Knowledge of the market
It’s vital to do your research, but ultimately you have to be able to trust that your local partner investment manager knows more about the local real estate market than you do. The key word here is ‘local’: you need the company or person that manages your real estate investment to have a comprehensive understanding not only of the state and trends in the real estate market, how they apply to the city or state where your investment property is located.
Expertise in the segment
The most vital thing to bear in mind is whether the company you’re investing with has sufficient experience and know-how to operate successfully in the relevant segment of the market for your investment.
Is it possible for a local partner investment manager to apply their experience from one area of the real estate market to develop expertise in another? Sure – but it’s your money they’ll be using to practice. Find a company/person with extensive knowledge.
Project history & track record
How do you assess the investment manager’s level of expertise? Ask about their portfolio and look into their track record. And I mean all of it – if they’re offering to manage your property once it’s rented out, make sure they have a background in doing that too.
Remember, it’s not just a numbers game. Does their track record reflect their experience in the kind of neighborhood, tenant demographic and price range you’re looking at?
Reliability & transparency
Of course, any investment manager will describe themselves as reliable and insist that they are transparent. But how can you tell?
Ask to see the reports they intend to send you. See if they suffice. Talk to previous investors.
One red flag is the offer of guarantees. There are no guarantees in real estate, and if you’re in the right market, you really shouldn’t need one.
An unfortunate number of investment managers take advantage of the limited local knowledge of out-of-state investors to sell their properties above market value. Do your research to find out what kind of experience other investors have had with the company before you get involved.
Credit and ability to financially leverage the project
The last thing you want when you put your money into any kind of investment is to be let down because you were misled about another party’s ability to contribute. Find out whether the company can put up the money you need by looking into older projects and getting their bank LOI for the new transaction.