Our Mindset Minutes show this week is focusing on vetting sponsors and how to do this effectively. When it comes to passive investing, one of the most important factors is vetting the sponsor and doing your due diligence. I dive into what questions you're going to want to ask the sponsors to get a clear understanding of the investment summary and have confidence going into a deal. So join the community for free and grab this chance to improve your knowledge on passive investing!
Our Mindset Minutes show this week is focusing on vetting sponsors and how to do this effectively. When it comes to passive investing, one of the most important factors is vetting the sponsor and doing your due diligence. I dive into what questions you're going to want to ask the sponsors to get a clear understanding of the investment summary and have confidence going into a deal.
So join the community for free and grab this chance to improve your knowledge on passive investing!
KEY TAKEAWAYS
1. Look at the credibility of the sponsor by going online and doing some research on who this person is.
2. Your first meeting with the sponsor is going to be a call of around 20 minutes and this will be where you're actually vetting each other. A great chance to discover if you're both aligned on the deal and that your core values match.
3. The next call will be the due diligence call. This is where you'll be diving deeper into the types of deals that the sponsor is looking to invest in. This is where you can ask all the questions you need to about the deal and the team.
4. If you have fear of investing or serious doubts then you shouldn't invest right now but take time to go and learn more and prepare yourself a little further. Invest when you have the confidence and knowledge to do so.
5. when you're doing anything for the first time it's going to feel a bit clunky... so give yourself some leeway to gain more knowledge and strengthen your confidence. Remember, there's always going to be more deals coming through!
BOOKS
The Passive Investing Playbook - https://theinvestormindset.com/passive
LINKS
Learn more about investing with Steven at
https://theinvestormindset.com/invest
Title: Vetting a Potential Sponsor
Host: Steven Pesavento
Duration: 12:38
Steven (00:11):
Welcome back to this week's mindset minutes episode on the investor mindset and I am Steven Pesavento, your host and each week, I share mindset tips and investing strategies on taking your real estate investing career to the next level. This week we're diving deep into one of the most important topics for passive investing, how to vet the sponsor and what exactly you're looking for. So make sure you join us each week as we share more tips and strategies about reaching financial freedom through real estate, and you can do so by hitting that subscribe button down below and making sure you never miss another episode. And as a reminder, make sure you grab the full passive investor playbook, The Ultimate Guide to Passive Real Estate Investing at theinvestormindset.com/passive and this guide is chocked full of all the stuff we've been talking about over the last five or six or seven episodes we're even diving deep into things like, what are the five core benefits that you get only by real estate investing? What is the best way to invest, actively versus passively? How do you make sure that you understand where you need to invest? How does syndication work? How do I go about finding a market? How to lay down the right foundational pieces for me to invest as a passive investor. We put together this guide after interviewing some of the best people in the industry and pulling together our own experience, now free for you, so definitely take advantage of that and go grab yourself a copy. So let's get into this episode.
Narrator (01:42):
This is the Investor Mindset podcast and I'm Stephen PesaVento. For as long as I can remember, I've been obsessed with understanding how we can think better, how we can be better, and how we can do better. And, on each episode, we explore lessons on motivation and mindset for the most successful real estate investors and entrepreneurs in the nation.
Steven (02:05):
So when it comes to Passive investing, one of the most important parts is vetting the sponsors that you're going to work with, doing your due diligence and there's many different steps. And I love to get deep into every single detail but what I want to give you here today is a little bit of a high level overview of what to expect and how to go about thinking about this, when you're going to go and analyze and understand the investment summary, and what questions you're going to be seeking to ask and get answered by the sponsors that you're working with.
So one of the first places that I recommend people begin is by looking at their credibility and, you can start right with their online presence in today's day and age. Everything is online and you should be able to find out nearly everything you need to get started about what someone's track record has been. How active are they and, what exactly their investment philosophy is. You're able to learn this by listening to their podcast or listen to them speaking on other podcasts, you'll be able to go to their website, read about them, read some of their articles and start consuming some of their content. This is going to help you understand, do they have the right set of core values that are in alignment with my core values? Are they looking to achieve the same type of thing for their investors that I'm looking to achieve? Do I have that alignment? And you can start to really understand who they are as a person. It almost gives you the opportunity to get to know them well before you ever step into a phone call with them, so I highly recommend starting there because there's so much available online, why not get educated before you step in and start talking with someone? A lot of folks that invest with us have been listening to the podcasts. They've been engaging, I've met them at different events along the way so they've had different opportunities to get to know me well, before we dive into the details of their experience and what they're looking for. And that's actually where we step into what I call the investor intro call. So it's typically after you register on someone's website or after you send them an email and say, hey, I'm interested. Can we speak? Typically they're going to schedule a call. Maybe they're going to send over a link and you're going to pick a time or they're going to suggest the time and you guys are gonna jump on a call and usually that's 15 or 30 minutes. And on that call, what you're typically going to do is you're going to cover two things, which are: What are your investing goals? What are you looking to invest in? What are you looking for in an investment? Are you seeking active or passive investing? Are you looking for more of a cash flow approach? More of an appreciation approach? Maybe more of a hybrid approach? You start diving a little bit deeper into what you're looking for, maybe what your risk profile is here, you start sharing a little bit about yourself and you're going to start laying the foundation for that sponsor to understand, hey, what are they looking for? And are they a fit for the type of investments that I'm doing? Because frankly money is everywhere. Money in the real estate investing world is frankly, in some ways I think, it's the easy part because there's so much capital out there that's looking for a great home to make a great return. And so as much as your vetting, the sponsor, the sponsor's vetting you, and they want to make sure that you've got the right core values as well. So they're going to be looking to get to know you, they're going to ask some of these questions and they're going to be taking notes and really saying, okay, well, this person fits into this category, they might be a good fit for this investment, or maybe they're not a good fit for me, but I know someone who'd be able to serve them elsewhere in their portfolio. So the other key piece of the investor intro call is understanding the sponsor's background and the sponsor's philosophy. So they're going to talk about their business. They're going to talk about their core philosophy, what type of investments they're looking to do, what type of risk profile they're typically providing to their investors. Do they provide multiple different deal structures? Some that are more conservative, some that are more aggressive. This is a great place to just get introduced to how they think about investing, how the sponsor thinks about investing and so it's going to be an opportunity for you to listen to what they have to share as well as ask questions. So come prepared to ask some key questions, but remember that this is a great place for you to build that relationship on this quick call, that you're going to be connecting together. And on these calls you're going deeper, you're understanding more and you're building that relationship.
Then on the next call, the due diligence call is where you're going to be diving deeper into the specifics of the type of deals. Those sponsors are looking to invest in the type of a specific offering that they have in front of you right now, and you're going to do due diligence on that opportunity. You're gonna ask questions about the sponsor team, about the returns, about what's expected, the business plan, the assumptions, everything we've been building up to over the last number of episodes that you've been listening to here, the number of videos we've been watching. As you're in this due diligence phase, you're going to be asking some key questions. However, as a reminder, when you're looking at the investment summary, you're going to be answering a lot of questions yourself, and you're going to bring some of those questions that don't have clear answers to the due diligence call and you're going to ask those to the sponsor. You're going to clarify and confirm some of the assumptions that you've made when you were going through the investment summary and make sure that they are accurate as well as just being able to get comfortable with that sponsor and with the information. And I really think that it's important that you do as many due diligence calls as is necessary. However, you also recognize that if you're looking to dive into every single number of every single piece, over 12 or 20 phone calls, that sponsor might say, I really would love to work with you but we're probably gonna end up filling it out with some other folks that have the trust in us. On the other hand, do as much of that homework as you can do on the deal beforehand, and you can dive into a couple of calls with the sponsor, they want to make sure that you're comfortable, because having an investor that is comfortable with the deal and is a hundred percent onboard is going to make their life a lot easier. Because remember, like when you're investing in one of these syndications, you're joining as a partner, you're coming on board hand in hand, arm and arm going forward together in order to produce a great return. And your capital is going to help fuel that and their expertise and experiences are going to help make that happen. So you want to be comfortable and if you're absolutely uncomfortable, I'd recommend not investing. If you're uncomfortable because of the fear of investing in general, because you don't really understand things, then you've got a good signal to yourself. That's pain telling you, hey, you need to go learn a little bit more, but if it's maybe, everything, you think it's a good deal, then I'd encourage you to make that decision for yourself. If it's something that you want to step into then, go and make that happen.
So a due diligence call is really a powerful call, I'll be honest. Many of our investors never take advantage of it. They'll do a lot of due diligence, they'll shoot over a couple of emails, we'll jump on a five minute call and they'll say, boom, we're ready to go. Others will look to the webinar - sometimes sponsors will put together a webinar where they're able to do some of that due diligence publicly from one to many people at once, and answer some of those same questions that they get to answer over and over again. So there's a lot of different ways you can go about doing your due diligence, but it's important that you do it. And as a part of the passive investor playbook, the ultimate guide to passive real estate investing, we've put together a series of questions that you can ask to key sponsors or general partners in order to get really clear on that. So make sure you grab that list, which again is available in the passive investor playbook at theinvestormindset.com/passive. So definitely take advantage of that and you're gonna be answering some of those questions as you're going through the deal. And then, of course, you're going to be answering any ones that don't come up when you're talking directly with the sponsor. So it's really important that you're clear on your goals, that you're clear on the investments goals, that you're really clear on the sponsor's intention and philosophy. And when all those things come into alignment, it ends up being a great opportunity to invest.
So typically the next step is, you're going to want to make that commitment. You're going to want to sign that you're committed to investing, you're going to want to review the PPM and the operating agreement and, wire the money and jump into it and celebrate once you've made that ad then of course, celebrate at the end of the period, that you've had your capital return and you made your return that was projected. When it comes down to this process, recognize that when you're doing anything for the first time, it's going to feel a little bit clunky. So give yourself a little bit of leeway, understand that the first deal you look at might not be the first deal you do. You might end up passing up a phenomenal deal, but remember that there will be other deals coming down the pipeline. Also, remember that, typically, deals are oversubscribed very quickly with a lot of these sponsors. So when you educate yourself upfront and then you're ready to make a decision and take action in that moment, that's a really good way to look at it.
So I am here as a resource, feel free to reach out to me. You can obviously do so by heading over to theinvestorsmindset.com/invest. If you're interested in investing with us and the type of deals that we do alongside us in a co-invest type relationship. If you're looking at vetting other sponsors, feel free to reach out, happy to share some resources with you as well. So, as a reminder, go take action with this stuff. Go apply the lessons learned, go grab the passive investor playbook at theinvestormindset.com/passive, take advantage of these free resources that are out here, and then start taking advantage of making investments of paying for education, paying for mentorship, paying for coaching, and committing yourself to building the career that you want to build. I'm a big believer that everything that you want is available out there for you, and you just got to go out and make it happen. Go give, value to other people, and it's going to come back in return. And it's one of the reasons why I love being able to do this podcast. I get so much personal satisfaction and being able to deliver so much educational knowledge to you guys. So I thank you guys for joining me. If you've been for any amount of time, please go drop us a review on iTunes, help us reach more people. It really does make a difference with the algorithm. And I just want to say, thank you. And I look forward to seeing you guys in the next episode.
Narrator (12:09):
Thank you for listening to the investor mindset podcast. If you like what you heard, make sure to rate, review, subscribe and share with a friend. Head over to theinvestormindset.com to join the insider club, where we share tools and strategies from the top investors and entrepreneurs and how to take it to the next level.