Please help me pick apart this private real estate investment

[Jason L.]

Hi, I am new to the BP forums but have been listening to the BP podcast and also another more general investing podcast for about 6 months now.

I've gotten information paralysis really.  I live in the San Francisco Bay area and have not been able to take the leap and look outside my area for opportunities.

Because I am a relative newbie to investing (I own 1 property in Jax,Fl), I emailed some of my high school friends about a site called Realty Mogul since I knew one was a broker.  Seemed like a decent service.

Anyway, it so happens a different friend replied back and said that he helps run a private fund that buys MF properties in the South and Mid South and gets a good return.

I asked him more about it and we met.

He's one of my oldest friends whom I've known for about 20 years now.  

He gave me a pitch about his firm, and it seems pretty solid.

They buy and hold for cashflow.  They have over 3000 units and look to expand.

My question is, what else do I need to ask?  I don't even know where to start.  How can I tell if this is where I want to go with my money?  

He said it's about a 7% annual return over the last 8 years. Seems easy in comparison to finding, buying, rehabbing, refinancing (BRRR). We could make an investment of $50k at the minimum.

Can anyone help me figure out what questions I need to ask?

Thanks for your help and time!

Jason

[James Mc Ree]

On the surface, this looks a lot bigger than it is and 7% return to you is relatively low.

You need to know what you are buying.  Are you going to be a full partner with equity and responsibility?  (Probably not.)  Are you going to be a passive financial partner with no say whatsoever?  (maybe).  When can you get your money back?  Is the 7% guaranteed (probably not).  Can you make more if the firm makes more?  Can you talk with existing partners?  How frequent are payments?  What protects your investment?  How leveraged is the firm?  There are probably another 1000 questions to ask.

In brief, you need to read and understand the contract and supporting material before deciding to invest.

Jim.