When reviewing the documents related to a real estate investment, it is highly recommended to consult a professional opinion whether it be an attorney or investment advisor. These are the main document types associated with an investment opportunity.
An investment summary or a business plan is less of a legal document and more of a marketing document that may be provided to more easily describe an investment. It could include a more visual description of team experience, investment terms, objectives, risks, benefits, and other information that the sponsor wants to share.
A private placement memorandum (PPM), also known as an offering memorandum, is generally the first document an investor will receive from the Sponsor of a real estate deal. This document outlines the project’s objectives, terms, risks, and potential benefits.
An operating agreement outlines the roles and responsibilities of members including management, dictates how cash will flow into and out of the entity, and covers other topics such as management compensation, transfer-ability, reporting, voting rights, decision-making processes, and more.
A subscription document defines the terms for an investment and serves as an investor’s application to join the investing entity. It is completed by the investor prior to the investment and used as acknowledgement that the investment has been accepted by the sponsor.