May 6, 2024

The Ultimate Guide to Create a Real Estate Offering Memorandum for Your Next Deal

The Ultimate Guide to Create a Real Estate Offering Memorandum for Your Next Deal

The offering memorandum is essential for every real estate investor or buyer to ensure a successful and smooth deal closure. 

Including an offering memorandum in your resale contract makes sense if you are about to resell your investment property for cash or another purpose. It helps showcase your property's strengths and highlight your credibility in the real estate market.

A real estate offering memorandum (OM) is like a pitch deck for your property. It is a detailed document that outlines the terms of a financial transaction, often accompanied by visual aids. It undergoes thorough review to ensure accuracy before being finalized and binding on both parties. An offering memorandum (OM) is also known as an investment memorandum or private placement memorandum (PPM). 

Many real estate investors overlook the importance of an offering memorandum. They can make or break your next deal. 

So, what exactly is an offering memorandum, and why should you care about it?

In this article, you'll learn everything you need to know in order to create a real estate off-market offering memorandum. Also let’s  examine the benefits of creating an offering memorandum for your next real estate investment.

What is a Real Estate Offering Memorandum?

A real estate offering memorandum is a set of terms and conditions that you require your buyer to sign before they commit to buying your property. It serves as a contract between you and the buyer of your property. The seller's agent also has an offering memorandum. It contains terms and conditions that the seller's agent requires the buyer to sign.

In an ideal world, your buyer and seller's agents would also review the offering memorandum and sign off on it. This way, your listing agreement, contract, and what's known as an "offering memorandum" are all under one document. This document forms the foundation for a smooth transaction. It contains all the terms and conditions a client or seller's agent must sign before closing the deal.

Real estate firms constantly look for ways to streamline the closing process and cut costs. When you're ready to take your real estate business to the next level, it's time to think about creating an offering memorandum. 

Why is an Offering Memorandum Required?

Like most legal documents, real estate contracts are often delayed in being delivered or executed by either party. This is why you also need a listing agreement. Real estate transactions are complex, with many risks and opportunities for profits. The listing agreement lays out certain terms that protect both parties, no matter what happens.

Real estate agents and listing agents between buyers and sellers are legally required by their licensing organizations to deliver a listing agreement to all parties. When you are selling your property, the listing agreement is essentially a contract that defines the terms of the transaction. Your listing agreement should be in strict compliance with all applicable laws.

It should also be written in clear and simple terms. This is paramount because the listing agreement sets the tone in which the transaction will proceed. It should also address any contingencies that may arise.

Benefits of Having an Offering Memorandum in your Deal documentation

Having an Offering Memorandum in your real estate deal documentation will help you and your buyer to have all the transaction information together in one place; this will make your deal a smoother and easier process. The offering memorandum will guide the buyers and sellers throughout the entire process of closing the deal.

Many points are explained in the OM, including property conditions, total price, interest rate, and closing cost details. It is a major document as it will govern all aspects of a real estate deal. It is a contract between buyer and seller that describes what is expected from both parties in detail. Let's check out the key points for having an offering memorandum:

Benefits Impact
A fast and safe investment When sellers are ready to unload their property, they will first look for a buyer. The listing agreement is the first step in finding a buyer. If you have a well-written, comprehensive listing agreement, the seller will sign and deliver it to the buyer without hesitation. This is how a reliable offer is formed.
Less paperwork The listing agreement is much less paperwork and fuss compared with making a contract. The listing agreement or the memorandum is a legally binding document. The buyer and seller are bound to it by law. You don’t need to go through months of legalities and court dates.
A roadmap for negotiations The listing agreement is a roadmap for negotiations. It lays out the terms of the offer, and it’s always a good idea to have a roadmap in case negotiations go awry.
Protection against fraud The listing agreement is a safeguard against fraud. The law requires the seller and buyer to approve a seller’s agent.
Documentation of interest The listing agreement is a record of interest that documents your right, as the seller, to sell the property.

It is greatly beneficial for a company to have an offering memorandum in their deal documents, it helps to avoid misunderstanding between the company and the investors and streamline the process of raising funds, and it will reduce the time taken to close a deal. The offering memorandum also protects the interest of both the company and the investors. As well as being legally binding it can be used in any potential disputes between them.

The offering memorandum acts as the real estate springboard to help close a deal. To get clear pictures of the offering memorandum in real estate, we have infused graphical visualization of specific aspects of this legging documentation in an infographic. Let’s take a look at:

Real Estate Offering Memorandum Guide

Ways to Write an Offering Memorandum for Your Deal

The process of writing an offering memorandum for your next real estate deal is quite similar regardless of the type of property your listing for sale or how much. The main thing you need to remember is to keep it extremely simple and to the point so that everyone understands the terms of the agreement without any confusion. The four ways to write an offering memorandum for your next real estate deal are:

  • Use a style guide: There are many types of real estate documents, and it's important to know the difference between them. The listing agreement is one type of real estate document that differs from the purchase agreement. The listing agreement is more of a roadmap for negotiations and protection against fraud.
  • Organize your documents: There are many different ways to organize your files, and you need to know which way works best for you. You can use a filing system with separate folders for each document type. You can also use cloud-based software that provides real-time file management and search functions.
  • Equip yourself with knowledge: Before you even begin writing your offering memorandum, you need to know what you're doing. You can do so by reading articles online and books about various aspects of real estate investing.
  • Get help from a pro: In some cases, you may want to bring in a professional to help you write your offering memorandum. It is especially the case if you're not familiar with real estate law.

Key Sections to Include in Your Offering Memorandum

Let's jump right in and explore the important sections you'll want to include in your real estate offering memorandum to make sure it's well-structured.

1. Introduction

The introduction section of your offering memorandum serves as the first impression for potential investors. Here's how you grab their attention.

  • Opening Statement: Briefly summarize the investment opportunity and highlight potential returns.
  • Property Description: Mentioning the property type (residential, commercial) and location.
  • Investment Overview: Briefly explain the exit strategy and projected ROI.
  • Sponsor Introduction: Introduce your company and its experience in real estate.

Remember, a strong introduction sets the tone for the entire OM and encourages deeper exploration from investors.

2. Essential Disclosures

To ensure informed investment decisions, sponsors are required by law to disclose material information to potential investors. Here's a breakdown of common disclosure categories:

  • Property disclosure
    • Location and description of the property
    • Physical condition of the property
    • Zoning and legal restrictions
    • Existing or potential environmental hazards
    • Any history of litigation or code violations
  • Financial disclosures
    • Historical and projected financial performance of the property
    • Debt structure and financing arrangement
    • Fees and expenses associated with the investment
    • Sponsor's projections for return on investment (ROI)
  • Sponsor disclosure
    • The sponsor's experience and track record in real estate development or management
    • The qualifications and affiliations of the sponsor's team members
    • Any compensation arrangements between the sponsor and the investors
  • Investment disclosures
    • The investment structure (e.g., LLC, joint venture)
    • The minimum investment amount and investor suitability requirements
    • The risks associated with the investment, such as market fluctuations, vacancy rates, and potential construction delays
    • The anticipated timeline for the investment, including the projected holding period and exit strategy

By providing clear and comprehensive disclosures, you demonstrate your commitment to responsible investment practices and build a strong foundation for gaining investor trust.

3. Operating Agreement

It helps outline the rights and responsibilities of the sponsor and investors. This agreement clarifies:

  • Profit/Loss Distribution: How profits and losses are distributed amongst investors based on their contribution.
  • Voting Rights: Decision-making procedures within the investment group.
  • Dispute Resolution: Mechanisms for resolving any conflicts that may arise.

A well-drafted operating agreement establishes a clear framework for collaboration, minimizes the potential for disagreements, and safeguards the interests of all parties involved.

4. Investment Summary

The summary section provides a quick reference guide for investors, highlighting the key features of the investment opportunity:

  • Property Overview: Briefly describe the property's location and type.
  • Investment Details: Total investment amount and minimum investment required.
  • Projected Returns: Highlight expected ROI for different holding periods.
  • Exit Strategy: Outline how investors will realize their profits.

You can also present this summary as a cheat sheet for busy investors. Bullet points and tables make it easy to scan and grasp the most important details about the investment opportunity at a glance

5. Subscription Agreement

This acts as a binding contract, officially locking in an investor's commitment to the offering and their designated investment amount. So, make sure to include:

  • Investment Details: The specific investment amount and associated terms.
  • Investor Representations: Financial capacity and suitability for the investment.
  • Closing Conditions: Conditions that need to be met before finalizing the investment (e.g., securing financing).

A clear subscription agreement streamlines the investment process, ensuring a smooth experience for both the sponsor and the investor.

Additional Considerations:

Enhancing Your OM with Compelling Design and Visuals

Including high-quality visuals can significantly enhance the impact of your offering memorandum. Consider incorporating the following:

  • Financial Visuals: Use charts or graphs to represent key financial projections (income and expense forecasts).
  • Clear Design: Prioritize clear fonts, consistent formatting, and white space for readability. Include captioned images to support the text.

Including a Map

Adding a facilities map to your OM is a great way to present information about nearby amenities. It makes your listing more credible and engaging. The map should highlight schools, hospitals, parks, shopping centers, and public transportation options. A facilities map provides a clear picture of the property's surroundings.

To add a facilities map to your offering memorandum (OM), follow these steps:

  • Collect data on nearby amenities such as schools, hospitals, parks, shopping centers, and public transportation options.
  • Use a mapping tool or software to create a map that highlights these amenities. 
  • You can use different symbols or colors to differentiate between the types of amenities.
  • Add labels to the map indicating the names and locations of each amenity. You can also include additional information such as distance from the property or any unique features.

In the OM, explain the benefits of each amenity and how they enhance the property's appeal. This could include factors like convenience, quality of life, and potential rental demand.

By incorporating these essential sections and strategically leveraging visuals, you can create a compelling offering memorandum that effectively communicates the value proposition of your real estate project to potential investors.  This well-structured document will foster trust and transparency, ultimately laying a strong foundation for a successful investment opportunity.


Creating an effective offering memorandum is crucial for any real estate investor. It ensures they have all the details necessary to sell their property at a successful price and make a profit. Users who find themselves in such situations will benefit greatly by using a real estate investment consultation. A well-informed investor can create an effective offering memorandum that describes the property accurately while addressing any potential risks involved with the sale.

Frequently Asked Questions

Who prepares the offering memorandum?

The offering memorandum is usually prepared by an investment banker or a securities attorney hired by the real estate sponsor. They work with the sponsor to gather information and ensure the document adheres to relevant regulations.

Is an offering legally binding?

Yes. The offering in the PPM The Private Placement Memorandum (PPM) serves as a legally binding contract between the sponsor (the real estate company) and the investor. This document outlines the investment's terms and conditions in a comprehensive manner, offering legal protection for both parties involved.

How long does it take to create an offering memorandum?

The time to create an offering memorandum can vary depending on the complexity of the deal and the completeness of the underlying information. It can typically range from a few weeks to a few months. However, with SponsorDocs, you can get syndication documents in less than 2 business days.

How much does it cost to create a PPM?

The cost of creating a PPM can vary depending on the complexity of the offering, the length of the document, and the experience of the professionals involved. Fees can range from tens of thousands of dollars to over a hundred thousand. However, with SponserDocs, you can get it for $6,000 per Doc Set.

What are the Consequences of Breaking a Memorandum of Agreement?

Breaking a Memorandum of Agreement (MOA) can have consequences, but they might not be as severe as a broken contract. While MOAs are formal and outline expectations, they may not be fully enforceable in court. The repercussions could involve financial penalties outlined in the MOA, damaged reputation, or difficulty collaborating in the future.

What is the difference between OM and PPM?

OM (Offering Memorandum): It serves as an investor-facing presentation highlighting key features and returns to pique interest. PPM (Private Placement Memorandum): This is an in-depth legal document with details on the sponsor, property, investment structure, risks, and projections. It's important to note that the terms "OM" and "PPM" are often used interchangeably. However, the distinction between the two often lies in the level of detail and the target audience. The OM acts as the initial hook to generate excitement, whereas the PPM serves as the authoritative source for committed investors.

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