How do you know you are investing with the right team? 

This is the #1 most asked question from investors. With stories in the media about foreclosures it can be scary entrusting others with your hard earned money.

I find that people want to invest in real estate, but they don't have the experience themselves or they don't want the investment to be a time consuming job. Investing with best in class operators can be the solution you are looking for and completely passive. But there is some work on the front end. And that involves finding someone you can trust. I spend hundreds of hours interviewing operators, researching the team, talking to other capital allocators, and attending conferences on a mission to find partners I can trust not only with my money but my investor’s money. When considering investing in a property, it's crucial to thoroughly evaluate the operator. This involves delving into their background, track record, and experience in the specific asset class.

Let's examine the due diligence inquiries that can provide us with further information about the operator's qualifications.

First, we need to understand the operator's past and present circumstances. What is the duration of their business existence and what is their past performance? What is each member’s role in the deal and has everyone on the team worked together before? It's critical to determine if their success is mostly attributable to competent operations or advantageous market circumstances. We ought to ascertain whether they have experienced prior recessions and how those experiences went. 

We also need to find out how many investors the operator has and what assets they currently have under management. This data will help us gauge their scope and level of popularity. If they have a big web presence, it's worth looking into as this can reveal how transparent and involved they are with investors.

To assess if the operator is well-equipped to handle investor transactions, we should find out if they have the capability to send ACH deposits. If they are able to take on more work, it will be evident from their bandwidth relative to their planned tasks.  

Understanding the technology and platform the operator uses is crucial. This will help us assess their efficiency and ease of communication. It's also important to inquire about the reporting structure and frequency. As an investor, knowing how often we will receive updates and what they will entail is vital. We will ask for examples of past communication. 

One of the most important aspects of our due diligence is exploring the operator's knowledge of risk mitigation in the market and their ability to make conservative assumptions. We look at their underwriting and compare it to other operators’ underwriting and data from national analysts such as Costar and RealPage. This will provide insight into their approach to managing potential risks and protect investors' interests. 

It's also crucial to take tax-related factors into account. We ought to find out when the operator anticipates receiving the tax documents. It’s important to ask who they are using to send out K-1s and what was the timeliness of distributing these in the past. We may better organize our finances and fulfill our tax obligations with the use of this information.

Finally, it's critical to ask existing and former investors for recommendations. Learning about their experiences will give you important information about the reliability and effectiveness of the operator. Lastly when assessing an operator, it's also important to follow our intuition.

If you want to dive deeper into our due diligence questions, we have created a list of questions we ask when considering a potential investment. Click HERE to claim your copy FOR FREE.

Do not hesitate to schedule a call in case you have questions or want to discuss this further.