Real estate limited partnerships (RELPs) are limited partnerships structured specifically to invest in real estate. RELPs are a type of syndicated ownership structure which, unlike a corporation or other investment vehicles, allows a number of investors to pool funds and invest in real estate while retaining the flexibility benefits of a partnership. They are a popular structure as they provide ability to diversify investments across multiple properties and funds, while shielding individual investors’ liability to a certain extent through being organized like a limited partnership.

A typical RELP would have a number of limited partners who provide capital and a general partner who takes sole legal responsibility for making decisions and managing the investments. Limited partners are passive investors who provide the capital, with no legal responsibilities nor any day-to-day involvement. The general partner is the one who finds, manages and monitors the investments, whose decisions are binding on the limited partners.

The potential benefit of RELPs can be high returns, although these rewards will typically be associated with a correspondingly higher level of risk. Moreover, RELPs are often structured to provide certain tax benefits, as income generated by investment property is usually passed down to the limited partners as individual income and is taxed at marginal rates. As such, RELPs offer a favorable tax treatment compared to other investments.

In conclusion, RELPs are an attractive option for sophisticated investors who seek to diversify their real estate investments and benefit from certain tax advantages. The general partner of an RELP must possess specialized real estate market knowledge and skills and the limited partners should consider the experience, reputation and records of the general partner before committing to the investment. RelPs can be a valuable investment, but like all investments, it pays to do your research before committing funds.