FOR the sophisticated investor, real estate limited partnerships can bring exceptional rewards. To safeguard your investments, here are some tips to mull over during your decision making process. @ Always ensure the real estate project itself makes sense. The attractions of the limited partnership structure must be the icing, not the cake. @ You are surrender- ing total control of this venture to the general partner (GP. Ensure he is qualified to han- dle this responsibility. Demand refer- ences from sub-trades, the Securities Commission, past projects and past clients. This is no area for amateurs. M@ Ensure that the entire limited partnership offering will be sold out. Too often these ventures are nor fully subscribed thus the venture will be under-capitalized and not be able to reach its objectives. Be very wary ‘of early closings. This is where a minimus number of units are closed by the GP betore all the units are sold. 8 Find out who owned the property before your group buys it. It is not uncommon for a property to change hands two or threc times before your group acquires the property. Each owner before you probably took a profit. If this has happened in a short time frame — read it as a red flag. What percentage of the total funds being. raised is going into hard ‘assets? 1 have seen offerings where 30% of the raised funds yces directly into’ the GP’s pocket right ar the start. This is termed “front-end loading.” This is unacceptable. @ Are growth projections reason- able? Again, I have seen offerings based upon 10% appreciation tore- casts cach year for 6 years. In my 25 years of real estate investing J have never, never seen this kind of ‘growth. & Who is selling you the investment? Financial planners, financial brokers and even realtors receive basically no instruction whatsoever on real estate investing. In promoting the invest- ment are they relying on their own evaluation or that of the promoter? ® Beware of income guarantees. fs the cash to pay anv guarantees set aside from the proceeds of the initial capital raised or is it to come from future earnings? If it is the latter, how can it he guaranteed? & Read the prospectus or offer- ing memorandum from cover to cover. Understand everything. Remember that “approved” by the Securities commission does not mean that they have reviewed and approved of the investment. “Approved” just means that the information required under the Securities Act of British Columbia has met the “minimum” standards as set down by law. Insist that all prices, estimates of value and and everything that is fun- damental to the investment viability is backed up by independent third party reports. As a rule, do not take the word or assurances trom people who have an interest in the venture. @ Be very wary of clauses within the offering documents that may climi- nate your “limited liability.” Often, limited partners (LPs) are asked to take on a share of any mortgage lia- bilities in exchange for other incen tives. If you do this you will become liadle tor the increased amounts you undertake. If you are doing this, ask yourself why you are using a limited partnership structure in’ the first place? &3 Ensure you get an accurate list of the names and addresses of all other limited partners. If the general part- ner is sot performing as expected, there will be a provision in the offer- ing documents that details a process to replace the GP. Usually this means getting 75% of the LPs to vote on his replacement. If things go sideways and you want to replace the GP and you do not know who the other LPs are -—~ you could be out of luck and Friday, August 28, 1998 — North Shore News ~ 47 SPSPHSSSSCHHSSHSSSHSHSHSHHSHKSSSHLOESKCHSSHFTEHOKRDESRHOHOECHSSSHSEHEBHHASSOEEBE your investment down the drain. BM Never confuse the investment with the iavestment structure. The investment, especially when it involves real estate, must come first. The property and the plan to increase its value must be able to stand alone on its own merits. [fnor .» Walk away! B Monthly income projections are a vital aspect of this twpe of invest- ment. Ensure you understand what process will happen should these manthly payments not materialize. ® Beware of hidden feces. Al too many limited partnership offerings have a vast assortment of attached fees. Make a fist of every fee you can isolate and have the GP explain every fee and specitically ask if your fist is a complete list and get his response — in writing! @ Inquire as to the form and fre- quency of venture update reporting, to the limited partners from the gen- cral parmer. Giving up day-to-day involvement does not mean being kept in the dark. Insist on regular monthly reports if you are to invest. B® For obvious reasons, demand an annua’ external audit of all books regarding the partnership. ted partnerships should earn trust {a a column as short as this it is impossible for me to give you all the questions you sitould ask. | have pre- pared a list of 90 questions one should answer when investing in any residential income property. If you wouid like a copy of this list, send a self addressed and stamped envelope to my office at 7320 Westminster Hwy., Richmond, B.C. V6X IAI. Trust must be carned not given. — Michael Dowty is vice-presi- dent, special projects of Century 21 Prudential Estates Ltd. and isa long-time West Vancouver resident. Call bien at 925-6453. i NEWS photo Mike Wetiotieid Green thumb gathering | JUDGES for the Communities in Bloom competition stopped in for a garden party at McNair House while they toured North Vancouver City. Scott Alsop (left) kept busy serving watercress finger - sandwiches to guests and to McNair House cwner Donna Fontaine (right). e AY A GLANCE ... Se eeerecncccveseenereneesesees ADORESS: 5950 Condor Place PCCP ema e terme eee Eee sen Dee reneeseseeeEle LOT SIZE: 200x118x123x50 - 12,550 sq.ft. approx eee mere eae sees enero oen Oe Senssereoenener INTERIOR SIZE: 1,888 SQ. FT. POR CO meee mee seer eesaeeeeneessesreuenesesere NUMBER OF BEDROOMS: 3 Poorer cewsccneancossses epee eenernvaeronee NUMBER OF FLOORS: 2 POR reece wernemeareseseccroesenenevesserseer ASKING PRICE: $997,000 Corre ero eee a sora nereneesvererseueneseereres OPEN HOUSE: By appointment Ons Omer ener eeresesenemeseseresereseeneee LISTING AGENT: Penny Mitcheil 926-6233 Poca rece seoseoerseancsesnenscesaent SPECIAL FEATURES: Total privacy. South west facing ocean views Quiet cul-de-sac. Spacious open floor plan. , ot Ag oa Feature Listing 5950 Condor Place prereren pr Captivating hideaway Spectacular 200° degree ocean views from Point Grey to Passage, Bowen and Vancouver Islands. Stunning location with every room capturing the view. Fabulous wraparound decks. Secluded quiet cu!-de- sac. Perched high on Eagleridge above Seaview Walk. Large Rarely available. useable property for further development. Sought after location. Complete serenity. Panny Mitchell, Remax Masters Realty