Ten Lessons I Learned as a Private Placement Investor

by Marc Halpern

Founder, Deep Due Diligence Investors

October 3, 2025

Over the years, I have invested in dozens of private placement offerings and built the Deep Due Diligence Investors Club into a collaborative group of more than 50 accredited investors. Along the way I have had successes and a few losses, with overall strong net double-digit gains. Both the gains and losses have been excellent teachers. These are ten of the most valuable lessons I learned, including some real-world examples.

Some of you may disagree with my conclusions and that’s OK. My goal in this article is to make you think, not lecture you about absolute truths.

1. Deep Due Diligence Minimizes Risk, But Never Eliminates It

Deep due diligence reduces the number of unknowns. If there are 50 possible risk factors that can cause a potential negative outcome, a “normal” due diligence might reveal 30. Deep due diligence might uncover 45. This 75% reduction in unknown negative factors greatly reduces risk, but it never eliminates risk.

In 1987, I invested in a garden apartment complex across from the gates of Fort Dix, one of the largest Army bases on the East Coast. During the Cold War it was a perfect location. Two years later, peace broke out, troop numbers fell, and the property went bankrupt.

In 2018 and 2019, I invested in two multifamily syndications without asking, “What if a global pandemic leads to eviction moratoriums? After all there was a global pandemic in 1918!” Within two years, it happened. Thankfully, I enjoyed a 29% annual return on the 2018 apartment syndication that exited in 2023 and a 37% annual return on the 2019 apartment syndication that exited in 2024. Other apartment syndications in which I invested in 2021 and 2022 did not fare as well, due to the Fed raising rates at an unprecedented combination of pace and magnitude in 40 years. We actually planned for interest rate increases when we invested in 2021 and 2022, just not at that pace and magnitude.

So, sometimes you win and sometimes you lose. Do not expect “all the time you win.”

Most risks can be anticipated, but some risks are simply hard to imagine in advance with a reasonable probability. The lesson is that we will never bat 1.000, but deep due diligence still improves the odds since when we reduce unknown factors by 70%-80%, we dramatically increase investment performance.

2. Teams Are More Effective Than Lone Wolves

I have always been obsessive about reading every word of the PPM and challenging every cell in every pro forma spreadsheet. Even so, I found that group due diligence produces far better results than doing it alone.

Our Deep Due Diligence Investors Club includes engineers, IT professionals, pilots, physicians, contractors, business owners, retirees in many fields and people from many other occupations. Each brings a different set of skills and a different viewpoint. One of our members who is a lineman from the power company once uncovered problems in an energy arbitrage deal that none of the rest of us had enough knowledge to evaluate. A gynecologist member of our group brought unique insight when we reviewed a birth control technology. When our group looks at the same elephant from 10 different angles, we get a more complete picture.

Our logo at Deep Due Diligence Investors shows three wolves. Why? Teams are more effective than lone wolves.

3. Most Investors Do Not Read the Documents

Ninety percent of investors never read the PPM or the operating agreement. Ninety-five percent do not challenge every cell in every spreadsheet or ask for sensitivity analysis. This is exactly where the risks are either disclosed or buried.

In our group we require members to identify at least one risk not listed in the PPM. That forces us to understand every disclosed risk to a depth that makes us deeply aware of the obvious and less-obvious risks. It’s not easy identifying risks not disclosed when the legal team of the capital raiser works hard with the sponsor to comply with the requirement to disclose all the different ways an investor can lose money.  When moving into new asset classes, the specific risks differ dramatically. The only way to recognize those differences is to perform deep due diligence.

In the next lesson, we will talk about AI. One strength of AI is that, when prompted properly, AI helps identify risks not covered in the Risk Factors section of the PPM or in their pitch decks.

4. Artificial Intelligence Helps Manage Deal Flow

Today we see hundreds of private placement offerings (PPO’s) each year, sometimes close to 1,000. Without technology it would be impossible to keep up.

We use a Deal Screener AI tool developed by Richard Wilson of Family Office Club (that includes 28 criteria parameters that I requested) that judges whether the pitch deck contains enough information to justify posting the offering to our deal flow funnel. The Deal Screener AI tool allows us to reject 90 percent of offerings in under a minute. Another 5 percent can be eliminated in five minutes when we combine our human judgment with another AI tool called the Due Diligence tool that looks at the quality of the investment, not just how much information is disclosed. We then proceed to deep due diligence on the remaining 5% of offerings. Since I typically invest in 4-5 deals per year, I eventually wind up rejecting 99% of PPO’s. I am not concerned about missing a good deal using our screening process because my deal flow is massive enough that good ones will always show up.

If you want to understand our deal flow process, as an investor or as a capital raiser, you can read the details here: https://duediligenceclub.com/wp-content/uploads/2025/08/Deep-Due-Diligence-Investors-Deal-Flow-Process.pdf

Before having the AI Deal Screener tool in April 2025, we had to manually screen hundreds of pitch decks just to decide which ones justified posting to our members. I was the gatekeeper and frankly, I was overwhelmed, especially since I’m just a part-time investor with plenty of activities in my other businesses. The AI tools provided by Richard Wilson of Family Office Club and some custom GPT’s that I created on my own have dramatically affected how I handle deal flow. It is now manageable and I am no longer overwhelmed.

We also use AI tools for forensic accounting, evaluating investment quality, and aligning portfolios with each investor’s goals for income and growth. 

One of the most effective methods is what we call the cage match. An investor-member can upload to our Portfolio Management Assistant multiple currently-active PPO’s (typically 4-6), upload their current portfolio, then tell the bot their current desired income and growth targets. The AI tool is preprogrammed to analyze macroeconomic trends and market factors that may be relevant to each of the PPO’s in the cage match. The bot then ranks the PPO’s for alignment with the investor-member’s investment criteria, points out risks and delivers a table comparing various aspects of the PPO’s so that the human investor-member can decide which PPO’s warrant due diligence. The human investor still decides, but the analysis is sharp enough to point the investor in the direction of the top 1-2 PPO’s that best match that investors investment criteria at that moment.

To be clear, I now use AI extensively during due diligence, but mostly to save time. AI does hallucinate and can be wrong even without hallucination. That’s why I still apply my human intelligence and human judgment on every PPO in which invest. I always keep in mind AI is NOT investing $100,000 of hard-earned money, I am!!!

5. Diversification Is Non-Negotiable

When interest rates spiked from March 2022 to July 2023, many multifamily syndications collapsed. Investors who were concentrated in apartments saw heavy losses.

Diversification saved me. My self-directed Roth 401(k) is 100% invested in private placement investments, but spread across 12 asset classes. These include investments in areas such as litigation funding, land development, medical devices, mobile home parks, commercial lending, industrial outside storage, NNN sale-leaseback and others, some of which are “non-correlated” asset classes.

Mobile home parks, for example, often move differently than apartments. Demand for affordable housing rises, while new supply is limited by “Not in My Backyard” restrictions. Office space is struggling in many markets, but certain segments still perform well (Class A in selected locations, for example). By being spread out, I was able to absorb losses in one sector while gains in others carried the portfolio forward.

Some people talk about “deworsification” due to the challenge of not being an expert in multiple asset classes. My personal experience is that I can learn enough about a new asset class while combining joint deep due diligence in teams, to construct a well-diversified private placement portfolio that delivers strong double digit annual returns even in years during which a couple of deals go bad, including now in 2025 when a few deals underperformed.

6. Ego Must Stay Out of the Room

Investors who are serious about due diligence tend to check their egos at the door.

In our group, we do not accept members who simply want to benefit from the work of others. Everyone is expected to ACTIVELY and PERSONALLY participate in the deep due diligence process. That expectation creates a culture where collaboration is strong and bias is low. It also explains why, despite having more than 50 members actively engaged in DDD on teams, we haven’t encountered disruptive personalities.

We achieve a high level of “objective purity” because it takes a certain mindset and approach to objective analysis to simultaneously consider ALL the pros, ALL the cons, ALL the risks and assign weights to each.

The level of objectivity attracts the right type of people with aligned mindset.

7. Meeting Face-to-Face Is Irreplaceable

Zoom calls are convenient, but meeting sponsors in person reveals what no pitch deck or spreadsheet can.

At Family Office Club events, we often meet a dozen sponsors in a day. Within fifteen minutes of direct conversation, you can not only get an idea about the quality and essence of the investment offering, you can sense energy, body language and ethics. I have met sponsors who were highly competent and also demonstrated strong integrity. Others looked good on paper but raised red flags when we met them.

Richard Wilson told me about the “liquidity test.” It’s not what you think. After the formal LP-sponsor meetings that we conduct in a private meeting room when the capital raiser is on best behavior, you go out to dinner or lunch and order some ethanol-containing liquid. Sponsors will often reveal other behaviors in the relaxed alcohol-enhanced environment that provide insight into ethics and decision-making. Sometimes, you can even learn about how respectful a person is by the way they treat the server. Tip: Say ‘thank you’ every time a server fills your glass with water. It’s also a good way to program your kids about how to treat other people.

At the Family Office Club Super Summit in Florida in 2024, we brought 32 members. We had a private meeting room and rotated through sponsors. The in-person experience told us more about those sponsors than months of emails could.

I love meeting with selected sponsors face-to-face in dedicated sessions 3-4 times per year and I am very grateful to Family Office Club for providing private meeting rooms for our club for LP-sponsor meetings and their staff even coordinates the schedule for our group.

8. It Is Possible to Learn New Asset Classes

I invested in a note secured by a neurocare facility in Sacramento. I had no prior knowledge of that asset class. By studying the nature of neurocare facilities, the market, the sponsor, and the specifics of the facility, I gained confidence. The investment exited with a 20 percent annualized return, even though it was made in June 2022 when interest rates were rising rapidly.

I had a similar experience with a farm in Paraguay. At first, I resisted the pitch by the general partner raising capital for 15 months. I already knew him and trusted him, so that wasn’t the issue.  I was concerned about corruption in that country and potential nationalization of businesses. After careful study of the recent political history, government decision-making and social stability in Paraguay, I concluded that the probability of the risks materializing would be low. Study and discipline, not prior expertise, gave me the confidence to invest, especially in the context of portfolio diversification and limiting my exposure to less than 5% of my investable funds as discussed in Lesson #9 below.

I’m sure that most of you do not have “government corruption” on your due diligence checklist. The point is that one can use common sense to customize questions about risks when encountering a new asset class and that doesn’t even include input from AI that is now available as a supplement to human intelligence.

9. Limit Exposure to Any Single Deal, Any Single Asset Class or Any Single Sponsor

No matter how attractive the opportunity, I avoid putting more than 5% of my total investable funds into a single investment.

I analyze every opportunity using three elements: the jockey (sponsor), the horse (the asset), and the track (the market). A best-in-class sponsor with a strong asset can often not overcome a bad market or certain types of macroeconomic conditions. Two out of three is not enough. All three must be right.

When the jockey, the horse and the track all pass muster of deep due diligence, the temptation is huge to invest more. My discipline to keep single investments under 5% of the investment portfolio, has kept my overall portfolio performance strong when unexpected negative outcomes reared their ugly heads, usually due to risk factors that I could not reasonably anticipate.

Let me take this opportunity to address the claim made by many that they invest in the jockey. I want reemphasize that while the jockey is undoubtedly crucial, choosing a best-in-class jockey is a necessary but insufficient prerequisite to investing.

Some say that they screen the jockeys first. When encountering massive deal flow, it is not practical to screen 100 jockeys per year. I first screen the massive amount of offerings using AI and only if an offering APPEARS to meet my investment criteria, will I invest the time, effort and mental bandwidth to perform deep due diligence on the jockey. This way I have to screen maybe 5 new jockeys per year, not hundreds.

The point is that screening massive amounts of deals is a lot less resource-intensive than screening massive numbers of sponsors.

Another approach that some investors use is to find 5 sponsors they trust and invest only with those sponsors who pass their rigorous screening. The way I look at it is that such a practice would dictate that at least 20% of my portfolio would be concentrated with one sponsor and I believe in diversifying in three dimensions: multiple investments in multiple asset classes with multiple sponsors.

Usually a sponsor will be an expert in one asset class. If I limit myself to five best-in-class sponsors, I would be limiting myself to five asset classes.

You can certainly do that if you like. I just don’t feel comfortable concentrating 20% of my portfolio with one sponsor or one asset class or one project. Others feel comfortable doing that. Each investor must figure out their own personal comfort zone.

10. High Deal Flow Enables Selectivity

In my experience with PPO deal flow, quality requires quantity. With high deal flow, you can afford to be extremely selective and reject 99% of opportunities to filter down to best-in-class offerings from best-in-class sponsors. Even then some will fail, but deep due diligence minimizes bad outcomes while confidently investing in good ones.

Because we screen most deals quickly, we reserve deep due diligence for the rare few that make it through. Our DDD teams form organically. Investors only step in if they have capital ready for deployment at that moment (we don’t like the term “dry powder”) and if the deal aligns with their current goals for income and growth. That ensures everyone doing the work has real skin in the game.

Is this fool-proof? No. But my goal is portfolio wide high performance, not the unrealistic perfection of batting 1.000.

Final Thoughts

Private placement investing will never be free of risk. Fort Dix can downsize. Pandemics can shut off rent rolls. Interest rates can spike. But deep due diligence, collaborative teams, disciplined diversification, AI assistance and high deal flow tilt the odds strongly in our favor.

These lessons were not learned in theory. They were earned through both wins and losses. They continue to shape how we invest today at the Deep Due Diligence Investors Club.

Learn more about Deep Due Diligence Investors at www.DueDiligenceClub.com