I meet with a former SVP from one of the largest banks in the world on a monthly basis. We usually catch up on things we're working on and explore different ways to work together. During today's call, I mentioned that my plan was to expand the types of deals I raise money for. Instead of just raising for lending opportunities, the plan is to get into larger deals. With excitement, he explained the process of setting up a fund and then went on a tangent. He mentioned a specific, non real estate related deal that was sent to him, that raised a lot of red flags. Nothing was done illegally. The fund was structured within the confines of the law, however, many Reg D offerings are less standardized and lack transparency. Proformas are assumptions, not proof. You have limited exit options once you're in. 1. Illiquidity Is the Norm, Not the Exception Most private placement investments are highly illiquid by design. • Restricted securities are typically issued, meaning they cannot be freely sold or traded on a public exchange. • Secondary markets often do not exist, leaving investors with no practical exit until a liquidity event occurs, if one occurs at all. • Issuer-controlled exits are common. If redemptions are allowed, they may be subject to lockups, redemption gates, or company approval, and may occur at a discount to the original investment. Investors should assume their capital may be tied up for years with limited ability to exit on their own terms. 2. Disclosure Standards Are Not the Same as Public Markets Private offerings are exempt from many of the disclosure requirements that apply to public companies. • Form D filings are notice filings, not approvals. They do not imply that regulators have reviewed the deal, the projections, or the fairness of the offering. • Financial projections may be optimistic, forward-looking, and not independently verified. Valuations are often based on assumptions rather than operating history. • Audited financial statements are not always provided, which places a greater burden on investors to verify the company’s financial condition.

Hi All, We've been so focused on due diligence on short term loans in the real estate world that we feel pretty comfortable with the system. Everything is asset based and underwritten with the worst case scenario in mind. However, I've had a few people ask about how to evaluate equity positions. These are going to be riskier, because you have to underwrite the deal as well as those who are going to be running the asset. While doing some research, I ran across another capital raising company who offered their due diligence framework as a lead magnet. It, of course, is biased and uses language to push you towards working with them but I stripped it all out and created a generic template. I wanted it share it with you all: Investment Due Diligence Framework A high level checklist for evaluating operators, funds, and passive investment opportunities. 1. Firm History and Leadership Founding date and evolution of the firmExperience of key principalsTotal transaction volume and assets managedEvidence of learning and refinement across market cycles 2. Investment Strategy and Edge Primary investment focus and target asset classesCurrent asset allocation approachUse of vertical integration or in house managementDeal sourcing strategy including off market accessDurability and scalability of competitive advantages 3. Market and Acquisition Criteria Clear acquisition triggers and value creation thesisGeographic focus and supporting demand driversPopulation and job growth trendsVacancy rates and competitive supply analysisDepth of market research and underwriting discipline 4. Operations and Asset Management Planned value creation initiativesCapital improvement and operational optimization strategyReporting cadence and performance review processCost control systems without quality degradation 5. Financial Structure and Debt Strategy Typical leverage levels and LTV targetsDebt philosophy conservative versus aggressivePreference for fixed rate and long term financingRisk management approach for interest rate changesAdvance planning for refinances and maturities