Definition
Capital calls require investors to contribute additional capital beyond initial investment, typically for renovations or repairs. Investors must have capital reserves.
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Capital calls (or capital contributions) require investors to fund additional requirements during hold period. Typically 10-25% additional. Used for major renovations, repairs, or debt service. Investors must have capital available or face dilution/withdrawal. Advance notice required (typically 30 days+). Default on capital calls results in investor penalties. Investors should reserve capital for potential calls. Impacts total investment requirements and returns. Key risk in partnership investments. Professional sponsors minimize excessive calls.
Pro Tip
Reserve 20-30% of investment capital for potential capital calls.
Example
Capital call required investors to fund $25,000 each for major building renovations.