I’m sure you’ve been there, that shopping trip where you browse the entire store, finding things you’ve just “gotta have” and once you get to the checkout, you’re faced with the realization that not only did you buy what you didn’t need, but you didn’t get anything you actually needed.
Your cart filled up with pretty stuff, you blew the budget, and you don’t even know how it happened. Meanwhile, you lost hours of precious time and didn’t really get anything done. This is the same aimless frustration you might experience when you first start looking into real estate syndication deals.
It’s possible you’ll begin to receive a seemingly endless string of opportunity emails, each with a summary that could be 50 pages long. Although this can be exciting, without knowing specific tactics, your goals, and a strategy for sifting through these, you’re sure to need guidance.
This 5-minute method shows you how to review a real estate investment deal with clarity and confidence.
Step 1: The First Glance
New deal alert emails are like a surprise gift. You had no idea it was coming, but you can’t wait to rip it open and see what’s inside. Learning how to review a real estate deal quickly helps you avoid wasted time.
The emails you receive about new deals are full of valuable information, but a few highlights you’ll want to pick out at first glance are the type of asset, market, hold time, minimum investment, and funding deadline.
If you open the email simply aiming to extract only these pieces of information, you’ve already avoided unnecessary information overload. All you’re trying to do at this point is to find out if these data points match your investing goals. If not, there’s no reason to waste any further time or energy. As an example:
You receive a deal alert and pull these details:
- Asset Type: B-class multifamily
- Market: Dallas, TX
- Hold time: 5 years
- Minimum investment: $50,000
- Fund Deadline: 3 weeks from today
With this simple, at-a-glance information, you’re able to immediately see that although this is the perfect asset class and market you wanted, you are aiming for a longer hold or an emerging market. Or perhaps you already know you need more than 3 weeks to access your capital. PASS.
Another deal will pop up shortly and you’ll get opportunity after opportunity to practice this little exercise. At some point, the details will all be exactly what you’ve been waiting for and you’ll get to dig deeper.
Step 2: The Numbers
Once you’ve decided a deal’s initial look aligns with your goals, it’s time to dig further into the investment summary and explore.
As an example, you might learn that this particular deal is offering:
- 8% preferred return
- 9% average cash-on-cash return
- 17% IRR
- 20% average annual return including sale
- 0x equity multiple
But what does all that mean for you and your $50,000?
In time, you’ll get lightning-quick at this and know right away what all of that means, but right now, let’s pretend this is your first go.
Preferred Return & Cash-on-Cash Return
Preferred return, a common structure for deals, means that the first percentage (in this case, 8%) of returns go 100% to the limited partner passive investors. Sponsors don’t receive any returns until the property earns more than that.
This means that if you invested 50K and everything went according to plan, you should see 8% of $50,000 or $4,000 this year, which breaks down to $333 per month.
Cash-on-cash return measures how much actual cash you receive each year based on your original investment. A 9% cash-on-cash return means you could expect to earn $4,500 annually from your $50,000. It’s a helpful snapshot of year-to-year income, especially for passive investors who want ongoing cash flow.
Equity Multiple
The next fun number on the list is the equity multiple. This number quickly tells you how much your investment is expected to grow during the project.
Continuing on the example above, your $50,000 investment with a 2x equity multiple should work out to $100,000 once the asset is sold. This accounts for the cash flow distributions plus the profits from the sale.
We typically aim for a 1.75x – 2x equity multiple on deals, so you can use that as your benchmark.
Average Annual Return & IRR
My last two concerns when initially examining a new deal alert are the average annual return and the IRR.
The average annual return tells you what the average earnings are, averaged over the hold time.
In the example above, we discovered that your $50,000 is expected to double to $100,000 over the next 5 years. That total return is 100% of your original investment, and when divided over the 5 year hold period, we see that your average annual return is 20%.
The IRR (internal rate of return) is the average annual return (in this example 20%) and adjusts for the time delay. Since the majority of your earnings are expected later, at the sale, and time has cost associated with it, the IRR takes that into account. An IRR of 14% or more is a great target.
Step 3: Make a Quick Decision
Once you’ve reviewed these numbers, ask: does this deal match your investing goals?
If these numbers align with your investing goals, you can go ahead and let the sponsor know you’re interested by requesting the full investment summary or submitting a soft reserve.
If you’re on the fence, you can spend more time reading into the details to make that decision with confidence.
Conclusion
New real estate investment deal alerts are exciting, but without a system, they can quickly get overwhelming.
Whether you’ve had funds ready for weeks or are still in limbo getting them rolled over into a self-directed IRA, it’s imperative to know exactly what you’re looking for so you can jump on the perfect deal and minimize wasted time.
Use this 5-minute review strategy to stay focused, filter fast, and move confidently toward your next investment.
*This article was updated with new content 4/11/2025.
