a living and you are going to have some real friction costs.

I’d call these ideas a very long shot. Given that the GV program is not universally loved and may at some point disappear, I’m moving faster, not slower.

Steve

Steve,
No, that wasn’t what I meant.

I am meaning someone who owns a property and sells it off in units to investors…it doesn’t have to be all at once or even coordinated among investors. An owner who has a 10 unit apartment building and wants to rehab it will sell of 10% interest. Perhaps they would use the proceeds to fund the renovation and then as they sell off units they pay back investors. Worse case situation is that the units don’t sell and the investor gets a unit in an apartment. That type of scenario could be a win win.

How is (1) much different than purchasing real estate on your own? Sure you’re dodging the taxes for buying real estate unless you end up buying it.

(2) there’s a project in Evora where someone is restoring a monastery and turning it into a hotel; the investors are all part-owners of the project. There’s a few others, various forms of “someone’s building a resort/hotel/development and you buy a piece of it”. You have fractional ownership. However, like with most of these projects, the buy-back path is really unclear. They typically say “profits are retained to pay for the buy back” - uh, sure, and if there are no profits or there aren’t enough profits? “sell back to the owner” - but you are the owner so who are you selling it back to? I was really interested in it for a while, but … I dunno. I’ve had people pan the project as being unclear/unstable/uncertain. shrug of course we’re all throwing the dice one way or the other. I’m sure there are some others, and they all probably have the same caveats - TANSTAAFL.

This is super interesting idea. I am representing a group of 3 (maybe 4) friends who are highly motivated to invest in real estate. We are not fan of real estate funds and hotels, we prefer to have a compound or small community with 5-10 units.

if there are such boutique projects and looking for investors, please reach out to us.

thanks!

There’s definitely projects I’ve seen. If you ask someone like Algarve Senior Living or Portugal Homes, I’m positive they can aim you at places like this. Casa Dom Pedro in Porto sounds like what you’re interested in - several units in a dedicated compound in a historic part of town. I can’t be interested because my wife’s disabled and so hills are bad, but as a concept it really is nice and you might like it.

(I have no interest in this, just relaying.)

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Thanks Jeff B for the pointer.

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