Property investment memorandum: structuring the decision

An investment memorandum should not sell an idea back to its author. Its purpose is to bring the thesis, evidence, model, risks and conditions for proceeding or stopping into one place.

Begin with the decision, not the description

On the first page, the reader should see what is to be bought, how value would be created, how much capital is required, the expected period and the decision needed now. The neighbourhood story, photographs and advantages follow. If the thesis needs a long narrative, its foundations may not yet be defined.

Separate facts from assumptions

Use three statuses: confirmed by a document; working assumption with a source; and open question. Give each important item a review date and owner. An exit price inferred from comparables is an assumption. The registered owner shown in a current title extract is a fact. A proposed layout change before the architect's opinion is an open question. This register prevents assumptions silently turning into “known” information.

Explain a source of value creation

Why would the next buyer or tenant value the property more? Possible answers include correcting a technical defect, lawfully improving the layout, preparing permits or securing a more durable agreement. General market appreciation is not controllable value. If several independent assumptions support the deal, show the contribution and risk of each.

Put the economics in a clear table

Include the full budget, cash timetable, exit range and result after costs. Do not show profit without capital and time. Do not call the project's result before financing, taxes and contractual allocation the investor's return. Compare costs with the full-budget guide and test sensitivity in the DNPI calculator.

Express risks as actions

“Market, works, timetable” is too general. For each risk show the event, warning signal, effect, verification and decision. If the architect does not confirm a key layout, recalculate the exit without it and return the scheme to the investment committee. A risk with no review owner or deadline is unmanaged even if it appears in an appendix.

State approval conditions

Approval may be conditional. Record outstanding documents, the budget ceiling, contractual protections and the date through which conditions remain valid. State grounds for stopping immediately as well. This reduces the temptation to continue simply because time and money have already been spent on diligence.

Appendices should support rather than overwhelm

Keep conclusions in the main text. Place the title extract, drawings, technical report, owners' association minutes, contractor quotes, comparables and model in dated, clearly named appendices. The DNPI pre-deposit checklist provides a practical diligence set.

Version the decision

Retain the version on which approval was based. Give each price or budget change a source and date. After conditions are met, issue an update showing what closed and whether the conclusion changed.

Red flag: a material risk is named, but no one owns its review, there is no deadline and its effect on the decision is unclear.

A good memorandum lets another specialist reproduce the project logic and see which conclusions rest on facts and which on assumptions.