How do Multifamily investors make money?

[Arturo Borges]

When structuring a syndication deal geared towards apartment building acquisitions with a value-add strategy, how do General Partners make their money? More specifically, how does the smallest General Partner (1.5%-2.5% equity) makes their money? Is it a 1.5%-2.5% of the entire disposition amount? Or just the capitalization through renovations, etc. So that small 1.5%-2.5% General Partner would only make money at disposition and the percentage is based on?

[Account Closed]

@Arturo Borges

Equity investors are always #1 & they get paid their returns 1st.

When we syndicate deals, if the Deal allows for it, we can possibly earn income in the following 1-5 ways:

Acquisition Fee: paid at closing 

Asset Management Fee: paid quarterly over the life of the investment 

Capital Transaction Fee: paid at refinance - if there’s a refinance 

20-30% Of Cash Flow: paid quarterly over the life of the investment

20-30% Of The Profit: paid at refinancing &/or disposition of the investment

The way these are split is determined & agreed on by the General Partners. All are disclosed to Equity investors aka Limited Partners. Again, the Equity investors are always #1 & they get paid their returns 1st. We work in things like an asset management fee, for example, if the Deal is really "Juicy" and allows for it while maintaining an attractive ROI for the Equity Partners.

Hopefully this Helps-

To Your Wealth,

Dino