How do I look for private limited partnership investment opportunities? (Or should I?)
"Investing in an existing company is almost like buying a house, or even becoming an ""Angel investor"" in a start-up. Before you start the process, decide how much you want to be involved in the day-to-day and which industries you would feel most comfortable in.  The latter is an important consideration since you would have to know sufficient about the industry in order to evaluate the quality of your prospective investment. Searching for a suitable business is a time-consuming process: The guidance for evaluating any company has been answered in another question, so I'll simply link. Most business owners are looking to their businesses to provide them a pension, so they often look to sell around retirement age.  Buying such a business is tricky - you may be assisting the next generation to finance the purchase which can have it's own struggles. Ideally you'll be looking for a young(ish) company with proven sales and which is looking to finance growth in an optimal way.  Such a company may have many options for raising capital so you'll be competing to invest. As to whether or not it's a good idea...  KFC only became a household name and global franchise after Pete Harman joined Harland Sanders as a partner.  Richard and Maurice McDonald may have founded McDonald's but it was Ray Kroc who made it a success. New partners bring in new ideas and fresh energy which the original entrepreneurs may have lost during the difficulties of starting out. But that goes back to my first query; just how much do you want to get involved?"
"First, you mentioned your brother-in-law has ""$100,000 in stock options (fully vested)"". Do you mean his exercise cost would be $100,000, i.e. what he'd need to pay to buy the shares? If so, then what might be the estimated value of the shares acquired? Options having vested doesn't necessarily mean they possess value, merely that they may be exercised. Or did you mean the estimated intrinsic value of those options (estimated value less exercise cost) is $100,000? Speaking from my own experience, I'd like to address just the first part of your question: Have you treated this as you would a serious investment in any other company? That is, have you or your brother-in-law reviewed the company's financial statements for the last few years? Other than hearing from people with a vested interest (quite literally!) to pump up the stock with talk around the office, how do you know the company is: BTW, as an option holder only, your brother-in-law's rights to financial information may be limited. Will the company share these details anyway? Or, if he exercised at least one option to become a bona-fide shareholder, I believe he'd have rights to request the financial statements – but company bylaws vary, and different jurisdictions say different things about what can be restricted. Beyond the financial statements, here are some more things to consider: The worst-case risk you'd need to accept is zero liquidity and complete loss: If there's no eventual buy-out or IPO, the shares may (effectively) be worthless. Even if there is a private market, willing buyers may quickly dry up if company fortunes decline. Contrast this to public stock markets, where there's usually an opportunity to witness deterioration, exit at a loss, and preserve some capital. Of course, with great risk may come great reward. Do your own due diligence and convince yourself through a rigorous analysis — not hopes & dreams — that the investment might be worth the risk." just pick a good bond and invest all your money there (since they're fairly low risk) No. That is basically throwing away your money and why would you do that. And who told you they are low risk. That is a very wrong premise. What factors should I consider in picking a bond and how would they weigh against each other? Quite a number of them to say, assuming these aren't government bonds(US, UK etc) How safe is the institution issuing the bond. Their income, business they are in, their past performance business wise and the bonds issued by them, if any. Check for the bond ratings issued by the rating agencies. Read the prospectus and check for any specific conditions i.e. bonds are callable, bonds can be retired under certain conditions, what happens if they default and what order will you be reimbursed(senior debt take priority). Where are interest rates heading, which will decide the price you are paying for the bond. And also the yield you will derive from the bond. How do you intend to invest the income, coupon, you will derive from the bonds. What is your time horizon to invest in bonds and similarly the bond's life. I have invested in stocks previously but realized that it isn't for me Bonds are much more difficult than equities. Stick to government bonds if you can, but they don't generate much income, considering the low interest rates environment. Now that QE is over you might expect interest rates to rise, but you can only wait. Or go for bonds from stable companies i.e. GE, Walmart. And no I am not saying you buy their bonds in any imaginable way. "I agree that you should CONSIDER a shares based dividend income SIPP, however unless you've done self executed trading before, enough to understand and be comfortable with it and know what you're getting into, I would strongly suggest that as you are now near retirement, you have to appreciate that as well as the usual risks associated with markets and their constituent stocks and shares going down as well as up, there is an additional risk that you will achieve sub optimal performance because you are new to the game. I took up self executed trading in 2008 (oh yes, what a great time to learn) and whilst I might have chosen a better time to get into it, and despite being quite successful over all, I have to say it's the hardest thing I've ever done! The biggest reason it'll be hard is emotionally, because this pension pot is all the money you've got to live off until you die right? So, even though you may choose safe quality stocks, when the world economy goes wrong it goes wrong, and your pension pot will still plummet, somewhat at least. Unless you ""beat the market"", something you should not expect to do if you haven't done it before, taking the rather abysmal FTSE100 as a benchmark (all quality stocks, right? LOL) from last Aprils highs to this months lows, and projecting that performance forwards to the end of March, assuming you get reasonable dividends and draw out £1000 per month, your pot could be worth £164K after one year. Where as with normal / stable / long term market performance (i.e. no horrible devaluation of the market) it could be worth £198K! Going forwards from those 2 hypothetical positions, assuming total market stability for the rest of your life and the same reasonable dividend payouts, this one year of devaluation at the start of your pensions life is enough to reduce the time your pension pot can afford to pay out £1000 per month from 36 years to 24 years. Even if every year after that devaluation is an extra 1% higher return it could still only improve to 30 years. Normally of course, any stocks and shares investment is a long term investment and long term the income should be good, but pensions usually diversify into less and less risky investments as they get close to maturity, holding a certain amount of cash and bonds as well, so in my view a SIPP with stocks and shares should be AT MOST just a part of your strategy, and if you can't watch your pension pot payout term shrink from 26 years to 24 years hold your nerve, then maybe a SIPP with stocks and shares should be a smaller part! When you're dependent on your SIPP for income a market crash could cause you to make bad decisions and lose even more income. All that said now, even with all the new taxes and loss of tax deductible costs, etc, I think your property idea might not be a bad one. It's just diversification at the end of the day, and that's rarely a bad thing. I really DON'T think you should consider it to be a magic bullet though, it's not impossible to get a 10% yield from a property, but usually you won't. I assume you've never done buy to let before, so I would encourage you to set up a spread sheet and model it carefully. If you are realistic then you should find that you have to find really REALLY exceptional properties to get that sort of return, and you won't find them all the time. When you do your spread sheet, make sure you take into account all the one off buying costs, build a ledger effectively, so that you can plot all your costs, income and on going balance, and then see what payouts your model can afford over a reasonable number of years (say 10). Take the sum of those payouts and compare them against the sum you put in to find the whole thing. You must include budget for periodic minor and less frequent larger renovations (your tenants WON'T respect your property like you would, I promise you), land lord insurance (don't omit it unless you maintain capability to access a decent reserve (at least 10-20K say, I mean it, it's happened to me, it cost me 10K once to fix up a place after the damage and negligence of a tenant, and it definitely could have been worse) but I don't really recommend you insuring yourself like this, and taking on the inherent risk), budget for plumber and electrician call out, or for appropriate schemes which include boiler maintenance, etc (basically more insurance). Also consider estate agent fees, which will be either finders fees and/or 10% management fees if you don't manage them yourself. If you manage it yourself, fine, but consider the possibility that at some point someone might have to do that for you... either temporarily or permanently. Budget for a couple of months of vacancy every couple of years is probably prudent. Don't forget you have to pay utilities and council tax when its vacant. For leaseholds don't forget ground rent. You can get a better return on investment by taking out a mortgage (because you make money out of the underlying ROI and the mortgage APR) (this is usually the only way you can approach 10% yield) but don't forget to include the cost of mortgage fees, valuation fees, legal fees, etc, every 2 years (or however long)... and repeat your model to make sure it is viable when interest rates go up a few percent." "I agree with Joe Taxpayer that a lot of details are missing to really evaluate it as an investment... for context, I own a few investment properties including a 'small'  10+ unit apartment complex. My answer might be more than you really want/need, (it kind of turned into Real Estate Investing 101), but to be fair you're really asking 3 different questions here: your headline asks ""how effective are Condo/Hotel developments as investments?"" An answer to that is... sometimes, very. These are a way for you-the investor-to get higher rents per sq. ft. as an owner, and for the hotel to limit its risks and access additional development funding. By your description, it sounds like this particular company is taking a substantial cut of rents. I don't know this property segment specifically, but I can give you my insight for longer-term apartment rentals... the numbers are the same at heart. The other two questions you're implying are ""How effective is THIS condo/hotel development?"" and ""Should you buy into it?"" If you have the funds and the financial wherewithal to honestly consider this, then I am sure that you don't need your hand held for the investment pros/cons warnings of the last question.  But let me give you some of my insight as far as the way to evaluate an investment property, and a few other questions you might ask yourself before you make the decision to buy or perhaps to invest somewhere else.  The finance side of real estate can be simple, or complicated. It sounds like you have a good start evaluating it, but here's what I would do: Start with figuring out how much revenue you will actually 'see': Gross Potential Income: 365 days x Average Rent for the Room = GPI (minus) Vacancy... you'll have to figure this out... you'll actually do the math as (Vacancy Rate %) x GPI (equals) Effective Potential Income = EPI Then find out how much you will actually pocket at the end of the day as operating income: Take EPI (minus) Operating expenses ... Utilities ... Maintenace ... HOA ... Marketing if you do this yourself (minus) Management Expenses ... 40% of EPI ... any other 'fees' they may charge if you manage it yourself. ... Extra tax help? (minus) Debt Service ... Mortgage payment ... include Insurances (property, PMI, etc) == Net Operating Income (NOI) Now NOI (minus) Taxes == Net Income Net Income (add back) Depreciation (add back) sometimes Mortgage Interest == After-tax Cash Flows There are two ""quickie"" numbers real estate investors can spout off. One is the NOI, the other is the Cap Rate.  In order to answer ""How effective is THIS development?"" you'll have to run the numbers yourself and decide. The NOI will be based on any assumptions you choose to make for vacancy rates, actual revenue from hotel room bookings, etc. But it will show you how much you should bring in before taxes each year. If you divide the NOI by the asking price of your unit (and then multiply by 100), you'll get the ""Cap Rate"". This is a rough estimate of the rate of return you can expect for your unit... if you buy in.  If you come back and say ""well I found out it has a XX% cap rate"", we won't really be qualified to help you out. Well established mega investment properties (think shopping centers, office buildings, etc.) can be as low as 3-5 cap rates, and as high as 10-12. The more risky the property, the higher your return should be. But if it's something you like, and the chance to make a 6% return feels right, then that's your choice. Or if you have something like a 15% cap rate... that's not necessarily outstanding given the level of risk (uncertain vacancies) involved in a hotel.  Some other questions you should ask yourself include:  How much competition is there in the area for short-term lodging? This could drive vacancies up or down... and rents up or down as well How 'liquid' will the property (room) be as an asset? If you can just break even on operating expense, then it might still make sense as an investment if you think that it might appreciate in value AND you would be able to sell the unit to someone else.  How much experience does this property management company have... (a) in general, (b) running hotels, and (c) running these kinds of condo-hotel combination projects? I would be especially interested in what exactly you're getting in return for paying them 40% of every booking. Seasonality? This will play into Joe Taxpayer's question about Vacancy Rates. Your profile says you're from TX... which hints that you probably aren't looking at a condo on ski slopes or anything, but if you're looking at something that's a spring break-esque destination, then you might still have a great run of high o during March/April/May/June, but be nearly empty during October/November/December.  I hope that helps. There is plenty of room to make a more ""exact"" model of what your cash flows might look like, but that will be based on assumptions and research you're probably not making at this time." It depends on the firm. I was interviewing with a few PE firms a few months ago, and the structure can vary. Some were definitely just LBO shops where the bulk of the staff were focused just on the deal. I remember a couple, however, that placed a lot of emphasis on getting in-house after the deal and performing what ultimately amounted to long term management consulting. These firms tended to hold companies for like 10+ years iirc. It sounds like there might be options out there in line with your passions, you just need to be pretty picky with the firm you join. I only remember one firm's name off the top of my head, but I'd be happy to pm it to you if you want to do some more research yourself. There are a couple of ways to buy into a private company.  First, the company can use equity crowd funding (approved under the JOBS act, you don't need to be an accredited investor for this).   The offering can be within one state (i.e. Intrastate offerings) which don't have the same SEC regulations but will be governed by state law.   Small companies (small assets, under $1 million) can be made under Regulation D, Rule 504.  For assets under $5 million, there is Rule 505, which allows a limited number of non-accredited investors.  Unfortunately, there aren't a lot of 504 and 505 issues. Rule 506 issues are common, and it does allow a few non-accredited investors (I think 35), but non-accredited investors have to be given lots of disclosure, so often companies use a Rule 506 issue but only for accredited investors. You could certainly look at the holdings of index funds and choose index funds that meet your qualifications.  Funds allow you to see their holdings, and in most cases you can tell from the description whether certain companies would qualify for their fund or not based on that description - particularly if you have a small set of companies that would be problems. You could also pick a fund category that is industry-specific. I invest in part in a Healthcare-focused fund, for example.  Pick a few industries that are relatively diverse from each other in terms of topics, but are still specific in terms of industry - a healthcare fund, a commodities fund, an REIT fund.  Then you could be confident that they weren't investing in defense contractors or big banks or whatever you object to. However, if you don't feel like you know enough to filter on your own, and want the diversity from non-industry-specific funds, your best option is likely a 'socially screened' fund like VFTSX is likely your best option; given there are many similar funds in that area, you might simply pick the one that is most similar to you in philosophy. You can find out the general types of investments by reading the public corporation 10-Q report that is filed with the SEC it can be accessed via the EDGAR system. It will not tell you what securities they have, but it does identify the short term and long term investments categories and their value. I mean some VCs focus on technology companies, that's a sector focus, but a very broad one. Are you saying you don't want to be limited to one sector?   Also keep in mind that series B investments are much more expensive then A rounds, just because there is more proof and less risk.   I know of some angel investors that invest by size rather than industry, maybe you could partner up with them. All depends on how much capital you have/ how much involvement you want to have with the company. 2 + 20 isn't really a investment style, more of a management style.  As CTA I don't have specific experience in the Hedge Fund industry but they are similar.   For tech stuff, you may want to check out Interactive Brokers.   As for legal stuff, with a CTA you need to have power of attorney form, disclosure documents, risk documents, fees, performance, etc. You basically want to cover your butt and make sure clients understand everything.   For regulatory compliance and rules, you would have to consult your apporiate regulatory body. For a CTA its the NFA/CFTC. You should look at getting licensed to provide crediabilty. For a CTA it would be the series 3 license at the very least and I can provide you with a resource for study guides and practice test taking for ALL licenses.   I can provide a brief step by step guide later on. "You may want to look into robo-investors like Wealthfront and Betterment. There are many others, just search for ""robo investor""." Here is a nice overview from Vanguard on some options for a small business owner to offer retirement accounts.   https://investor.vanguard.com/what-we-offer/small-business/compare-plans I would look over the chart and decide which avenue is best for you and then call around to investment companies (Vanguard, Fidelity, etc. etc.) asking for pricing information. You won't be able to know the trading activity in a timely, actionable method in most cases. The exception is if the investor (individual, fund, holding company, non-profit foundation, etc) is a large shareholder of a specific company and therefore required to file their intentions to buy or sell with the SEC. The threshold for this is usually if they own 5% or greater of the outstanding shares. You can, however, get a sense of the holdings for some of the entities you mention with some sleuthing. Publicly-Traded Holding Companies Since you mention Warren Buffett, Berkshire Hathaway is an example of this. Publicly traded companies (that are traded on a US-based exchange) have to file numerous reports with the SEC. Of these, you should review their Annual Report and monitor all filings on the SEC's website. Here's the link to the Berkshire Hathaway profile. Private Foundations Harvard and Yale have private, non-profit foundations. The first place to look would be at the Form 990 filings each is required to file with the IRS. Two sources for these filings are GuideStar.org and the FoundationCenter.org. Keep in mind that if the private foundation is a large enough shareholder in a specific company, they, too, will be required to file their intentions to buy or sell shares in that company. Private Individuals Unless the individual publicly releases their current holdings, the only insight you may get is what they say publicly or have to disclose — again, if they are a major shareholder. "As for the letting the ""wise"" people only make the decisions, I guess that would be a bit odd in the long run. Especially when you get more experienced or when you don't agree with their decision. What you could do, is make an agreement that always 3/4 (+/-) of the partners must agree with an investment. This promotes your involvement in the investments and it will also make the debate about where to invest more alive, fun and educational). As for the taxes I can't give you any good advice as I don't know how tax / business stuff works in the US. Here in The Netherlands we have several business forms that each have their own tax savings. The savings mostly depend on the amount of money that is involved. Some forms are better for small earnings (80k or less), other forms only get interesting with large amounts of money (100k or more). Apart from the tax savings, there could also be some legal / technical reasons to choose a specific form. Again, I don't know the situation in your country, so maybe some other folks can help. A final tip if your also doing this for fun, try to use this investment company to learn from. This might come in handy later." Shorts are difficult because you have to find someone to lend the stock to you. In contrast, put options don't require that. They also have some nice properties like you're only out the contract price. The options chain for BSFT will give you an idea of where the market is.  Keep in mind that BSFT only IPO'd last year and announced blowout earnings recently. Make sure the P:E you're looking at is using recent earnings reports!