Part 9/10:
A significant risk involves the injection of bad assets—properties that are overvalued or of poor quality—into the fund. Investors should inquire about the source of assets, financial due diligence, and whether the sponsor has overvalued assets or artificially inflated valuations.
Additional Risks
Investors should be aware of further potential risks:
Market Cycles and Credit Availability: Market downturns can trigger liquidity crunches, leading to adverse sales conditions or forced liquidation.
Asset Quality: Injecting substandard or overvalued assets can result in poor returns.
Artificial Valuations: Sponsors might overstate asset values, affecting the overall profitability and transparency of the investment.