[[Internal rate of return (IRR)|IRR]] dwindles as hold periods get longer. A [[Preferred return and promote|promote]] is a proportion of IRR (at least, after clearing the preferred return) that goes to the sponsor. Therefore, sponsors compensated partially by a promote maximize their income by selling ASAP. Because my goal is to develop great coliving houses and hold them forever, a promote is incompatible with my goals. **It'd be better to use any capital beyond the preferred return to pay back investor capital**. Source: [Moses Kagan](https://kagansblog.com/2018/04/long-term-holds/). **A different solution: [[Promote crystallization]].** Instead of paying the promote out of an eventual sale (which forces the sale) or forgoing the promote entirely (the approach above), the GP's promote can be *crystallized* at a milestone like lease-up and stabilization: the asset is valued and the [[Preferred return and promote|waterfall]] is run *as if it sold at that moment*, converting the promote into a permanent co-ownership stake in the still-held property. The GP keeps upside and ongoing cash flow without ever needing to sell, so GP and LP can both want to hold forever. ReSeed Partners — Moses Kagan's real-estate accelerator — is built around this structure (see [[Combination VC and RE fund]]). Source: Brad Hargreaves, ["YCombinator for Real Estate"](https://www.thesisdriven.com/letters/ycombinator-for-real-estate-reseed/). #Question: this structure allows for an 8% IRR but none of the upside from appreciation. It's arguably less risky than a regular real estate deal because LPs get capital returned sooner. How easy or difficult would it be to raise capital with such a structure?