Proper due dillegence for passive investment opportunity.

[Matt Heerwald]

My wife and partner are looking seriously at investing 25-50k in a build in central austin. The proforma suggests an 11mo timeline and forecasts 25% profit, with 9% preferred return. What is the proper due diligence? Thanks!

[Sarah Lorenz]

So tell me if I understand those terms correctly. If you invest $25,000, you hope to make a 25% return, which would be $6250, hopefully in 11 months. And the preferred return means that you are guaranteed 9% but you'll hopefully get the 25%? Or that if there is any profit, you get first dibs on it to get your minimum of 9%, which would be $2250. And if there is profit over and above that, it may go up to the 25%? 

Or . . . I had another investor use the term "preferred return" and what he meant was that he was first guaranteed 9% on his $25,00000 ($2250), which was written in as part of the cost of the project for the use of his money, and then after that, profit was calculated and he took 25% of the total profit.