Syndication Launch Newsletter #00112

Don’t Invest Blind: 5 Filters Every Deal Should Pass

You’ve found a promising deal. The numbers pencil out. The pitch deck’s looking slick.

But before you get too far into calling investors or dreaming about the promote, ask yourself:

“Would I invest in this deal if someone else brought it to me?”

These five filters are the baseline every serious deal should pass. Run your opportunities through them, and you’ll not only avoid costly mistakes—you’ll stand out as a thoughtful, credible operator investors actually want to back.

1. Market Fundamentals: Is the Location Strong Enough to Back Your Business Plan?

You can't fix a weak market with a strong business plan. Before you dive into underwriting, stress-test the market itself:

• Population + Job Growth: Are people moving there? Are jobs being added across multiple industries?

• Supply/Demand Balance: Check current vacancy rates and new construction. Is the submarket already overbuilt?

• Legislative Climate: Is the area landlord-friendly? High eviction restrictions and rent control can kill cash flow.

2. Sponsorship & Operational Capability: Are You the Right Team for This Deal?

Investors don’t just bet on the deal—they bet on you. Be honest about your readiness to execute:

• Track Record or Advisory Support: If you’re new, who are your experienced partners or mentors?

• Operational Plan: Have you already sourced your PM, GC, leasing broker, and lender relationships?

• Skin in the Game: Are you personally investing or guaranteeing the loan?

📌 Pro tip: Credibility isn’t just about experience—it’s about preparation, transparency, and assembling the right team.

3. Business Plan Clarity: Can You Articulate What You’re Doing and Why It Works?

An unclear business plan is a fast way to lose investor trust. Nail your narrative before you pitch:

• Timeline & Milestones: How long will renovations take? When does cash flow start?

• Rent Growth Support: Are your pro forma rents supported by local comps and market data?

• CapEx Breakdown: Are your renovation budgets detailed, realistic, and padded for contingencies?

📌 Pro tip: If you can’t explain your business plan to a smart 12-year-old, you’re not ready to raise capital.

4. Capital Stack & Fee Alignment: Are You Structuring the Deal to Win Together?

Even great deals can be soured by lopsided structures. Make sure your deal terms reflect alignment:

• Preferred Return & Waterfall Structure: Is the LP return competitive? Are you overreaching on promote?

• Total Fees (Acquisition, Asset Mgmt, Dispo): Are your fees in line with industry standards for your experience level?

• Debt Terms: Is the leverage appropriate for the risk profile and market conditions?

5. Downside Protection & Exit Strategy: Have You Planned for the Unexpected?

Every deal looks good in Excel. Real credibility comes from showing how it holds up under pressure:

• Stress Tests: What happens if interest rates stay high, occupancy drops, or rent growth stalls?

• Exit Flexibility: Do you have multiple exit options—refi, sale, or even long-term hold?

• Liquidity & Reserves: Have you built in operating reserves and capital buffers for delays or surprises?

Bottom Line:
Raising capital starts with earning confidence. These five filters aren’t just for underwriting—they’re the foundation of how you present deals, mitigate risk, and position yourself as a trusted operator.

CRE Terminology of the Week

Ancillary

In commercial real estate, ancillary refers to income, services, or spaces that are supplemental to the primary use of the property—but still generate revenue or add value. Example: pet rent, parking, laundry facility, etc.

Why it’s important
Ancillary revenue can significantly boost NOI without the need for major capital outlay.
Here’s how to think about it as an operator:

• It’s often high-margin income with low operational burden.

• Ancillary features can differentiate your property from competitors.

• Underwriting in additional ancillary streams can help bridge return gaps in tight deals.

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