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Updated about 1 year ago on . Most recent reply
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GP & LP Investor Payout Math
I'd love for someone to go through some math here. Everything I read talks about the pref and splits and percentages, but I don't know percentages of WHAT? Of the NOI, of the cash the LPs invested? Both?
Here is what I'm looking at:
46 Unit Apartment Building / Purchase price: $5,000,000
Rents are at $1k/month, 90% occupancy, with a 45% expense ratio. Brings NOI to: $322,920 (CAP: 6.45%)
Assumable Fannie Mae loan at 4.25% IO with a balance of $3,500,000 ($157,500 annual payments). IO runs out in 2028.
If I raised $1,500,000 (30%) at a 6% pref, how would you pay back your investors?
Distributions made monthly.
6% Pref to LPs
>6% to 10% to GP
>10% 70/30 split (LP/GP)
1. In this scenario, $322,920 NOI - $157,500 IO payments - $90k investor 6% pref = $75,420 remaining.
2. Do you take that $75,420 and divvy that up next?
I'm just kind of lost where the calculations come from next.
Thank you.
Most Popular Reply
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- Attorney
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Nobody can appropriately comment on your question without reviewing the partnership/operating agreement. There is no set structure and is dependent on the terms of the agreement.