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Checklist of Questions To Ask A General Partner When Evaluating an Investment As A Limited Partner/Passive Investor

by | Feb 13, 2024 | 0 comments

Below is a checklist of questions to ask a general partner when evaluating an investment as a limited partner/passive investor.

GENERAL QUESTIONS

  • Have you ever lost your own money on a real estate deal?
  • How about other people’s money?
  • How do you balance risk mitigation with returns?
  • What’s the most difficult challenge you’ve overcome?
  • What makes you different from other groups?
  • Can I speak with some of your past investors who have invested with you MULTIPLE times?
  • Have you been through any market cycles?
  • How many deals have you gone full cycle?
  • What has been your worst syndication deal?
  • Have you ever called capital and why?
  • How are your current deals performing compared to projections?
  • What is your liquid net worth?
  • Have you ever oversubscribed a deal?
  • How often do you provide property updates to your investors?
  • Can I see an example of how do you communicate bad news?
  • What gaps do you have on your team that you need to outsource?

DEAL LEVEL QUESTIONS

  • Can I see your underwriting?
  • Have you conducted stress tests on your analysis?
  • Is your “skin in the game” coming from your acquisition fee?
  • What type of financing are you securing for this deal and why?
  • Why did you choose this market?
  • What is your plan for capital reserves for the deal?
  • How long until I start seeing distributions and what’s the cadence?
  • What happens to my ownership interest on a refinance?
  • What’s your promote structure? Fee Structure?
  • How detailed of reporting are you willing to share?
  • What are your worst case scenarios in this deal?
  • What does your management or acquisition fee cover?
  • If the property over-performs are the LP’s capped or do they participate in that overage?
  • Are you sourcing capital anywhere but from retail investors?
  • If so, what control rights do your equity partners have?
  • What’s the yield-on-cost at stabilization?

LEGAL/TAX QUESTIONS

  • How do you stay compliant with SEC broker/dealer laws with your capital partners?
  • Whats your track record on producing K1’s each tax year at a reasonable time?
  • LEGAL/TAX QUESTIONS

 

ABOUT THE TEAM QUESTIONS

  • What is your contingency plan if one of the partners falls ill or passes away?
  • What’s your role on your team and who else is involved as a GP?
  • Who is the asset manager and what’s their experience?
  • Who are your most crucial team members?
  • Is your property management in house or outsourced?
  • If outsourced how do you manage your PM?
  • Have you worked with the PM on past acquisitions?
  • Who are the active operating GPs? What is their experience?

 

To learn more about real estate investing and syndications, reach out to us at https://investwithspark.com/contact/ today!

 

 

 

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