Free checklist for investors

Questions to ask a sponsor before you invest

Fifteen questions about the track record, the fees, the loan, your money and what happens after, with what a good answer sounds like. Pick the ones that matter and email them to the sponsor.

Before you invest

15 questions

How did your past deals compare with plan?

Which fees are paid even if it goes badly?

Who holds my money before closing?

What if rents come in lower?

Email the list to the sponsor

Which would you like answered?

Eight are ticked to start. Change them, then email the list or copy it.

Track recordHow many deals have you run, and how did each turn out compared with the plan you showed investors?Why it matters: Past deals show how a sponsor’s plans hold up when rents, rates and repairs move.A good answer: Names, dates and the numbers for each deal, including the ones that did worse than planned.Have you ever cut distributions, returned money to investors or made a capital call? What happened?Why it matters: Every sponsor has had a hard stretch. How they handled it tells you more than a clean list does.A good answer: A plain account of what went wrong, what was done and what changed afterwards.Who is on the team for this deal, and what does each person actually do?Why it matters: You are betting on the people running the building as much as on the building.A good answer: Names, roles and who answers to whom, including the property manager.

Fees and alignmentWhat fees do you and your partners earn, and which are paid even if the deal does badly?Why it matters: Fees paid up front or regardless of results pull the sponsor’s interest away from yours.A good answer: Every fee listed with its amount and when it is paid, in the offering documents.How much of your own money is going into this deal?Why it matters: A sponsor with real money at stake loses when investors lose.A good answer: A dollar amount or a share of the raise, and whether it is cash or fees turned into equity.How is the profit split, and who is paid first? Is there a preferred return?Why it matters: The order of payment decides who gets paid when there is less to go around.A good answer: The order stated step by step: capital back, preferred return if any, then the split.

The dealWhat has to be true for this plan to work, and what happens if rents, occupancy or rates come in worse?Why it matters: Every plan works when everything goes right. You want to know how much room there is.A good answer: A downside case with numbers, and what the sponsor would do first if it happened.How is the loan set up: rate, length, when it comes due, and is the rate fixed or floating?Why it matters: Debt that comes due or resets at a bad time is how many deals get into trouble.A good answer: The lender, the terms and the due date, and what the plan is if rates are higher when it comes due.How much cash is held in reserve, and what is it for?Why it matters: Reserves are what pays for a surprise without asking investors for more.A good answer: A figure in the budget for reserves, kept apart from the renovation money.

Paperwork and moneyWho holds my money before the deal closes, and what happens to it if the deal does not close?Why it matters: Your money should not sit in a sponsor’s personal account.A good answer: A named escrow account with a third party, and a clear promise that unused money goes back to investors.Which exemption are you raising under, 506(b) or 506(c), and how do you check that I am accredited?Why it matters: It decides how the sponsor may find investors and what they must verify about you.A good answer: The exemption named, and a verification step done by a third party, not a checkbox.Can I read the operating agreement and the offering memorandum before I commit?Why it matters: These documents, not the pitch, say what you actually own and what the sponsor can do.A good answer: Yes, in full, with time to have your own attorney read them.

After you investHow often will I hear from you, and what will the updates include?Why it matters: Silence is the usual sign of a problem. You want a steady rhythm from the start.A good answer: Monthly or quarterly reports with occupancy, income, expenses and progress against the plan.When will I get my Schedule K-1 each year?Why it matters: Late K-1s hold up your own tax return, and some sponsors send them months late.A good answer: A date or range, and a track record of meeting it.What is the plan to sell or refinance, and what happens if you need more time?Why it matters: Your money is tied up until the exit, so you should know the plan and the plan B.A good answer: A target window, the triggers for selling, and what the documents allow if it takes longer.Who do I contact if I have a problem and you are not available?Why it matters: You want a second person who knows the deal.A good answer: A named backup contact who has the deal’s records.

8 questions picked

Opens an email in your own mail program, with the questions written out and ready to send.

Email these to the sponsor

Want to see a sponsor answer most of these up front?

DoorRaise sponsors publish the numbers, the risks and the documents on the deal page, and host a live Q&A. Our example deal shows what that looks like.

Look at the example deal

Questions

What should I ask a sponsor before I invest?+

Ask about their track record (including the deals that went badly), every fee and when it is paid, how much of their own money is in the deal, how the loan is set up, who holds your money before closing, and how often you will hear from them. The questions above cover each.

What does a good answer look like?+

Specific, in writing and consistent from one call to the next. A good sponsor gives names, dates and dollar amounts, and is as open about what went wrong as about what went well. Vague, rushed or changing answers are worth noticing.

Is it rude to send a sponsor a list of questions?+

No. A sponsor who runs deals properly expects them, and many answer the common ones on their deal page. A sponsor who dislikes being asked is telling you something.

Does DoorRaise see my questions?+

No. The list is built in your browser and the email opens in your own mail program. Nothing is sent to DoorRaise.

Is this advice?+

No. It is a list of things worth asking. An attorney and your own research decide what is right for you. Offers on DoorRaise are open to accredited investors only.

A general list, not legal, tax or investment advice. Offers on DoorRaise are open to accredited investors only. Investing involves risk, including loss of the entire investment.

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Run deals? Answer these before anyone asks

Create your sponsor page on DoorRaise. The numbers, the risks and the documents go on one deal page, and we check every investor and hold the money in escrow.

Create your sponsor page How it works