At Cap10, we work for you
We find and vet deals so you can make quick decisions about where to allocate your capital
Scroll down to review our process
We find active deals across the country raising capital for their real estate projects. Most of these are groups you'd never find on your own.
We require that each principal of a sponsor on the platform pay for a deep dive background check for criminal activity, lawsuits, foreclosures, and bankruptcies. Individual investors never get this type of review on the sponsors they invest with.
We may at times ask a sponsor for an actual audit of their track record, but at a minimum, we review a track record to ensure that it is attributable to the key principals of the sponsor. Does their track record include similar deals in the same or similar market?
What are the fees the sponsor is charging to the deal throughout the life of the deal (Acquisition fee, financing fee, asset management fee, management fee, sale fee, etc)? Are these fees market? Plus, we run a sensitivity to show how these fees impact your IRR and cash-on-cash returns.
What is the preferred return and promote structure? Is it market?
We review the IRR and cash-on-cash to ensure that the cash flows modeled actually achieve the proposed level of return.
How does the historical revenue and expenses compare to the sponsors modeled future revenue and expenses?
Are key capital events during the investment horizon reasonable? Is there a refinance event that has a significant IRR impact? Does it seem reasonable to complete the business plan during the investment horizon? Shortening an investment horizon or adding a mid-horizon capital event (refinance) is a way that many sponsors manipulate a return higher.
How good is the property location? You've heard the saying "Location, Location, Location"... Well you may not make money just because it is a good location, but a bad location is a risk you may not want to take. If we do not know the market personally, we will get boots on the ground insight into the quality of the location.
The success or failure of any real estate investment comes down to supply and demand for space. We gather information on new supply of similar product coming into the market to help you evaluate the potential of the investment.
Are the in-place rents above or below market? Is the sponsor modeling an increase in rents as a result of a renovation or other property improvements? Does it seem like these rents are achiveable given other nearby properties? What is the annual rent growth? Is the annual rent growth reasonable?
What is sponsor's underwritten vacancy over time? Does it align with the market? Does there appear to be a near term risk of elevated vacancy?
Is there material non-rent revenue generated at the propety or anticipated in the future? Does underwritten other revenue align with historicals and make sense going forward?
How did the sponsor come to the post-acquisition tax underwriting? Did they use a consultant? Do we have tax comps that support the underwritten taxes?
Does the sponsor have actual quotes for insurance? Insurance has gone up significantly the last several years, especially in flood/hurricane zones. Missing on insurance can greatly impact returns.
What is the expense ratio hisorically and in the sponsors proforma over time? Does this align with market for the property type?
Are the purchase and exit cap rates supportable by recent, relevant nearby comps?
Is the PSF / Per Unit basis supported by recent, relevant nearby comps?
What is the replacement cost for the property if built new? This can be a good indication as to whether this is a "good deal".
How much leverage is being used and does this impact the risk of the deal?
Are the loan terms at market?
Is the sponsor signing recourse to get the best available rate and terms