10 Critical Questions every Investor Should Ask Before Investing in any Multifamily Deal
Hello Readers
When it comes to investing your hard-earned capital, asking the right questions can make all the difference between a winning deal and a cautionary tale.
As a multifamily operator and investor, I’ve seen firsthand how strong partnerships—and smart due diligence—can generate consistent cash flow and long-term wealth. Whether you’re a seasoned Limited Partner (LP) or just getting started, the best investments begin with clarity, transparency, and alignment.
So, before you wire that next $50K or $100K into a multifamily deal, here are 10 powerful questions every LP should ask the operator—and why they matter.
1. What’s your track record and experience in multifamily?
Look beyond flashy pitch decks. Ask about the operator’s history: How many deals have they closed? What markets have they operated in? Have they gone full cycle on any deals (bought, managed, and sold)? Experience matters—and past performance is often the best indicator of future behavior.
2. How is the deal structured, and how do you get paid?
Understand the compensation structure. Is there a preferred return? What’s the equity split after that? Are there acquisition or asset management fees? As an LP, you want to know that your interests are aligned with the operator’s—and that they’re incentivized to perform.
3. What’s the business plan for this asset?
Is it a value-add play, a stabilized cash-flowing deal, or a ground-up development? Each strategy comes with different levels of risk, return, and timing. Make sure the business plan matches your investment goals, risk tolerance, and timeline.
4. How conservative are your underwriting assumptions?
Too many operators project rosy returns based on aggressive rent growth or low expenses. Ask about their assumptions for rent increases, vacancy rates, exit cap rates, and expenses. A good operator underwrites with realism, not optimism.
5. What’s the worst-case scenario—and how will you handle it?
Real estate isn’t risk-free. How would the deal perform if rents flatline? If interest rates rise? If a major employer leaves the area? You want an operator who stress-tests the deal and has contingency plans—not one who pretends the market will only go up.
6. What is your communication and reporting process?
How often will you get updates—monthly, quarterly? Will you receive financials, rent rolls, and progress photos? A great operator communicates clearly and consistently, keeping LPs in the loop even when things don’t go perfectly.
7. How much skin do you have in the game?
Is the operator investing their own capital into the deal? If they’re asking you to invest but have little to no money in it themselves, that’s a red flag. You want partners—not just promoters.
8. Who’s on your team, and what’s their role?
Real estate is a team sport. Ask about the asset manager, property manager, construction team, and legal counsel. You’re not just betting on a property—you’re betting on the people running it.
9. What are the key risks—and how are you mitigating them?
Every deal has risks. Market shifts. Delays. Cost overruns. Ask the operator to name the top 3 risks in this specific deal, and what they’ve done to minimize each one. Their answer will reveal whether they’re thoughtful or winging it.
10. What’s your exit strategy—and when do I get my capital back?
Is the plan to sell in 5 years, refinance, or hold long-term? How flexible is the timeline? When should LPs expect return of capital—and what are the projected total returns (Cash-on-Cash, IRR, Equity Multiple)? Get clear on the path and the destination.
🧠 Final Thoughts: Be a Smart, Strategic LP
Investing in multifamily real estate can be a powerful tool for building passive income, tax advantages, and long-term equity—but only when you partner with the right operator.
The best operators welcome tough questions. They operate with transparency, accountability, and alignment.
So, ask. Challenge. Dig deeper.
Because smart questions don’t just protect your money—they elevate the entire industry.
👉 If you found this valuable and want to learn more about how we underwrite deals and evaluate opportunities, hit reply or DM me directly. I’m always happy to talk strategy, risk, and returns.
Stay curious,
Manny Del Val - Level 7 Investor CFO
Multifamily Investor | Real Estate Strategist | CFO Level 7 Investors
📍 Investing in Class A, B, and C multifamily assets across the Sunbelt and Midwest
