Dot your "i" cross your "t"

Updated: Jan 3, 2020

The Private Placement Memorandum (PPM) is a legal document (so it's dry and boring) but important to read and understand. The PPM states the objectives, risks, and terms of an investment involved with a private placement. This document includes items such as the company's financial statement , management biographies, a detailed description of the business operations, and more. Like they say... the devil is in the detail, should you decide to just gloss over the text of a PPM that's your choice, BUT spend the time to understand the following sections...

Summary of the Company and Use of Proceed, this section breaks down who the managers are, the property that is being purchased with a nice summary of what the proceeds will exactly be used for.

The Risk Factor Section.... this section covers various risk associated with the investment; Illliquidity factor, know that there is typically no market to sell your share/interest, plan on a long term hold up to 5 yrs. Other risk factor are; changes in the environmental regulations, rental regulations, and economic factors which all could effect occupancy rates. Be a smart investor and read all of the risk section of the PPM.

Another important section of the PPM is the Business Plan, this section spells out exactly what the plan will be to add value to the property. Value is added to the property (but not limited to) improving the interiors and exteriors of the property, and improving the property management team. Rents are than increased respectively... more rent, more money, more cash flow.

Know thy Definitions... I believe it's important to understand various key terms, you must know the definition of key terms in a PPM and how they are used in these types of agreement, most PPM's will have a section of definitions.

Be a smarter Limited Partner....

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