Checklist for Investing In Real Estate Crowdfunding Development Projects

A fellow investor compiled the following due diligence check list for real estate investors. After you are comfortable with the crowdfunding portal and the fees charged by both the platforms and developers, here are some of the questions you will need to answer. Don't be afraid to pick up the phone and call the sponsor or developer. It's your money and you should be aggressive in determining if an investment is right for you.

Checklist for Investing In Development Projects

Where is the developer/sponsor in the process of getting approved (permits, zoning, etc…)?

How much experience does the builder have? Past projects? References? Credit & background checks?

Have you checked the builders license, all insurance (s) are current?

Who is going to be the General Contractor?

Is there a construction loan? Amount? Terms? Can you review the inspections before draws are given?

What measures of control are available to investors if the sponsors don’t meet the milestones needed to complete construction and arrive at a marketable project?

If there are delays, cost overruns, etc...anything affecting the profitability of the project, will there be an adjustment made to the profit participation of the investors?
If the project is a failure, what can I hope to recoup from my investment and what is the process? How long would it take?

What is the structure of the partnership/JV?

Have you reviewed an appraisal on the after completed value of the units being built? Have you reviewed comps? Are those comps conservative? (this is in bold because it’s VERY important).

How much skin in the game does the sponsor have?

Is there any mechanism in place to make sure the project is built free of mechanics liens?

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