GP & LP Investor Payout Math

[Nicholas Kitchen]

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.