We consistently emphasize the importance of passive investors partnering with sponsors who have a demonstrated track record. But here's the problem: this is often a vague concept.
When most LPs think about track record, they think of unit counts, assets under management, and years of experience. And while those metrics matter, they're just one small component of the overall picture.
Let me give you a framework you can revisit to help you evaluate whether a sponsor has the experience to execute the deal they're pitching you.
The three-box test
When looking at a sponsor's track record, you want to check three main boxes:
Box #1: Market Experience. Have they done deals in the same market where this deal is located? Not just the same state… the same market. Market dynamics vary significantly, and experience in one market doesn't always translate to another.
Box #2: Product Type. Have they done deals with the same product type and size? If they're pitching you a 200-unit multifamily deal, have they successfully executed on similar-sized multifamily deals before?
Box #3: Business Plan. Have they executed deals with the same business plan in the past? A value-add renovation strategy is very different from a ground-up development or a stable cash-flowing asset.
Ideally, and I think it would be a red flag if they didn't, a sponsor should check all three of these boxes. If they don't, there needs to be a very compelling reason for you to continue evaluating the deal.
But here's where it gets interesting, especially in 2026...
What really matters now: closed deals vs. current deals
It's encouraging to see sponsors communicate that they've gone full cycle on deals, meaning they've bought, successfully exited properties, and delivered the returns they projected to investors.
But there's a lot of nuance here because of how crazy the market got between 2017 and 2022, when things were really humming.
When you're looking at a sponsor's closed deals, you need to dig deeper and place a premium on deals that were bought at the market top (roughly 2018 to 2022) and sold at the market bottom (the last couple of years, 2023 to 2026).
Why does this matter?
These are deals where the operators bought when the market was high and truly created value based on their skills, vs. the “market” bailing them out.
An investor who bought when the market was hot, sold when the market was cold, and still delivered quality returns to investors is one I would feel much more comfortable investing with than one who only has full-cycle deals where they bought in a warm market and sold in a hotter market (even if the returns for that deal were numerically higher).
In that scenario, it's hard to determine how well they actually executed their business plan versus just riding a wave.
The most overlooked component: current deals and portfolio
Here's what most LPs miss when conducting due diligence on a sponsor: they don't examine how the sponsor's ongoing deals are performing relative to the original business plans.
This takes some poking and prodding, but you need to ask questions like:
Are you making distributions on these deals?
How are you leasing units? What rents are you getting compared to your projected rents?
How quickly are you implementing the business plan?
If you've executed a capital event like a refinance, how did that go?
As a sponsor myself, one of the more challenging things we try to communicate is that we have many ongoing deals that are going extremely well - deals where we've refinanced and returned a significant portion of investor capital and are significantly exceeding expectations.
But the reality is, there are many sponsors where that is not the case. Their existing deals aren't going well, but they don't call that out. And it's your job as an LP to extract that information.
To wrap this up:
Context is critical when looking at a sponsor's track record, especially when evaluating their current and historical portfolio.
Don't just look at unit counts or the number of full-cycle deals. Spend significant time actually analyzing how they've performed through different market cycles and how their current deals are tracking against projections.
The sponsors who can demonstrate strong execution in tough markets and transparency about their ongoing portfolio are the ones worth your capital in 2026.
Best,
Axel
P.S. Next time you're evaluating a sponsor, ask them about their current deals and how they're tracking against projections. The quality of their answer will tell you everything. Know another LP who would find value in this email? Forward this email to them.
Someone forwarded this to you? Subscribe here to get weekly strategies delivered to your inbox.