Template

Real Estate Fund Due Diligence Checklist

A real estate fund checklist tuned for sector, leverage, valuation, liquidity, operations, and tax structure.

What this template is for

Real estate diligence differs by strategy, sector, structure, and market cycle. A core open-ended fund, a value-add multifamily strategy, an opportunistic development fund, and a niche sector specialist all require different questions. This checklist covers the structural, operational, valuation, leverage, and tax issues LPs need to evaluate before committing.

When LP teams use it

Core or core-plus open-ended fund evaluation
Value-add closed-ended fund evaluation
Opportunistic and development fund evaluation
Sector specialist evaluation: industrial, residential, office, retail, life sciences, data centers, self-storage, hospitality, senior housing, student housing, or niche real estate
Re-up evaluation for an existing real estate manager
IC preparation for a real estate fund commitment

The template

Strategy and sector

Core, core-plus, value-add, opportunistic, or development
Open-ended or closed-ended structure
Sector mix: office, industrial, retail, residential, life sciences, data centers, self-storage, hospitality, senior housing, student housing, niche
Geographic concentration
Market type: gateway / growth / secondary / tertiary
Asset size range
New construction vs. acquisition mix
Stabilized vs. transitional assets
Single-sector vs. diversified strategy
Control vs. minority ownership
Joint venture or operating partner model
Where this fund sits in the firm's product set
What makes this strategy hard to replicate
What market environment would make this strategy struggle

Portfolio fit

Role this manager would play in our portfolio
Existing exposure to this GP or related strategy
Overlap with current real estate managers
Sector exposure created by this commitment
Geographic exposure created by this commitment
Vintage-year exposure context
Liquidity and pacing impact
Expected commitment size and rationale
Income vs. appreciation role in the portfolio
Inflation sensitivity
Interest-rate sensitivity
What the portfolio loses if we pass
What risk the portfolio takes if we commit
Re-up view: increase / maintain / reduce / pass / undecided, if applicable

Sourcing and acquisition discipline

Sourcing channels
Relationship-driven vs. marketed process mix
Off-market or limited-market deal evidence
Operating partner or broker network
Acquisition volume reviewed vs. closed
Win rate and why deals are won
Deals passed on and why
Entry cap rates vs. market comparables
Purchase price basis vs. replacement cost
Underwritten rent growth and occupancy assumptions
Acquisition discipline in competitive markets
Examples of deals avoided that later underperformed
Evidence that sourcing advantage is repeatable

Operations and asset management

In-house operating platform vs. third-party model
Property management approach
Leasing approach
Asset management depth
Operating partner oversight
Capital expenditure planning
Tenant retention strategy
Expense control and margin improvement
Revenue management capabilities
Construction management capabilities
Property-level reporting cadence
Operational KPIs by sector
Examples where asset management created value
Examples where operating plans missed expectations

Development and construction risk, if applicable

Entitlement status
Permitting status
Construction budget
Contingency reserve
Guaranteed maximum price contract? yes / no
General contractor relationship
Development timeline
Pre-leasing or pre-sales status
Cost overrun history
Delay history
Land basis
Construction financing terms
Exit or stabilization assumptions
Sensitivity to interest rates, cap rates, and leasing delays
Track record of completed developments
Projects that failed to meet budget or timeline

Leverage and capital structure

Property-level leverage policy
Fund-level leverage, if any
Target loan-to-value
Maximum loan-to-value
Fixed vs. floating-rate debt mix
Rate cap or hedging policy
Debt maturity schedule
Refinancing risk in current portfolio
Interest-rate sensitivity
Debt service coverage
Covenant requirements
Recourse vs. non-recourse exposure
Construction loan exposure
Subscription line use
NAV facility use, if applicable
Stress case under higher rates or lower occupancy
How leverage contributed to historical returns

Valuation and NAV

Third-party appraiser cadence
Internal valuation policy
Valuation committee composition
External valuation firm
NAV calculation cadence
Recent comparable transaction support
Discount rate methodology
Cap rate methodology
Treatment of development assets
Treatment of impaired or non-stabilized assets
Sensitivity to cap rate expansion
Sensitivity to rent growth assumptions
History of write-downs and timing
Realized sale prices vs. prior marks
Any gap between appraisal marks and transaction evidence
Valuation transparency in reporting

Liquidity and structure

Open-ended or closed-ended fund
Redemption queue history, if open-ended
Gate history, if open-ended
Subscription queue dynamics
Redemption frequency
Notice period
NAV strike process
Distribution policy
Income distribution vs. reinvestment policy
Reinvestment provisions
Fund term and extension rights, if closed-ended
Recycling provisions
Secondary transfer provisions
LPAC rights
Side pocket or special investment provisions
Liquidity terms relative to underlying asset liquidity

Tax and legal structure

REIT vs. partnership structure
Blocker access for tax-sensitive LPs
UBTI considerations
ECI considerations
FIRPTA considerations, if applicable
State tax filing implications
Tax reporting cadence
K-1 timing
REIT compliance considerations
Use of taxable REIT subsidiaries
Withholding considerations for non-U.S. LPs
ERISA considerations, if applicable
Side letter tax provisions
Legal structure by vehicle or feeder

Performance

Gross and net IRR, TVPI, DPI by fund
Income vs. appreciation split
Realized vs. unrealized performance
Same-store NOI growth
Occupancy trends
Rent growth trends
Exit cap rates vs. entry cap rates
Debt impact on returns
Leverage-adjusted performance
Benchmark comparison: ODCE, NFI-ODCE, NCREIF, Cambridge, Burgiss, or sector-specific benchmarks, as applicable
Performance by sector
Performance by geography
Performance by vintage
Loss ratio by asset
Top-asset concentration of returns
Performance through prior cycles
Performance excluding the top one or two assets

Terms specific to real estate

Management fee rate and basis
Acquisition fees
Disposition fees
Development fees
Property management fees
Asset management fees
Leasing fees
Fee offsets to LPs
Carry, hurdle, catch-up, and waterfall
GP commitment
Fund term and extension rights
Recycling provisions
Co-investment rights
Key-person provisions
Removal rights
LPAC rights
Valuation and reporting rights
Redemption provisions, if open-ended
Any terms that deviate from market

Operational due diligence

Fund administrator
Auditor
Counsel
Tax advisor
Property manager relationships
Valuation provider
Debt advisor or lender relationships
Compliance program and CCO
Cybersecurity and business continuity
Conflicts policy
Allocation policy across funds, SMAs, and co-investments
Related-party transaction policy
Insurance coverage
Environmental review process
Title, zoning, and survey process
Past or pending litigation, regulatory, tax, environmental, or compliance matters

ESG, environmental, and policy considerations

Environmental diligence process
Phase I / Phase II review process
Climate and physical risk assessment
Flood, wildfire, storm, or heat exposure
Energy efficiency or building standards
Carbon reporting, if applicable
Tenant health and safety considerations
Affordable housing or community impact considerations, if applicable
Labor, construction, or contractor policies
Exclusions or policy restrictions
Insurance availability and cost trends
Any mission, ESG, or policy constraints relevant to the LP

References

On-list LP references
Off-list LP references
Operating partner references
Property manager references
Broker references
Lender references
Joint venture partner references
Tenant or customer references, if applicable
Former employee references
Reference feedback on asset management quality
Reference feedback on transparency around marks
Reference feedback on behavior during stress
Reference feedback on development execution, if applicable

Re-up specific questions, if applicable

What changed since the prior fund?
Has strategy drifted?
Has sector exposure changed?
Has geography changed?
Has fund size increased materially?
Has leverage increased?
Has valuation discipline changed?
Has the team changed?
Has the operating platform improved or weakened?
Did prior assets perform for the reasons we underwrote?
Were marks supported by realized exits?
Did the manager communicate well through market stress?
Should we increase, maintain, reduce, or pass?
What would make us not re-up?

Red flags and mitigants

High leverage with near-term maturities
Floating-rate debt without adequate hedging
Appraised marks unsupported by transaction evidence
Redemption queue building in an open-ended fund
Fund-level leverage masking asset-level weakness
Development exposure without demonstrated execution history
Related-party fees or conflicts
Strategy drift into unfamiliar sectors
Concentration in one market, sector, tenant, or asset
Weak realized performance despite strong marks
Delayed write-downs
Refinancing risk in a higher-rate environment
Tax structure not suitable for the LP base
In-house platform claims not supported by operational evidence
Identified concern
Severity: low / medium / high
Manager explanation
LP team view
Mitigant
Follow-up owner
Status

Final diligence conclusion

One-paragraph investment view
Primary reason to invest
Primary reason not to invest
Biggest underwriting question
Biggest valuation or leverage question
Open diligence items
Recommended commitment size
Recommendation: proceed / proceed with conditions / defer / pass
Conditions to close
Items to monitor after commitment
Reviewer confidence level

Common mistakes

Underweighting refinancing risk in a higher-rate environment
Treating appraised marks as comparable to transactional evidence
Skipping the redemption queue conversation on open-ended funds
Failing to confirm blocker access for tax-sensitive LP categories
Crediting in-house platform claims without operational diligence
Ignoring debt maturity schedule and rate exposure
Not separating income return from appreciation return
Underestimating development cost overrun and entitlement risk
Accepting sector-level tailwinds without asset-level proof
Failing to compare realized exits against prior marks
Treating open-ended liquidity terms as more liquid than the underlying assets

How Allocator Desk manages this in a live system

Creates a real estate diligence workflow with sector, leverage, refinancing, valuation, liquidity, tax, and operating-platform fields
Tracks redemption queues, gates, subscription queues, NAV history, and valuation methodology per fund
Surfaces debt maturity, rate exposure, refinancing, and development-risk flags during diligence and monitoring
Connects appraisal cadence, cap rate assumptions, and realized exit evidence to the manager record
Maps tax structure, blocker access, UBTI, ECI, reporting, and side letter terms into the obligations record
Links quarterly monitoring, annual meeting notes, references, and prior IC memos into the re-up decision
Preserves sector-specific risks, red flags, mitigants, and reviewer conclusions for future monitoring and re-up reviews
Turns real estate diligence from a static checklist into a searchable record of asset-level judgment, structure, and risk over time