Ramen Retirement: Syndicate Investment Checklist
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Deal Overview: SAMPLE KC DEAL
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CategoryAnswerKey questions / guidance
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Deal / property nameSAMPLE KC DEAL
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SponsorKC Multifamily
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Target marketKansas City, MOWhich market / sub-market?
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CategorySlow & Steady MarketsLarger second tier cities that exhibit stable growth and economic prospects, but no major impetus for a phase shift in the market trajectory. These will be good cash yielding markets, but don't expect a ton of appreciation upside.
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Stated preferred return
8%Look for 8% or greater
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Target IRR20%+Look for 18% or greater
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Deal Summary Write Up
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Market & Strategy: Why do you like this market? Why do you like this strategy? What do you believe about the future that makes this market and strategy a good one given the current investing climate? What do you know that would suggest that is true?
GP Diligence: What makes this GP a good partner for this market and strategy? What data do you have that supports that assertion?
Deal Diligence: What are the key drivers of value in this deal? What do you have to believe for those assumptions to be true? What sort of downside protections exist in the deal? What would a 'worst case scenario' look like for the property?
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GP Diligence
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CategoryAnswerKey questions / guidance
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Past experienceWhat have the principals of the GP been doing for the last ten years?
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Current footprintWhat investments does the GP have in the target market today?
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Past performancePerformance over the last cycle? Recent deals exited successfully?
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Acquisition fee1% or less?
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Disposition fee 1% or less?
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GP management fee1% of equity invested, or 2-4 percent of gross revenues?
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Performance fees
20-30% of profits (distributions in excess of preferred return, and capital gains); No waterfall
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Co-invest10%+ of the common equity?
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Stability of sponsor
Do their past experiences suggest a stable, predictable future? Does their story make logical sense?
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Career capitalDo they stand to lose a lot should their reputation become damaged?
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TrustworthinessAny flags thrown up? Any lingering doubts that you can’t quite articulate?
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Deal Diligence
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CategoryAnswerKey questions / guidance
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Rental rates
What are rates today? What are the projected forced gains? What are projected inflation gains?
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VacancyWhat is current vacancy? Projected vacancy over life of deal?
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Competition
What are replacement costs for a comparable building? What is the building environment like?
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Expenses
What are current fixed and variable expenses? Where do they expect to improve? Is that realistic?
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Capital expenditures
What is planned capex per unit? What is the expected rent increase due to the capex? >20% ROI?
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Financing
What is year 1 LTV? Coverage ratio? Interest rate? Is financing needed during life of deal?
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Cap rates
Purchase cap rate? Target sale cap rate? Prevailing rates for comparable rehabbed properties?
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