The Questions Investors Should Be Asking

If you’re like a lot of people, you’ve probably started using AI for things that once required a Google search, a spreadsheet, or a lot of time. It can summarize documents, explain complicated concepts, compare information, and even help you think through decisions—from home projects to holiday planning.

It’s also becoming a tool for investment research. Real estate investors are uploading offering memoranda, private placement memoranda, property financials, and other investment materials and asking AI to explain the investment, identify potential risks, and weigh in on whether the opportunity makes sense.

While AI can sort through a lot of information quickly and surface questions you may not have thought to ask, it may not know your risk tolerance, investment goals, broader portfolio, or your gut feeling about a particular sponsor, opportunity, or market. It also can’t tell you which issues actually matter most to your investment decision.

AI tools for real estate investing, such as ChatGPT, Claude, and Gemini, can be helpful for research and due diligence, but they shouldn’t make the investment decision for you. Use them to better understand the opportunity, look into the numbers, and prepare questions—not to decide whether you should invest.

Investors Are Already Using AI for Real Estate Due Diligence

Investors are using AI to dig into projected returns, spot inconsistencies in financials, and come up with questions for sponsors. Using AI for investing can save time when you’re working through lengthy offering documents filled with financial details and legal terminology.

But not every question AI generates is equally important. The questions worth pursuing depend on the information provided and the investor’s goals. Someone focused on income and diversification may have different priorities than someone focused primarily on appreciation and a longer hold period.

So, what questions does AI suggest investors ask sponsors—and which ones are actually worth pursuing?

Before You Upload Investment Documents to AI

Before getting into those questions, there are a few things to keep in mind before uploading investment documents to AI. Some offering documents may contain confidentiality provisions, so investors should pay attention to those requirements before doing so.

Fully executed investment or subscription documents should be treated with particular caution. These documents can contain highly sensitive personal information, including Social Security numbers, home addresses, bank account information, and other confidential details. There is little reason to upload that information when it isn’t necessary for analyzing an investment opportunity.

What Questions Is AI Telling Investors to Ask?

We used AI tools to evaluate multifamily investment materials and looked for the questions and themes that came up repeatedly.

The most common topics included:

• The sponsor’s track record and experience
• Projected returns and underwriting assumptions
• Fees and sponsor economics
• Potential risks and downside scenarios
• Leverage and financing
• Liquidity and the exit strategy
• Tax considerations

Many of these are exactly the kinds of questions an investor should be asking. Others may send you down a rabbit hole.

For example, AI may identify a highly technical disclosure in an offering document and treat it as something that needs further investigation. Offering documents often contain boilerplate risk disclosures and other standard language designed to satisfy legal and regulatory requirements. AI may read all of it and start asking questions about specific SEC requirements or technical legal provisions.

Those questions may be completely valid from a legal or compliance perspective, but that doesn’t necessarily mean they’re important factors in deciding whether the investment makes sense.

The Questions Worth Asking—and Our Answers

From there, we focused on the questions we think are most useful for investors to investigate.

1. What does the sponsor’s track record tell you about its experience and performance?

A sponsor’s track record can provide insight into its experience and past performance.

How many deals has the sponsor completed? What types of properties has it owned? How have previous investments performed? Does its experience line up with the strategy it’s pursuing today?

While past performance doesn’t guarantee future results, it can help investors understand who they’re partnering with and whether the sponsor has experience navigating different market conditions.

2. How much of the sponsor’s own capital is invested alongside LPs?

This can provide insight into how aligned the sponsor’s interests are with those of its investors. It’s also worth understanding how the sponsor’s economics are structured and what “skin in the game” means—specifically, how much of the sponsor’s own money is invested alongside LPs and how its financial interests align with theirs.

3. How does the sponsor make money, and what fees will investors pay?

Investors should understand how the sponsor gets paid and how those fees affect their investment. Look at acquisition, asset management, property management, disposition, and financing fees, as well as carried interest and other potential sources of sponsor revenue.

Investors shouldn’t necessarily look for a deal with no fees. Sponsors need to be compensated for the work they do. What matters is understanding the fee structure, whether the projected returns account for those fees, and whether the fees are reasonable for the investment.

4. What assumptions are driving the projected returns?

A projected return is based on assumptions about rent growth, occupancy, expenses, financing, property value, and the eventual sale. AI can help identify those assumptions, but investors still need to assess how reasonable they are.

Some assumptions may be conservative, while others may be more aggressive. An assumption that looks aggressive based on the materials provided to AI may make more sense when considered alongside additional market data, the sponsor’s experience, or other information that wasn’t included in the materials.

The goal is to understand what needs to happen for the projected returns to materialize and how much room there is for those assumptions to fall short.

5. What happens if an investment doesn’t perform as projected?

Every multifamily real estate investment has downside risk. What happens if rents grow more slowly than expected, occupancy falls, or expenses increase? What if interest rates or refinancing conditions are less favorable than predicted?

Investors should look beyond the expected outcome and consider what happens if those assumptions don’t play out.

6. How much leverage is being used, and what happens if financing conditions change?

Debt can increase potential returns, but it also introduces additional risk. Multifamily investors should understand the property’s leverage, interest rate, maturity, and refinancing assumptions. They should also consider how the investment could be affected if financing becomes more expensive or the property doesn’t perform as expected.

7. What are the liquidity and exit assumptions?

Investors should understand how and when they are expected to get their money back. That means looking at the projected hold period, the assumptions behind the sale price and exit cap rate, and how much the projected return depends on selling the property at a particular point in the market cycle.

For an illiquid investment, the exit strategy can be just as important as the initial underwriting.

Questions AI Gets Too Hung Up On

AI can flag issues that appear significant on paper but may have little impact on the investment decision.

Legal and regulatory disclosures are a good example. Offering documents contain standard language designed to disclose potential risks and satisfy legal and regulatory requirements. AI will read all of it and may produce a long list of questions about specific SEC requirements, legal provisions, or disclosure language.

Those questions aren’t necessarily wrong, but they aren’t usually the ones that should drive your investment decision.

The same thing can happen when AI sees an unusual number in a financial model. It might flag a difference in projected expenses or rents and assume there’s a problem when there may be a perfectly reasonable property-level explanation.

AI can also flag hypothetical risks that are technically possible but unlikely to materially affect the investment. An underwriting assumption may look aggressive based on the information provided to AI, for example, but market data, sponsor experience or other information outside the uploaded documents may support it.

A technically sophisticated question isn’t automatically an important investment question.

If AI gives you a question you don’t understand, ask it to explain the issue in plain English. That may reveal something worth investigating or a technical issue with little relevance to the investment.

What matters is figuring out which issues could materially affect your investment.

How to Use AI More Intelligently for Multifamily Due Diligence

If you’re using AI for real estate investing, be clear about what you want it to do. Tell it whether you want to summarize the offering, identify questions, look for inconsistencies, explain financial terminology, or help you prepare for a conversation with the sponsor.

It’s also useful to give AI some context about what matters to you as an investor. The more it understands about your objectives, the more relevant its analysis can be.

For example:

“I’m evaluating this multifamily investment as a passive investor. My primary goals are long-term wealth creation and diversification. I care most about downside risk, sponsor experience, fees, leverage, and the assumptions behind the projected returns. Review the materials and identify five to seven issues I should investigate further. For each issue, cite the specific section or page where you found it. Separate facts stated in the documents from assumptions or interpretations, and explain which issues could materially affect the investment’s potential returns or risk. If important information is missing from the materials, flag that rather than making assumptions.”

That kind of prompt gives AI more context than simply saying, “Is this a good investment?”

From there, investors can take a few simple steps:

• Ask AI to show its work. Have it cite the specific section or page supporting a concern so you can go back to the source material yourself.
• Separate facts from assumptions. Investment marketing materials will naturally contain assumptions—that’s part of presenting an investment thesis. The important thing is understanding which assumptions are driving the projected results.
• Focus on what could materially matter. Not every issue AI identifies deserves the same attention. Ask which concerns could meaningfully affect returns, risk, or the overall investment thesis.
• Take relevant questions to the sponsor. AI can help you prepare, but the sponsor is often in the best position to explain why a particular assumption or strategy was used.
• Verify important information independently. AI shouldn’t replace your own due diligence or advice from qualified financial, tax, or legal professionals.

Have Questions About Your Investment Strategy?

Every investor has different goals, priorities, and circumstances. AI can help you research an investment, but it can’t determine whether an opportunity is right for you. If you are an accredited investor and would like to talk through your current investment strategy or goals, reach out to the BAM Capital Investor Relations team at invest@bamcapital.com.

 

Disclaimer: This content is for informational purposes only and is not financial, tax, legal, or investment advice, nor an offer or solicitation to buy or sell securities. Investment opportunities offered by BAM Capital and its affiliates are made pursuant to Rule 506(c) of Regulation D, available exclusively to accredited investors, as defined by the Securities and Exchange Commission (SEC) and, if applicable, qualified purchasers, as defined by Section 2(a)(51) of the Investment Company Act of 1940. Verification of accredited investor status is required before participation in any investment.

Contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Financial terms, projections, or forward-looking statements contained herein are hypothetical and should not be interpreted as guarantees of future performance or safety. Such statements reflect BAM Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Investing in private real estate securities involves significant risks, including, without limitation, illiquidity, economic downturns, and potential loss of invested funds or capital. Past performance does not predict or guarantee future results. Historical transaction figures represent past performance across multiple deals as of the date this information was published, not a single investment transaction. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. Prospective investors are strongly encouraged to conduct independent due diligence and consult with legal, tax, and financial advisors before making any investment decisions.

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