Most operators think investors decide on spreadsheets.
They don't.
LPs decide on trust + clarity + downside control — then the spreadsheet confirms the decision.
If you're raising capital, this is what your best LPs are filtering for. Quietly.
The Three Questions Every LP Update and Pitch Must Answer
When an LP looks at an opportunity, they're subconsciously asking:
- Am I getting my money back? (downside + risk)
- Am I on track to hit the target return? (math + execution)
- Can I trust this team when things get messy? (credibility)
Everything that matters maps to one of those.
Everything else is noise.
What Makes Me Invest
1) Track Record I Can Verify (Not Just "We're Experienced")
The fastest way to get a check is verifiable proof.
What I want to see:
- Specific past deals (asset type, market, size)
- Outcomes stated plainly (multiple, IRR, hold period)
- What you did to create the outcome (not what the market gave you)
- Roles and responsibility (who actually ran what)
What upgrades trust instantly:
- LP references I can speak to
- Third-party verification when available (audits, statements, lender docs)
- Evidence that matches reality (I can look up the asset, timelines make sense)
If it's vague, it's a red flag.
2) Skin in the Game That Actually Hurts (Alignment)
One of the first questions I ask:
"How much are you putting in?"
What I'm listening for isn't the number. It's the meaning.
Strong alignment looks like:
- GP capital that is material
- Not "our promote is our investment"
- Clear disclosure of fees, acquisition fees, AM fees, refinance fees, etc.
The best sponsors answer this cleanly and calmly.
If someone gets weird or evasive here, I assume incentives are misaligned.
3) Conservative Underwriting With Downside Scenarios
I assume every pro forma is optimistic.
So I want sponsors who show they've stress-tested the deal.
Green flags:
- Assumptions stated clearly (exit cap, rent growth, expenses)
- Exit cap rate not dependent on "the market saving you"
- Sensitivity tables (what breaks and when)
- A real downside case where the plan is still survivable
The best sponsors don't sell upside. They show how they avoid permanent loss of capital.
4) A Value Creation Plan That Isn't Vibes
"We'll operate better" isn't a strategy.
A real plan includes:
- Specific levers (pricing, occupancy, ancillary income, expenses)
- Numbers behind each lever
- Timeline to implement
- Cost to execute
- Proof it's achievable (comps, prior playbooks, market evidence)
Specific beats vague every time.
5) Communication Style That Signals Competence
The easiest sponsors to back are usually the simplest communicators.
Signs I trust:
- They bring up risks before I ask
- They answer directly, without defensive energy
- They say "I don't know" when appropriate
- They show the plan, not excuses
Signs I pass:
- Everything is "great" with no risks
- Vague language instead of numbers
- Defensiveness under basic questioning
- "Trust me" instead of evidence
How you communicate in diligence is how you'll communicate during problems.
What Makes Me Pass
1) Unrealistic Projections and "Perfect" Stories
If the returns require everything to go right, it's not conservative.
Red flags:
- Exit cap lower than entry without a strong reason
- Rent growth assumptions that aren't supported
- No downside case
- "Conservative" used as a label, not demonstrated
When challenged, a good sponsor explains assumptions calmly. A weak sponsor gets emotional.
2) No Real Track Record, No Mitigation
First-time sponsors can raise — but they need mitigation.
If the team is new, I want:
- Small check size expectations
- Strong operating partners or advisors
- Tight reporting and governance
- Conservative structure and fees
What makes me pass is not being new. It's being new and pretending you're not.
3) GP Contribution That's Token (Misalignment)
If GP capital is near-zero, I assume:
- fees matter more than performance,
- and downside will be handled poorly.
Promote is not at-risk capital.
If you want LP trust, show you bleed too.
4) Overcomplicated Structures
If I can't understand the waterfall in 5 minutes, I'm out.
Complexity usually hides:
- extra fees,
- asymmetry,
- or incentives that don't align.
Simple, standard structures remove friction and speed decisions.
5) Sloppy Diligence and Slow Responses
If you're disorganized before you have the money, you'll be worse after.
Red flags:
- slow responses,
- missing materials,
- partial answers,
- inconsistency across documents.
Execution shows up in small behaviors first.
6) Weak Market Understanding
If you're raising money in a market, you should know it cold.
I listen for:
- competitor awareness,
- supply pipeline,
- demand drivers,
- why this asset wins there,
- and what could go wrong locally.
Generic market commentary is a tell. Real operators speak in specifics.
The LP Checklist That Predicts "Yes" vs "No"
Track record
- Can I verify it?
- Do LP references confirm it?
- Is your role clear?
Alignment
- Is GP capital meaningful?
- Are fees disclosed cleanly?
Underwriting
- Are assumptions explicit?
- Is there a real downside case?
- What breaks the deal?
Value creation
- Are levers quantified?
- Is execution costed and timed?
Trust
- Do you communicate risks early?
- Do you answer directly?
Market
- Do you know competitors and supply?
- Did you physically inspect assets?
If most of those boxes don't check, I pass — even if the pro forma looks great.
Key Takeaways
- Verifiable track record beats marketing claims
- Alignment is not optional
- Conservative underwriting wins repeat checks
- Value creation must be specific and quantified
- Communication style predicts how problems will be handled
- Complexity creates friction and distrust
- LPs are backing people and process as much as the asset