I've been offered an opportunity to invest what do I need to ask?

Every once in a while I get a friend reach out to me a say "I've been offered an opportunity to invest in a multifamily deal what do I need to ask?"

When you don't know what you don't know it's hard to come up with qualifying questions.

Here is a simple breakdown to categories of what you need to consider as a passive investor in a multifamily deal:

• WHO is asking for money - do you know/trust them? Do they have enough experience doing the same thing they ask you to invest in? Do they have a good team around them?
• WHAT are you investing in - this is where you consider the property type, condition, location, demographics, etc.
• HOW MUCH do I need to invest and what's the return I'll get - here you look at the numbers. Keywords such as COCR, IRR, CAP Rate, DCR, Equity, Debt, Debt service, yield penalty, terms, amortization and other weird financial terms that you will need to understand to evaluate the financial strength of the deal
• WHY should I invest with them - this is wher you define your goals and make sure the current offering match your goals. If you invest for cashflow but the deal offers no payouts in the first year, does it still make sense for you? What if you look for a long term hold and the plan is to flip in 2 years?

The details come later and will very between the deals. Just keep these 4 questions in mind and you can mitigate a lot of the risk of investing in a deal that is not right for you.