Do any investors do background checks on general partners?

Question

Hi All,

I have been looking into investing in a apartment syndication. Do any investors run background checks on the general partners? If so who do you use?

Thanks.

Jay Hinrichs · Answer

I find it somewhat amazing that investors will put a blue collar work force tenant through the wringer IE back ground credit etc etc all over can they pay 750 dollars of rent.. but investors will do no back ground on someone they hand 100k or more to :)

Sam Bates · Answer

Lee,I'm a general partner and recommend you do background checks on any GP you plan to invest with. If you have a personal relationship with the GP and know them well you may want to reconsider, but an average Joe from the street it's imperative. I would also ask pointed questions regarding their financial and business history and see how they react to the questions. You are entrusting that person to steward your capital the best as they can and if they have questionable character or have limited to zero experience with large sums of capital or capital projects I would run.Here is a list of 3 background check companies that are recommended for 2020.https://www.business.com/categories/background-check-companies/

Dan LaFontaine · Answer

@Lee Nestlerode 1000% with @Ronan Donnelly and others. Actually, sometimes not only the GP but any other major players. Some of the background check companies will give you package deals, in which case you might want to even check the broker, the property manager, etc. Best money you'll ever spend. Just be sure to use a high quality company and pick a thorough package. @Sam Bates provided a list, and there are plenty of other reliable reviews to help you choose.

Mark Schmiel · Answer

The next one I invested in I talked with the accounting firm they use for annual auditing, the bankers they use for financing, as well as a

number of past investors.

Yannik Cudjoe-Virgil · Answer

I would advise to perform a background check on every sponsor/operator. You must look out for yourself in business, and you can't depend on no-one else to do so. That's just how the business is. Partnerships are like marriage. Easy to get into, hard to get out of. Don't get stuck with the wrong partner.

Dan LaFontaine · Answer

@Kay Kay Singh Glad that worked out for you, but IMO that's playing with fire. Scammers are very smart too and they certainly know the basic trust principal that if someone agrees to a background check they must have nothing to hide. In fact that's the fundamental basis of con man's strategies, hence the term "confidence man/con man". With the low price of background checks these days - not much more than your wire fee and certainly less than your attorney fee, I'd say it's not worth saving the $25-175 or the 15 minutes. Unless you know someone personally or have come to through past deals. Which I personally try to focus on. But to each their own. Wishing continued success on your investments.

Ronan Donnelly · Answer

@Lee Nestlerode, definitely run a background check as there is a high degree of variability in the quality of sponsors out there. Even the Sponsor's response to your request can be highly informative. Good luck!

Mark S. · Answer

@Paul B. I relied on the very thorough underwriting done by the lending institutions. Better that what I could do myself

Paul B. · Answer

But would a background check have revealed anything about their experience?

Mark Schmiel · Answer

The next one I invested in I talked with the accounting firm they use for annual auditing, the bankers they use for financing, as well as a n umber of past investors.

Do any investors do background checks on general partners?

Do any investors do background checks on general partners?

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