- Sponsor Agnostic: Invest in a platform that is arms length and independent of project owners. Sponsors agnostic platforms have long term investor interests in mind compared to short term myopic thinking of sponsor owned portals who raise capital for their own projects. Check for any indirect dotted line connections.
- Due diligence: Make sure that third party consultants have vetted the reports independently. These reports should be ideally commissioned by the portals and not the sponsors.
- Background of Portal Team: Experience, Experience, Experience. Who is in the team? How many years of experience does the team have in the Real Estate Capital Business? Is the portal owned by non-real estate or tech guys who are “new” to real estate or seasoned professionals from the industry? What’s the outreach and network of such team members? Do they know all the key players in real estate, do they understand the capital stack, do they have relationships with senior debt lenders, lawyers, consultants and sponsors alike?
- Diversification 101: If you have $100,000 to invest, put in four different deals rather than putting it all in one! Make sure you have debt and pref equity both in your portfolio. Spread your holdings across geography and by asset type. Does your portal have enough critical mass and scope to provide you with steady access to quality deals?
- Legals: Make sure to read the subscription and LP agreement thoroughly. Is it a standard industry document or does it have too many carve outs that are overly favorable to the sponsor? Ensure that it is a balance between investor rights and sponsor rights. Don’t forget to check the past 3 years of historical financial data against the next 3 year of projections. For e.g., If it’s a condo project are the exit sale psd numbers realistic or they just pie in the sky!