LP due diligence guide

What to ask, when to ask it, and what to avoid

Welcome back and happy Thursday!

I didn’t come to appreciate all the things I learned about due diligence until I left an SVP role at a Public REIT (more on that experience here).

The truth is that there are four related but quite different aspects to diligence:

1. What to ask (usually people are most sensitive to this one)

2. When to ask

3. How to ask

4. What happens if the answers aren’t complete?

Today I’d like to dive into each of these to help you on your due diligence journey.

Announcements (article continued below):

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First, some general principles that I’ve learned over the years:

1. If you’re asking about anything related to transparency or honesty twice, you should probably just pass

2. When you’re conducting pre-investment diligence don’t forget that you’re in the middle of a sales process - the dinners and smiles are always appreciated, but don’t let it get in the way of the facts

   1. Similar to you not being able to you not being able to eat IRR, the dinners won’t help with your IRR either

I recently wrote on the extent to which due diligence matters (hint: it depends on your experience levels) and I recommend you start there. It’s hard to understand the importance of doing due diligence without the framework I set up there (and the meme in there isn’t bad either - hope you’ll enjoy).

Alright, let’s dive into it:

1. What to ask (usually people are most sensitive to this one)

   1. The goal here should be to compile a “laundry list” of questions as you’re going through each slide and anything else you have

      1. This is actually the easiest thing to answer in my opinion, since it’s fact based

   2. Biggest articles I’d send your way here are:

      1. Track Record Audit

      2. Top 15 Syndication Mistakes

      3. 26 questions to ask your GP

      4. Top 15 Syndication Mistakes

      5. Minimum Viable Due Diligence

      6. You can see the “Pre Investment Diligence” section of the Q1 2025 index for more

2. When to ask

   1. This requires a deeper level of thinking, because you’re forced to prioritize your questions

   2. You’ll hear many LPs say “I don’t care to prioritize.. I’m just going to send it all at once” and I have two thoughts on this approach