Investing is a tricky game! To ensure success, one needs to be ruthless in asking questions. This blog aims to educate our investors on what questions to ask before they invest in a deal.
This is the most fundamentally important question for an investor to ask upfront before making an investment decision. What is the minimum investment required? This makes the investor aware of the atmosphere of the deal and helps them to make an informed, rational decision. Knowing the lower limit for the investment informs the investor of their position within the deal.
This is again a very important question for an investor to ask before getting on board in a deal. To know about the partner’s track record, present active investments, how profits are split amongst them, their roles, and background information. These are some of the questions an investor should ask upfront before investing in any deal. Knowing about the syndication and its partners is crucial for an investor to build trust and boldly get into a deal with a particular syndication. Investing with a syndication is more of a relationship than just a business transaction, you can learn more about us here.
Underwriting is one of the most critical processes in the multifamily real estate world. It is a meticulous analysis of the property to evaluate its risks and take into consideration other aspects of the deal. Thereby, making it one of the most important questions for an investor to ask before going ahead with the deal. Ask your syndicator if they have been conservative while underwriting the deal. With conservative underwriting, you keep a safety margin for any unforeseen economic events, to ensure your investment portfolio keeps providing consistent returns even during downturns. If unfortunately, there is a loophole in the deal it will be exposed by studying the underwriting report and questioning it. By being aware of the underwriting process of the property, an investor can make a logical, rational, and confident investment decision.
The cap rate is the most important indicator of how much return an investor should be expecting out of a deal. Hence, the investor must be relentless in questioning the cap rate until fully satisfied before going into the deal. It is calculated by dividing the operating cost of the property by its current market value. Here you can read our blog where we delve deeper into this topic.
All investments come with an inherent risk! It is the nature of investing, that’s already given. But, to be confident while investing, an investor ought to ask all the questions and therefore inform themselves about the risks attached to the specific deal. As a Multifamily Real Estate Investment Company, at Crown Capital, we always take calculated risks and are absolutely transparent about it to our investors. Knowing everything about riskiness by questioning to one’s heart’s content is important before making a confident investing decision. Risks can be negated or be prepared for only when an investor knows what they are getting into.
We all know that location is everything when it comes to the multifamily real estate market, but with a good ripe location comes competition! Healthy competition drives investors to be on their toes and put in all their hard work driving ideal market conditions. But it can lead to over-saturation of the market as well. Competition in real estate is a double-edged sword and every investor should look out for a sweet spot where the competition is neither non-existent nor over-saturated. Therefore, to know in depth about the competition is imperative for an investor to make their final decision regarding the deal.
Knowing about the trends and the atmosphere of the current market conditions is important. Having a thorough knowledge of the economic landscape of the market enables an investor to firstly judge their syndicator’s knowledge and secondly help them to make an informed investment decision. Being aware of the inflation rate, and the possible downturns is important to make a wise decision. Here at Crown Capital, we are always researching and analyzing the market conditions relentlessly. We are adept at bending according to the market trends and the atmosphere of the market at any given time. Read our blog on real estate market cycles for more information.
Exit strategy is one of the most important aspects of a deal. The exit strategy of a deal is how the syndication plans to sell or transition an ‘exit’ out of their investment to maximize returns. Are they planning to liquidate the asset and repay the investors? Or, do they plan to reinvest the proceeds further in another deal? Knowing and understanding the exit strategy of a deal is imperative for any investor before investing boldly in the deal. An Investor has all the right to know everything in detail about the exit strategy of the deal. Read our blog where we discuss 5 exit strategies of multifamily real estate in detail.
At Crown Capital, our motto is to be transparent and honest about all the nuts and bolts of a deal with accountability to our investors. We desire to build long-term relationships and create win-win with all our partners and investors.
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