Historically, private equity real estate investing was arranged through syndications that were only open to friends and family, or people with whom the deal sponsor had some sort of personal relationship. It’s often been referred to as “country club” equity for this reason. There was an underlying assumption that this relationship had been pre-vetted to some degree, and therefore, investors had enough confidence in the sponsor to write a check that would translate into positive returns.
The nature of private equity real estate investing changed dramatically in 2012 with the passing of the JOBS Act, a federal regulation that eased the requirements about who can invest in private equity real estate and under what conditions. Now, there are more efficient mechanisms by which investors can invest – namely, through private capital networks.