*By Tanner Sherman, CEO of Top Tier Investment Firm*

Someone is going to pitch you a real estate deal this year. The slides will look sharp. The projected returns will make your pulse quicken. The operator will sound confident, maybe even charming.

And none of that tells you whether your money is safe.

we've managed over $30M in multifamily real estate. I have sat across the table from operators who run tight ships and operators who couldn't tell you their portfolio's occupancy rate if you held a gun to their head. From the outside, they looked almost identical. The difference only showed up when you asked the right questions.

Here's what I have learned: the deal is never as important as the person running it. A great operator will grind through a tough deal and still protect your capital. A bad operator will destroy a layup. So before you wire a single dollar, you need to vet the human being who's going to spend it.

This is the checklist I would use if I were a passive investor handing my money to someone else. These aren't gotcha questions. They're the baseline. Any operator worth your capital will welcome every single one.

1. How long have you been operating, and how many deals have you completed full-cycle?

This is where you separate the talkers from the operators. "Full-cycle" means they bought a property, executed a business plan, and either refinanced or sold it. Anyone can buy a building. The question is whether they have successfully navigated the entire lifecycle.

A good answer includes specific numbers: "We have acquired 14 properties, completed renovations on 9, and taken 4 full-cycle with an average IRR of X%." A bad answer is vague momentum language: "We're growing fast and have a lot of exciting things in the pipeline." Pipeline doesn't pay distributions.

If the operator is early in their career, that isn't automatically disqualifying. But they should be honest about it, and they should have experienced partners or key principals filling the gaps.

2. How do you get paid, and when?

Fee structure tells you everything about alignment. You want to know: What's the acquisition fee? The asset management fee? The disposition fee? Is there a preferred return to investors before the operator takes a promote?

The golden rule: the operator should eat last. If they collect large fees upfront regardless of performance, their incentive is to do deals, not to do good deals. Look for structures where the operator's biggest payday comes from the property performing well, not just from closing the transaction.

Ask for the actual waterfall in writing. If they can't produce it clearly, walk away.

3. Tell me about a deal that went sideways. What happened and what did you do?

Every experienced operator has a war story. If they don't, they're either brand new or they're lying.

What you're listening for isn't perfection. You're listening for ownership, problem-solving, and how they protected investors when things got hard. Did they put their own money in to cover shortfalls? Did they communicate proactively? Did they adjust the business plan when reality diverged from projections?

The operator who tells you "everything has always gone according to plan" is the one you should worry about most.

4. How often will I receive reporting, and what does it include?

Monthly reporting is the standard for any serious operator. Quarterly at minimum. If someone tells you they send annual updates, that isn't a passive investment, that's a prayer.

Good reporting includes: property-level financials (income, expenses, NOI), occupancy and collections data, capital expenditure updates, progress against the original business plan, and a narrative explaining what happened and what's coming next.

Ask to see a sample report from a current deal. The quality of their reporting tells you how seriously they take their fiduciary responsibility. If the reports are sloppy or nonexistent, imagine how they treat everything else.

5. Who manages the properties day-to-day?

This matters more than most investors realize. Some operators manage properties in-house. Some hire third-party property management companies. Neither approach is inherently better, but you need to understand the structure.

If they use third-party management, ask: Who's the company? How long have they worked together? What's the management fee? Who's accountable when things go wrong?

If they manage in-house, ask: How many units does your team manage? What's your staff-to-unit ratio? What systems do you use? In-house management can be a massive advantage because the operator controls the tenant experience directly. But only if they have the infrastructure to do it well.

6. What are your current occupancy and collections rates across the portfolio?

Occupancy is vanity. Collections is sanity.

A building can be 95% occupied and still bleeding cash if 20% of tenants aren't paying. You want both numbers, and you want them for the existing portfolio, not just the deal being pitched.

Strong operators know these numbers off the top of their head. If someone has to "get back to you" on their own portfolio's occupancy and collections, that tells you how closely they're watching the business. Anything below 90% economic occupancy deserves a conversation about why.

7. How do you handle capital expenditures, and what reserves do you maintain?

Roofs fail. HVAC units die. Parking lots crack. The question isn't whether capital expenditures will happen. It's whether the operator has planned for them.

Ask: What's the CapEx budget for this deal? How did you arrive at that number? What reserves are you holding? What happens if expenses exceed the budget?

Operators who underwrite-a-multifamily-acquisition) thin CapEx budgets to make returns look prettier are setting you up for a capital call. A conservative CapEx reserve isn't a drag on returns. It's insurance against the operator coming back to you asking for more money 18 months in.

8. What's the exit strategy, and what happens if the market shifts?

Every deal should have a primary exit strategy and at least one backup. "We will refinance in year 3 and sell in year 5" is fine as a base case. But what if interest rates spike? What if the market softens? What if the renovation-renovation) takes 18 months instead of 12?

Good operators underwrite multiple scenarios. They can show you what returns look like in a base case, a downside case, and an upside case. Great operators have already decided what triggers a change in strategy and will articulate that clearly.

If the only path to investor returns requires everything going right, that isn't a conservative investment. That's a bet.

9. Can I speak with your current investors?

References aren't optional. They're mandatory.

Any operator raising capital should be able to connect you with 2-3 current investors who can speak to their experience: the quality of communication, the accuracy of projections, how the operator handled problems, and whether they would invest again.

If an operator hesitates on this one, that's your answer. Happy investors are an operator's greatest asset. If they can't produce them, ask yourself why.

10. Are you properly registered, and have you filed Form D with the SEC?

This isn't a technicality. This is the law.

Most private real estate offerings are structured as securities under Regulation D, typically a 506(b) or 506(c) exemption. That means the operator must file Form D with the SEC and comply with state blue sky laws. You can verify Form D filings for free on the SEC's EDGAR database.

If an operator is raising money from investors and hasn't filed Form D, that's a serious red flag. It doesn't necessarily mean they're running a scam, but it means they either don't understand the regulatory requirements or have chosen to ignore them. Neither is acceptable when it's your money at stake.

Also ask: Do you have a securities attorney? Who's your CPA? What entity structure holds the asset? These are table stakes for a legitimate operation.

11. How do you communicate bad news?

This question catches people off guard, and that's the point.

The answer you want: "Immediately, directly, and with a plan." The answer you don't want: awkward silence followed by assurances that bad news never happens.

Properties have problems. Tenants stop paying. Contractors flake. Insurance claims get denied. The quality of an operator isn't measured by avoiding problems. It's measured by how fast they tell you, how clearly they explain the impact, and what they're doing about it.

Ask specifically: "If occupancy dropped 15% in a quarter, when would I hear about it and what would that communication look like?" The answer will tell you everything about how this person operates under pressure.

12. What happens to my investment if something happens to you or your company?

Nobody likes thinking about this. But your capital is tied up for 3-7 years in most real estate investments, and a lot can change in that window.

Ask: Is there a succession plan? What entity holds the property? Are investor funds held in a separate account from operating funds? Is there key-man insurance? What does the operating agreement) say about dissolution?

A properly structured deal means the asset is owned by a single-purpose entity, investor capital is segregated, and there are legal provisions for what happens if the operator can no longer perform. If the operator's death or disability would leave your investment in legal limbo, the deal isn't structured correctly. Full stop.

The Operator's Perspective

I will tell you something that might surprise you: I want investors to ask me these questions. Every single one.

When someone does serious due diligence before investing, it tells me two things. First, they're the kind of investor I want to work with, someone who takes their capital seriously and will be a thoughtful partner, not a panicked phone call every time the market dips. Second, it means they will appreciate the work we put into running a tight operation, because they understand what separates good operators from bad ones.

The operators who get defensive when you ask hard questions are telling you something. Listen.

Real estate can be an incredible vehicle for building wealth, earning passive income, and creating tax advantages that W2 income alone can't provide. But only if you put your money with the right people.

Do your homework. Ask these 12 questions. Demand clear answers. And if the operator checks every box, you have found something worth your time and your trust.

We talk about this every week on the Freedom Fighter Podcast. Listen on Spotify, Apple, or YouTube. Or reach out at Tanner@TopTierInvestmentFirm.com.

Tanner Sherman is the Principal and Managing Broker of Top Tier Investment Firm in Omaha, Nebraska. He co-hosts the Freedom Fighter Podcast with Ryan of Avara Investments.

The Passive Investor's Due Diligence Checklist: 12 Questions to Ask Any Operator Before You Invest a Dollar