How to Choose a Healthy Passive Investment Opportunity

There are several factors to consider when evaluating a deal and sponsor. Educating yourself is the first step in finding a great investment.

Operating Team

Having the right general partner and operating team is arguably the most important piece  when evaluating an investment opportunity. The way the team manages funds can be a big factor on the return.

·       Experienced team

• Experience with business plan, asset class, and market

·       Good track record

• Choosing good markets

• Finding and underwriting deals

• Operating properties to their potential and hitting projected returns

Once you are comfortable with the operating team, you can explore farther on the deal.

Margin of Safety

·       Reserves at closing

• Is there cash set aside for capital expenditures and repairs?

·       Cash flow management

• The sponsor should consider this before calculating the net operating income

·       Rent growth

• Do the comparable properties support the projected rent growth?

·       Cap rate

• Does the cap rate increase or decrease at sale? Does the market support this?

·       Underwriting

• Did the GP underwrite the best-case scenario or with margins of safety?

• Stress tests?

These are all important factors before moving forward on a deal with a particular sponsor.

If you are ready to get started analyzing deals, we invite you to join our Investors Club where we share exclusive current investment opportunities. From there you will have the ability to schedule a 1:1 Investors Strategy Session where you will walk away understanding:

·        Clarity on your wealth goals

·        Your current ability to invest

·        Which milestones make the most sense for you

·        A roadmap to your wealth plan