At Bright Sound Investments, we believe it is important for any investor to carefully vet the sponsors of real estate syndications (ourselves or other sponsors) to ensure that they are reputable and capable of managing investors’ funds effectively.
Here are five ways investors can vet sponsors of real estate syndications:
- Background check: (Passive) investors can conduct a background check on the sponsors of the syndication to verify their professional and personal backgrounds. This can include checking their credentials, experience, and past performance.
- References: Investors can ask for references from other investors who have worked with the sponsor in the past. This can help provide insight into the sponsor’s communication, management, and financial skills.
- Track record: Investors can look at the sponsor’s track record and previous deals to see if they have a history of success. They can also look at the sponsor’s investment strategy to determine if it aligns with their own investment goals.
- Due diligence process: Investors can ask the sponsor to explain their due diligence process, which should include a thorough analysis of the property, market, and potential risks. A transparent and thorough due diligence process can help assure investors that the sponsor is making informed investment decisions.
- Transparency: Investors should look for sponsors who are transparent and open about the investment opportunity, including the fees, projected returns, and potential risks. Sponsors who are willing to provide detailed information and answer questions can help build trust with investors.
There are several podcasts out there where you can learn more about the sponsor indirectly, as well as multiple real estate conferences for sponsors and investors to meet directly in person. Or maybe you know and have established trust with the sponsor outside of real estate. Remember, just as you are doing due diligence on the sponsor, they also need to do their due diligence to get to know you since syndications are often 5-7 year commitments.
