The Problem With Most Deal Reviews
Most passive investors receive a PPM and spend hours reading legalese before they ever get to the numbers that matter. By the time they reach page 40, they've lost the thread — and the sponsor is following up for a decision.
There is a better way.
The 7-Point Framework
1. Sponsor Track Record (2 minutes)
Before you open the financials, look at the sponsor's prior deals. Specifically:
- How many full-cycle deals have they completed?
- What was the average IRR vs. projected IRR?
- Did they return capital on time?
A sponsor who projects 18% IRR and consistently delivers 14% is still a strong operator. One who projects 12% and delivers 9% is a red flag.
2. Market Fundamentals (1.5 minutes)
Pull three numbers for the submarket:
- Population growth (5-year)
- Job growth (sector diversity)
- Rent growth (trailing 12 months)
If all three are positive, the market is working for you. If two of three are negative, the thesis has to be very compelling to compensate.
3. The Acquisition Price (1 minute)
Calculate the price per unit and compare to trailing 12-month comps in the same submarket. If the sponsor is paying a 20%+ premium to recent comps without a clear value-add thesis, walk away.
4. Cash-on-Cash Yield (1 minute)
Year-1 cash-on-cash yield should be positive for stabilized assets. For value-add deals, look at stabilized yield (Year 3-4). A stabilized CoC below 6% on a value-add deal is a weak risk-adjusted return.
5. Debt Structure (1 minute)
Focus on:
- LTV (60% or below is conservative)
- Loan type (fixed vs. floating — floating rate debt killed many 2021-era deals)
- Maturity date vs. projected hold period (2+ year buffer is healthy)
6. The Waterfall (1 minute)
A fair waterfall structure: 8% preferred return, then 70/30 LP/GP split above that. Watch for GP catch-ups that take a disproportionate share of upside before LPs see carried returns.
7. The Downside Case (2 minutes)
Ask the sponsor: what happens if rents are flat for 2 years and you need to sell? If the answer involves a capital call or significant loss of principal, the deal isn't priced for risk.
Using SkAI to Automate This
SkAI runs this entire framework automatically the moment you upload a PPM or business plan. You get:
- A 3-score investment rating (Sponsor, Market, Financials)
- Side-by-side market comp data
- Capital improvement ROI analysis
- A plain-English summary of risks and strengths
Instead of 10 minutes, you're looking at 90 seconds.
The Bottom Line
Speed matters in deal flow. Sponsors close oversubscribed rounds quickly. The investors who move fast are the ones who built repeatable frameworks — not the ones who read every footnote.
Build the habit. Or let SkAI do it for you.