Every Investor needs to ask some important questions before they invest in Real Estate. Here, we look at what sort of questions you should ask and the answers you should look for.

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… before investing in Real Estate
QUESTIONS AN
INVESTOR NEEDS
TO ASK

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RISK AND RETURN
Every Real Estate project carries some
level of risk, so there are 2 essential
questions an investor needs to ask:
What level of risk am I prepared
to accept?
RISK
What level of return can I expect
from this investment?
RETURN

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PROJECT SPONSOR + MANAGEMENT TEAM
The success of real estate projects is strongly influenced by the quality
and track record of the Project Sponsor.
Some questions to ask include:
Is the sponsor an
established company
with significant
financial resources?
Does the sponsor
have a strong track
record of successful
projects?
Does the Management
Team have a
successful track
record in Real Estate?

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THE INVESTMENT STRUCTURE
Equity holders are last in line for returns, so
carry greatest risk, however have the
greatest potential returns
OWNERSHIP
Equity is the ownership of interest in the
Sponsor company. Generally considered
higher risk, as there is no guaranteed return
or investment term
EQUITY INVESTMENTS
Projects offer different investment structures, so ensure the investment structure suits your
risk profile.
RETURN

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These investments offer a known interest
rate and term, and are repaid before equity
holders. Therefore, are less risky than
Equity investments
LENDING
As an investor, you are lending money to
the project sponsor
DEBT INVESTMENTS
RATE + RETURN
THE INVESTMENT STRUCTURE (cont.)

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SECURED VS UNSECURED
A secured investment carries much
lower risk than an unsecured investment,
as in the event that the Real Estate has
to be sold, you are entitled to a share of
the proceeds.
Consider whether the
investment is secured by the
Real Estate itself, or is
unsecured.

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How progressed is
the project? Has
work already
started? Has the
property been
purchased?
PROGRESS FUNDING COMMITTMENT TERM STRATEGY
Has funding been
received so far?
Has any bank
funding been
secured?
Have there been
any sales or pre-
commitments?
What is the project
term?
What is the exit
strategy?
The type of project will also influence risk,
so consider the following:
THE PROJECT

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Consider the following:
An investor should also consider the asset
itself. A top quality property in a desirable
location, will be less likely to fall in value.
Is the property located in a
desirable location?
LOCATION
Is the property located in a
vibrant, growing market?
MARKET
Are there any recent
comparable sales or projects to
consider as a benchmark?
BENCHMARKS
Would you personally want to
live in the property?
LIVEABLE
THE PROPERTY ASSET

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