A real estate limited partnership (RELP) is similar to a real estate investment group: It is an entity formed to purchase and hold a portfolio of properties, or sometimes just one property – only it is in existence for a finite number of years. An experienced property manager or real estate development firm serves as the general partner. Outside investors are then sought to provide financing for the real estate project, in exchange for a share of ownership as limited partners. They may receive periodic distributions from income generated by the RELP’s properties, but the real payoff comes when the properties are sold – hopefully, at a sizeable profit – and the RELP dissolves down the road.
RELPs allow investors to finance the construction or renovation of buildings, without needing to be directly involved in management or have real estate experience. However, they tend to be illiquid investments, since investors can only cash out at certain intervals – or often at all, until the RELP dissolves.