Real estate limited partnership (RELP)
A real estate limited partnership (RELP) is a direct participation program that pools investor money to buy, develop, or manage real estate. Income, gains, and losses flow through directly to the partners rather than being taxed at the partnership level.
A real estate limited partnership (RELP) is a form of direct participation program (DPP) organized to invest in real estate. Like all limited partnerships, a RELP has two classes of partners: a general partner who manages the business and bears unlimited liability, and limited partners — the investors — who supply capital, remain passive, and can lose no more than what they invested.
The defining feature of a RELP is flow-through taxation. The partnership itself pays no entity-level tax; instead, rental income, capital gains, depreciation deductions, and losses pass directly to the partners in proportion to their interests. Depreciation is especially attractive because it can shelter a portion of the partnership's rental income from current taxation.
RELPs come in several varieties with different risk-return profiles: raw land programs (speculative appreciation with no income), new construction programs, existing property programs (immediate rental income and lower risk), and government-assisted housing programs (tax credits and stable, subsidized income). Whatever the type, RELP interests are illiquid — there is no active secondary market, so investors should expect to hold until the partnership liquidates.
On the Series 7 exam, RELPs appear within the direct participation programs material. Know the partnership structure, the flow-through of income and losses, the role of depreciation, the main program types, and why illiquidity and general partner dependence make suitability a central concern.
Key takeaways
- A RELP is a direct participation program that invests in real estate through a limited partnership structure.
- General partners manage the program with unlimited liability; limited partners are passive with liability capped at their investment.
- Income, gains, depreciation, and losses flow through to partners without entity-level taxation.
- Program types range from speculative raw land to lower-risk existing property and government-assisted housing.
- RELP interests are illiquid, making suitability a key Series 7 exam theme.