Four questions you must ask your deal sponsor – and one for yourself
In the world of private real estate investing, it’s important to KNOW the sponsor. That individual or group will determine if the deal being considered will be good for you. Ask these four questions of any deal sponsor with whom you are considering investing. Then ask yourself the last one. “What is your track record?” A deal sponsor may claim success with his or her last few investments, but what does the long-term track record actually look like? Have there been failures and what were the circumstances? Has there been consistency in the profile of the properties purchased? Or are they just chasing what’s hot? “What is your proclivity for borrowing?” Deal risk stems from several areas, one of which is the extent of the financing. High loan to cost ratio, short-term loans, and high interest rates raise the risk substantially. Aggressive terms can boost returns, but jeopardize the deal
