The Private Investment Glossary

Accredited investor — An investor meeting income or net-worth thresholds set by securities regulation, eligible for certain private offerings. This platform collects a placeholder attestation only.

Alternative investment — Any investment outside public stocks, bonds, and cash: real estate, private credit, private businesses, funds, and similar assets.

Diversification — Spreading capital across deals, categories, sponsors, and time so no single outcome dominates your results.

Illiquidity — The inability to quickly sell an investment. Private interests don't trade on exchanges; expect to hold to maturity or exit.

Private placement — An offering of securities to a limited group of qualified investors rather than the public, documented through a PPM.

Sponsor — The developer, operator, or manager who sources the deal, executes the business plan, and reports to investors.

Vintage — The year an investment or fund begins deploying capital; results are often compared within the same vintage.

Capital stack — The layers of money funding a project, ordered by priority: senior debt first, then preferred equity, then common equity.

Preferred return ('pref') — A stated annual return owed to investors before the sponsor shares in profits. An 8% pref means the first 8% each year goes to members.

Profit split — How cash above the preferred return divides between members and sponsor, e.g. 70/30 member-favored.

Waterfall — The full set of rules in the operating agreement dictating the order in which cash flows to each party.

Co-investment — The sponsor's own money committed alongside members — meaningful alignment when it's a real percentage of the deal.

Revenue share — A structure paying investors a percentage of gross revenue (not profit), typically until a defined multiple is reached.

Senior debt — The loan at the bottom of the stack, secured by the asset and repaid first. Its size relative to cost (LTC) or value (LTV) sets the deal's leverage.

Subscription agreement — The contract through which an investor commits capital and makes representations to the issuer.

PPM (private placement memorandum) — The core disclosure document for a private offering: terms, business plan, risk factors, and conflicts.

Units — The denomination of ownership in an offering; your units divided by total units is your ownership share.

Target annual return / IRR — The annualized return the sponsor projects, blending cash flow and appreciation. A target, never a promise.

Cash yield — The portion of return paid as periodic income, measured against invested capital.

Equity multiple — Total cash back divided by cash in; 1.6x means $16,000 returned per $10,000 invested, ignoring time.

Distribution — A payment of cash from the investment to its investors — from operations, a refinance, or a sale.

Return of capital — A distribution that gives back part of your original investment rather than profit; it reduces your remaining basis.

Hold period — The expected length of the investment, from funding to final exit.

NOI (net operating income) — A property's revenue minus operating expenses, before debt service — the engine of real estate value.

Cap rate — NOI divided by property value; the market's pricing of a property's income stream.

Yield-on-cost — Stabilized NOI divided by total project cost; developers compare it to market cap rates to measure the margin they created.

K-1 — The annual tax form partnerships issue to investors reporting their share of income, deductions, and credits.

Due diligence — The investigation performed before investing: sponsor track record, market data, terms, financials, and legal documents.

Capital call — A request for committed fund capital to be paid in, typically as acquisitions close.

Closing — The moment a transaction completes — a property purchase funds, or an offering stops accepting commitments.

Downside case — A projection scenario assuming things go worse than planned; the case a careful investor underwrites to.

Exit — The event that returns capital: a sale, refinance, note maturity, or acquisition.

GMP contract (guaranteed maximum price) — A construction contract capping the builder's price, shifting overrun risk away from the project.

Loss reserve — Capital set aside in credit strategies to absorb defaults before investor yield is affected.

Stabilization — The point where a project reaches normal operations — leased up, enrolled, or at planned capacity.

Escrow — A neutral account holding investor funds until closing conditions are met.

Risk factors — The section of every offering describing specific ways the investment can lose money. Read it first, not last.