Questions to ask on RE investment offering 20% preferred return

[Farhan Abbasi]

I'm offered an investment offering outsized returns (20% preferred return over 90 days), and wondering what I can do or ask to determine whether it's a poor choice of investment. I already expect responses of "Unrealistic, move on." It would be helpful to offer concrete tests/research points. I have prior experience in real estate, am in the world of finance. The Sponsor's employee that is handling the raise is a friend and we're undertaking a different business together (so he has incentive to not screw me over). 

Here's the deal:

- SFH in a suburb of a major city with great fundamentals (job growth, population growth, multiple sectors).

- Purchase: $250K (presumably funded by Class A & B shares).

- Rehab: $80K (100% bank loan)

- Sale: $460K ($130K profit)

- Deal is owned by LLC (seems like a general fund LLC for various targets), not an LLC specifically for this deal.

- Payout: Upon sale and paydown of bank debt, Class A shares get their principal, then Class B shares get their principal, then Class A gets their 20%. 

- The Sponsor isn't taking a management fee (I presume they are majority owners of Class B).

I would be investing $50K into the Class A shares, due in 90 days. Principal + 20% (ie $10K profit).