Can you explain the difference between the preferred return and the IRR? – Ironton Capital

National Diversified Fund 7 is Live!

The preferred return is what the limited partner (LP, or investor) earns from the moment that the cash is wired to us.

Even though you’ll likely be funding well before the fund’s close date, the preferred clock starts immediately.
After the start date, the IRR (internal rate of return) clock starts. That runs separately for each investment that we make.
For NDF5 and NDF6, the plan of record is that the IRR will be 17% and 19%, respectively. Of course, actual results will vary, and this is only guidance.
Currently, we’re targeting 14-20% for NDF7; we’ll be able to refine this number as we identify more investments. We’ve found four as of this writing. We’ll likely have 8-12.
You earn a preferred return during the investment period. Around 5% (if you get depreciation shares) or 8% (if you don’t) of your total return is the preferred return. The balance is your share of the excess profits. For example, for the first 20% per year of return, 16% goes to the investor and 4% goes to the general partners running the fund. Most of the costs to run the fund come out of the 4%.

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