5 Things Passive Investors Should Ask Before Joining a Real Estate Deal

Not all real estate investments are created equal. Two deals can have the same projected returns but wildly different risk, debt, market exposure, and operator experience. If you’re a passive investor — or you’re just starting to review opportunities — you should have a standard set of questions you ask every sponsor. Here are five questions we encourage investors to ask us at Summit Horizon Capital.

“What is the actual business plan?”
Are we buying to hold, buying to renovate, or buying to reposition? A value-add multifamily deal looks different from a stabilized hotel in a high-tourism market. You should know what has to happen for the returns to materialize (rents raised, ADR increased, expenses trimmed, management improved, etc.).

“What debt is on the deal?”
Debt is where many good deals go bad. Ask: fixed or floating? How long is the term? What’s the interest rate? Are there reserves? Does the debt line up with the time it will take to execute the business plan?

“How are investor returns structured?”
Look for clarity on preferred return (for example, 8–13% pref), profit splits, and whether the sponsor is paid only after investors. A transparent waterfall builds trust.

“What’s the downside protection?”
Ask what happens if occupancy dips, if renovations take longer, or if the market softens. Good sponsors underwrite to stress scenarios and don’t assume perfection.

“Why this market?”
Even a great property in a weak market can underperform. You should see data on population, jobs, household income, and local supply.