Seeking due diligence guidance for Investory opportunity with ROI of 60%+

[Shailesh L.]

I have been informed of investor opportunity to invest in New construction condo project.   He wants to raise $20M through investors and remaining $30M will be through bank financing . He is asking each investor to invest $500K and he is promising to give returns at least 60% ($300K) on investment once construction is complete and all condo's are sold. This project  will be completed over 3 years of time.  Developer is currently aquiring land and appraisal of the site is done.  As part of due diligence , what should I be asking to the developer, what are the potential pitfalls and how do I protect my investment ?

[Chris Seveney]

Quote from @Shailesh L.:

I have been informed of investor opportunity to invest in New construction condo project.   He wants to raise $20M through investors and remaining $30M will be through bank financing . He is asking each investor to invest $500K and he is promising to give returns at least 60% ($300K) on investment once construction is complete and all condo's are sold. This project  will be completed over 3 years of time.  Developer is currently aquiring land and appraisal of the site is done.  As part of due diligence , what should I be asking to the developer, what are the potential pitfalls and how do I protect my investment ?

 Wow. First you can check out our page where we give you the top 20 questions to ask a sponsor but when someone "promises" any type of return I typically hit delete on that email. So first lets start with what can go wrong. YOU LOSE EVERYTHING and you have ZERO ways to protect your investment.

Here are my thoughts on condos right now in Florida:

1. Do you believe they can build and sell them all in 3 years. 

2. How many do they need to sell before they break even?

3. What if they take 5 years to sell? You are paying all those condo fees and putting $ in reserves during that time.

4. Have they sent you the PPM

5. Have you seen their und6erwriting model

6. What enticed you about this offering? Was it the 60% return which over 3 years is approx 20% per year.  

7. How much is the developer putting into the deal?

8. If you give money now and they are still in acquiring land and appraisal and you are giving $ before they even start construction I can pretty much guarantee you there is no chance this project is done and sold in 3 years. 

Top 20 Questions To Ask Your Syndicator Before Investing (biggerpockets.com)



Top 5 Strategies To Implement Before Investing In A Syndication (biggerpockets.com)