Tips for performing due diligence on a private real estate investment manager before making an investment

As a private real estate investor, you know that due diligence is key to ensuring a successful investment. But what do you need to look for when performing due diligence on a private real estate investment manager? Investing in real estate involves inherent risks and it is important to put in the effort to find managers with styles, strategies, and risk profiles that align with your investment objectives. There are too many considerations to list in one article, but here are what we believe to be some key considerations to keep in mind when assessing an investment manager.

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Understand what type of investment you are looking for – there are many different types of real estate investments, so you need to know which types might be right for you

For private real estate investors, understanding what type of investment you are looking for is paramount to success. It’s important to do research and evaluate potential investments carefully – look out for a company’s track record and performance, as well as their transparency and communication when it comes to reporting key investment information. Although a manager’s track record and past performance does not guarantee any future results, it can be a useful tool in evaluating a manager’s approach to investing and consistency in execution. Finding the right partner who is trustworthy and reliable can increase the likelihood that you get the most out of your private real estate investments.

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Understand the manager’s investment strategy – what types of properties does the manager invest in, and why do they believe these properties will be successful investments?

As an investor, understanding the private real estate manager’s investment strategy is an important step towards making informed decisions. By learning what types of properties they invest in and why they believe these will be successful investments, you can gain insight into how a private real estate manager selects investments and make sure that the approach aligns with your own goals and expectations. A trustworthy private real estate manager will be willing to share their investment philosophy, analyze and some key performance metrics, provide data-driven evidence to back up their strategies, and be open about the potential risks associated with investing in private real estate. They should also be transparent around how they measure performance – giving investors peace of mind knowing exactly how their money is being utilized.

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Research the manager’s experience and track record – how long have they been investing in real estate, and have they demonstrated that they can execute on their investments?

When private real estate investors are doing their due diligence, one of the most important pieces of information they should consider is the manager’s experience and track record. It’s essential to research a manager’s background to determine how long they have been investing in private real estate and what their returns on investment have looked like generally over that period. While past returns are not indicative of future performance, knowing this information can provide an investor with valuable insight into whether or not the manager is trustworthy and if there is potential for satisfactory performance. Furthermore, gauging a manager’s track record provides some transparency, allowing private real estate investors to gain some insight into patterns in a manager’s investment process.

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Review the manager’s fees and expenses – are they reasonable, and how do they compare to other managers’ fees?

It is critical for private real estate investors to review managers’ fees and expenses thoroughly when selecting a private real estate investment manager. Comparing fee structures with other private investment managers is essential to know what you are getting for your money. Not only should investors find out if the manager’s fees are reasonable, but they should also check the manager’s track record, performance, and investor reporting, as these will help provide assurance that the manager prioritizes transparency. Taking time to understand an investment manager’s approach is critical to making a decision about whether to trust that manager with your investment.

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Ask for references from other investors who have invested with the manager – what was their experience like, and would they recommend the manager to others?

Investing in private real estate can be a great way to diversify an investor’s portfolio and potentially increase returns; however, entrusting your money to a manager you are not familiar with can be an intimidating step. It may be helpful to ask for references from others who have invested with the manager you are considering to ensure that you are working with a trustworthy manager with a proven performance track record of performance and transparency. An investor should reach out to references and ask questions about their experiences before making commitments.

There are many different types of real estate investment managers, so it is important to understand which one is right for you. Putting in effort before investing to get important details about investment managers can go a long way in preventing negative outcomes.

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Nothing in this blog is or should be construed as investment advice or an offer or solicitation of offers of investments. Both Real Estate Investments and Securities offerings are speculative and involve substantial risks. Risks include, but are not limited to illiquidity, lack of diversification, complete loss of capital, default risk, and capital call risk. Investments may not achieve their objectives. Investors who cannot afford to lose their entire investment should not invest in such offerings. Consult with your legal and investment professionals prior to making any investment decisions. All Securities are offered through North Capital Private Securities, Member FINRA/SIPC.

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