Invest With Those You Trust

You’re an investor, and you’ve tried traditional investments, but you’re ready for more. You want something that gives you better, more consistent returns with less headache to achieve your investing goals more quickly. You know that most of the millionaires and billionaires in the US have improved their financial situation through investing in real estate and you want to invest with someone you can trust, while avoiding the hassle and learning curve that goes along with doing it yourself. A great way to invest in real estate is through passive investment in multifamily properties. Multifamily is a particularly good asset class because people need a place to live, so it is more insulated to economic conditions than some other commercial sectors. Many organizations offer the opportunity to passively invest in multifamily properties, but it is important to understand that as an investor, who you do business with is just as important as the business itself. We’re here to help you ask the right questions to make sure your multifamily investment is profitable and managed by people you can trust.

Take the time to get to know the manager or group managing your money on an intimate level. Treat your investment like a job interview. Make sure you hire someone that is going to be a good steward of your money and a loyal partner along the way. Dig into their track record, get to know their team, and learn about their approach when it comes to investing.

Do their investing goals align with your goals?

Real estate can be a great investment for a variety of reasons including value creation, cash flow and tax advantages. It is important that you be honest with yourself on your goals for investing in real estate so that you can invest with a group that undertakes projects consistent with your objectives. Is current cash flow your primary objective or are you using this vehicle primarily to accumulate net worth and provide a better future for yourself and your family? Real estate is a much less liquid investment than stocks, so it is important to think through your time horizon. While everyone would love to make as much money as possible as quickly as possible, being clear about when you are likely to need the funds you are investing back in your hands will help you make a better choice on what project to invest in. You should ask if they are focused on current cash flow or capital gain, when distributions are likely to start and how long the property is expected to be held.

What level of information and transparency will be provided to you?

Are they providing information on their track record and where they are in any currently owned projects? How often do they provide updates on the property performance and what information is provided in those updates? Are you able to schedule visits to the properties you are invested in to see them with your own eyes? Do they offer an online portal to allow you to review the financials of an investment 24 hours a day?

Learn about the team that will be handling your money.

Ask about their story. Learn about who they are, what they believe in, and how they do

business. How much experience do they have in multifamily investments? Does the team contain people with strong financial, property management and/or asset management backgrounds? Do they understand the fiduciary role that they are taking on when investing your money, do they feel personally accountable for the results you experience? Are the residents and team members that work on their sites a means to an end or is benefitting the residents and team members part of the overall goal? Do they give back to their communities?

If possible, meet the team and get to know who’s on the other side of that phone call or email

you just sent. Is someone available to answer any questions you may have along the way? Know who you’re dealing with, and who will play what part in your investment. You should understand the heartbeat of the company and feel confident in doing business with them. Look for the manager that will step into your shoes, someone that will take ownership of the destiny of your money.

How are they paid for their work on the project?

Do they take acquisition fees when the property is purchased? While this is not uncommon, if the acquisition fee exceeds what they invest in the project they are getting paid for closing the investment even if the investment doesn’t perform. Does any of your original investment get reallocated up front or are allocations to sponsors only from the profits on the project? Reallocation is a less common scenario, but one that should be clearly understood. There is really no harm as long as all goes well; however, if at the end of the day the property sells at a break even, that reallocation could mean that the sponsor made money when you did not get a full return of your investment. You should ask how the sponsor will be paid. What fees does the sponsor take throughout the project? Ask the sponsor how their fee structures are aligned with the performance of your investment. The more aligned the sponsor is with the investors, the better chance that the sponsor is continually making decisions that are in your best interest.

How do they add value as compared to their competitors?

Are they able to provide more detailed oversight through in-house management? What systems and processes have they developed that make them more efficient or effective than their peers? Are they cost effective in their upgrade programs by handling things in house, strong vendor relationships and bulk sourcing of their materials either domestically or internationally?

What do their investors say about them?

This tells a lot about the character of the manager. Most people will paint themselves positively but be sure and measure their honesty in this question. It’s a test of self-awareness and an honest appraisal of how other investors see them, not just how they see themselves. Ask for references and speak with investors who are invested currently and particularly ones who have seen a project go full circle and have received a return upon sale.

Again, who you do business with is just as important as the business itself. Don’t leave these questions unanswered. Click here to interview us today. We’d love the opportunity to earn your trust and investment.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *