Ding ding ding! You’re the lucky winner of a brand new responsibility: writing a real estate investor letter! Perhaps you’re new to the industry and need a primer on how to write a good investor letter. Or maybe you’ve written investor letters all your life and are looking for new inspiration. Each investor letter may should have its own special twist. You need to convince investors that you and your firm are unique. However, you must also provide a few basic elements. Below is our guide on how to write a real estate investor letter in 7 steps.
1. Introduce the Investment
Like nearly all great writing, you need an introduction. Make it a letter from the CEO. Or give an overview of what’s happened at the firm since you last sent them a letter. Talk briefly about major acquisitions or dispositions, or key activities at your properties. Foreshadow for the reader what’s to come. Get them excited to keep reading.
2. Include a Table of Contents
If your letter has more than a few pages, then I highly recommend including a table of contents. Your reader may only care about the financials, or they may want to read about a specific property (if your letter covers multiple properties). Their time is valuable. Give them the option to spend it wisely.
3. Visualize and Briefly Describe the Portfolio Composition
If you’re writing about more than one property, be sure to describe the overall portfolio. Break down the composition into property types by area or by unit count. If you’re only writing about one property, describe the resident or tenant breakdown. For example, show the industry exposure for a commercial property as well as lease type. Provide this information in a visual. Pie charts are outdated; if you want to look modern, at a minimum use a donut chart. Better yet, use a bar chart and show how this composition changed over time.
Some firms may include an overview of acquisitions here in a table. I recommend doing this only if you plan to also discuss dispositions in a similar manner. Otherwise, you can talk about acquisitions in the following section.
4. Highlight Key Investments or Strategies
Describe any notable events at your property or properties this quarter. Did you lease a huge tenant? Finished renovating the remaining apartments? Acquire an exciting new property? This is your opportunity to talk about whatever you want.
In this section, focus on your secret sauce. Do you manage properties better than anyone else? Have a unique investment thesis? Whatever it is, make sure you highlight it here.
Make sure to cover any lessons learned too. While you want to show investors that you’re doing things right, no one is perfect. Investors expect a few minor mistakes. They will question perfection. Be up front about what went wrong, what you learned, and how you’re better because of it. Everyone loves a good comeback story! And no one – and I mean NO ONE – likes a liar.
5. Provide a Financial Statement Overview
Every real estate investor letter must show the nuts and bolts of an investment. If you have a fund, show current projected returns. If you have a single property, show current projected returns along with the standard financial statements: income statement, balance sheet, statement of cash flow, and statement of shareholders’ equity.
Don’t forget to show debt information here too. Most investors want to see whether you have fixed or floating rate debt, what your current interest rates are, any major exposure to a single bank, and if you have any hedges against floating rate debt. Also, if you have covenants preventing investments above a certain leverage threshold, be sure to highlight each investment’s leverage.
Pro tip: If you really want to amp up your reporting, show how investments performed compared to your base case underwriting. Most investors want to see that you were conservative in your underwriting and then exceeded expectations.
6. Describe Upcoming Opportunities
If you have an exciting disposition that closed after the end of the quarter, disclose it! Get your investors excited about getting a return. Or if you hired a new key team member, talk about them! Here’s your chance to brag. Take it.
7. Thank Your Investor
Like your mom always told you, there’s nothing better than a handwritten thank you card. You may not want to write this yourself, but at least include your CEO’s signature. Tell them that you’re grateful for the opportunity to manage their capital. You know they have other options, and yet they trusted you.
I hope these 7 steps to write a real estate investor letter were helpful to you. Best of luck on your investor relations journey! And if we can be helpful with brainstorming ideas or helping you build the best visuals and tables for your investor report, feel free to reach out.
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