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How To Vet A Sponsor

by Yarusi Holdings LLC on

How To Vet A Sponsor 

There are two roles in a real estate syndication: the sponsor/general partner and the limited partners/passive real estate investors.

The sponsor is responsible for leading the transaction and executing the business plan whereas the limited partner’s only responsibility is to provide the funding for the deal. 

Real estate investing is a relationship business. The investor is investing in the sponsor first and the deal second. Selecting a sponsor to work with is a crucial step and it’s important to find somebody who has a strong track record of success, has a team in place, and is someone you know, like and trust. Here are some questions to ask when vetting a sponsor: 

  1. What is your background in real estate and how many years have you been in the industry?
  2. What is your track record in multifamily syndications? 
  3. How is the team structured? How many partners are in the deal? 
  4. What type of asset class do you invest in? 
  5. What is your investment strategy and criteria? 
  6. Have you ever taken a deal full cycle? 
  7. Can I see a comparison analysis of your offering vs actual results? 
  8. How well do you know the market you are investing in? 
  9. How many of your investors are repeat investors? 
  10. What is your typical hold period? 
  11. How do taxes work with this investment? 
  12. What does a worse case scenario look like for this investment?