Invesitng in alterantive real estate assets, should be a staple in every investors portfolio. When considering an investment in a real estate partnership or when choosing an investment sponsor, here are 5 key things to consider:
- What is the sponsor's vested interest; investment in deal?
- How long is sponsor's track record?
- How has sponsor performed during a recession or financial crisis?
- What is sponsor's contingency plan in the event of a downturn?
- How is sponsor compensated; performance based?
Economic prosperity breeds new sponsors every minute. Each economic cycle sees newly minted sponsors and overconfidence inspiring excessive exhuburance and risk taking. "Look at my impressive 5 year track record! "
Give me a battle worn, seasoned veteran with 20+ years of performance history and several years of losses, over a 5 year newby with fantastic returns. Over time, we all gravitate to the mean, and each economic cycle seperates the men from the boys. How an investment sponsor navigates during heavy storms is a critical success factor.
About the Author: Chad Mestler is CEO of Helvetica Group and has sponsored over 1,000 real estate investments and responsible for over $300 million of private investment capital. Chad has navigated private investors through 2 recessions and has managed over 2 dozen real estate partnerships and has sponsored several opportunity funds.
