4 Steps to Becoming a Limited Partner
There are steps you should do every time you're looking to invest as a limited partner in a real estate deal with a new sponsor/GP. I'm specifically talking about coming into a multi-family investment, either through a syndication or through a fund. There are four basic steps and I'll go through them fairly quickly and I can have links to more detailed videos below.
The first thing is to review the sponsor and the syndicator. Make sure they have a track record executing this type of deal, and if they don't, make sure someone on their team has the the operational knowhow to get a deal from start to finish. For example, if it's a value add deal, you need to make sure the team has experience working with the property manager and contractors to get the units completed, all construction projects implemented, and rents increased as a result of the work. Here's a list of questions you can ask the sponsor.
Step two is understanding the Private Placement Memorandum (PPM) and the offering docs. The PPM is a very detailed document - typically 100+ pages - with accompanying offering memorandum, and subscription documents (sub docs). The PPM outlines the opportunity, the sponsors, risks involved with the investment, how/when distributions will be made, and many other items pertinent to the opportunity being presented. It is highly recommended you have your attorney review the PPM with you.
Step three is signing the subscription agreement and wiring funds. The subscription agreement outlines how much you are committing to invest in the opportunity. Some offerings require immediate deposit of funds while others will take a small amount (i.e. 10% of total subscription) and initiate capital calls when needed.
Step four is ongoing communication. The GP has made an acquisition, the business plan is being implemented and you are wondering what's going on with your investment. With all of our deals, we have a backend investor portal you can access to see all your investments, how they're performing, how your distributions are being made and you can also access all of your documents at any time. Typically for us, if it's a value add type deal, we're gonna have weekly calls to explain to all the partners, how the deal is operating. Once we get the majority of the capital improvements completed, and the property is stabilized, we cut back to once a month and then once a quarter. At any time you can log into your portal, see how your invests are performing, and you can always reach out to us between weekly/monthly calls. So just understand that cadence with whatever sponsor you're working with so the expectation is set up front.
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About the Author
Randal is the founder of Ridgeline Investment Group, a real estate company specialized in multifamily investing. At Ridgeline Investment Group, Randal helps investors grow their wealth and achieve double-digit returns by investing alongside him in exclusive multifamily deals they usually don't have access to.
Randal is the host of The Randal McLeaird Show, a podcast that highlights honest, insightful, and thought-provoking discussions on the multiple approaches for successful real estate investing.
He started his career as a single family real estate investor where he flipped over 500 properties. He’s been a licensed real estate Broker for 10+ years and has recently been featured in Forbes. He’s a member of the Urban Land Institute where he sits on the ULI Next and ULI Neighborhood Development committees. He’s committed to entrepreneurship and works with local business owners as a volunteer mentor with SCORE. Randal is an experienced entrepreneur who has helped build and scale multiple companies.
Randal holds a BA in Political Economy from Tulane University in New Orleans.
You can read more about Ridgeline Investment Group at www.ridgelineig.com and learn more about Randal here.