Real estate sponsors often advertise an 8% preferred return, but that's just the cash flow during ownership. The actual return investors care about combines that cash flow with the equity gain when you sell the property, calculated as one annualized number.
the preferred return that everybody loves and will invest with you again and again is 8%. But that's not what you're selling to your investors. A lot of people get mixed up about this. What you're selling to investors is this average annualized return because you have to take into account eventually we're going to sell the property, we'll have created value, there's going to be equity that's going to also be shared with you. Add that all together from what you got from cash flow, and that's going to help us calculate that average annualized return. So that's, that's important to understand the distinction there.
