Do you look closely at DST PPM-s yourself?

Question

I have reviewed several PPM-s for DST-s. I wonder what do others look at closely? I usually do look at:

* Property location, business plan, environment. Main employers? Is it a growing area? Personal prior knowledge or ask family friends, or google. Weather, other risks.

* Sponsor's prior experience, results.

* Forecasted cash flow. If they plan x% rent increase yearly, is that feasible?, etc.

Btw this is for a list of DST-s that my financial advisor already selected. I definitely could not look at all of them...

Recently I ruled out a DST that was a NNN lease on a medical use facility. It was a small property (compared to others I looked at) with  4-5 million valuation. Monthly rent was just under 300k. The expenses included 4200 bank fee per month and 15k asset management fee per month. I thought that these are unnecessarily high for a NNN property. (There is a single rent payer!)

Brandon Bruckman · Answer

@Matyas A. S.  Some sponsors will supply 3rd party due diligence called a Mick report.  This is very useful to dig in beyond the assumptions in the PPM.

There are also other independent 3rd parties that have deep experience reviewing PPMs.  Send me a DM and I’ll share contact info.

Kyle Winther · Answer

I like to review the PPM with my clients, then get our DST sponsor on the phone to go over the PPM in more detail to make sure the client fully understands the risks/fees associated with a DST and really understand the property that they will be investing in.

Brandon Bruckman · Answer

@Chad Kolinsky Mick goes deeper.  You are correct, some sponsors will provide others ask you to pay for the 3rd party report.

Rob Pecha · Answer

@Matyas A. S. I would say all of those considerations you listed are valid. In order of importance in my opinion, I would go with the second one first, followed by your first choice, and then lastly the cash flow one. Another element you should certainly consider is any LTV baked into the program. Have a great weekend ahead!

Leslie Pappas · Answer

@Matyas A. S., I know it's been a while but what did you decide?

It's important to have the advice and perspective of an industry old-timer, in my opinion.

If you're still figuring out what to do and need any help, feel free to contact me.

Paul Moore · Answer

@Matyas A. S. Just checking in... did you find a DST?  How is it going for you?

Natalie Kolodij · Answer

Ask your adviser what they do to vet the deals. They may have done a lot of the leg work.

When I launched the passive investment department at an advisory firm I had to develop a pretty intensive due diligence sheet.

If the adviser is a fiduciary they should have something similar too.

We analyzed everything from debt, insurance coverage regarding risks of the area, ect

Do you look closely at DST PPM-s yourself?

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