What is the minimum investment, and why is it $50K?

Which costs do not shrink when the check does?

Five of them, roughly in order of size.

• Year-end reporting. Every investor gets a Schedule K-1, prepared, reviewed and filed. The cost is per investor, not per dollar.
• Subscription and verification. Reviewing documents, checking accredited status and keeping the record. Same work for the smallest commitment as the largest.
• Custodian coordination. Where the money comes from a retirement account, somebody chases paperwork through a third party. Again per investor.
• Ongoing reporting and questions. Distributions, statements, the call in March about a K-1.
• Transfers and estate changes. Rare, slow, and the same cost whatever the position is worth.

Spread those across a large commitment and they disappear into the decimals. Spread them across a small one and they are a visible share of what you were going to earn. That is the whole argument, and it cuts against small investors rather than against us.

Why the sponsor cares about the size of the commitment too

This is the part that is easy to miss. The terms are negotiated against the money arriving as one decision. A sponsor who takes a single large commitment has one investor to report to, one signature to collect and one relationship to manage. The same money arriving in twenty pieces is twenty of each.

There is also a hard limit on investor count in some structures. A sponsor relying on Rule 506(b) may sell to no more than 35 purchasers who are not accredited, and the offering has to be filed with a Form D either way. Even where the count is not capped by rule, it is capped by patience.

So a low minimum is not a free kindness. It is paid for somewhere, usually in weaker terms or in administration charged back to the deal.

What if the minimum is more than you want to commit?

Three honest answers, none of which involve bending the number.

• Wait. A deal you fund at a size that makes you anxious is the wrong deal even on good terms. There is another one next quarter.
• Use the listed market in the meantime. Public real estate funds take any amount, trade daily and ask nothing of you at year end.
• Look at sponsors with lower minimums. They exist. The trade is usually a larger, more institutional asset and terms nobody negotiated on your behalf.

What we would rather not do is take a commitment that represents too much of somebody's liquid savings because they qualified on paper. That one comes back as a hard conversation in year three, and we have had it.

There is one more version of this worth naming. Some people can afford the minimum comfortably and still should not write it, because the money is doing a job somewhere else. A deal is not an opportunity if it costs you the ability to wait out a bad quarter in your own business. That is the question we would rather ask on the call than discover in year two.