Finders fee percentage for bringing in investors?

[Anders Jax]

What kind of percent would be fair to command for bringing investors to the table for deals?

4% first million, 3% next million, 2% next million, 1% thereafter?

What duration would you hold those percentages for (to avoid getting backdoored after a single small deal)? 2 years? 10? 

Nobody is going to intro a heavy investor and have them put $100k on one deal, you get paid, then do a $10m deal a month later and get nothing.

[Brian Burke]

The appropriate fee is 0%. It is illegal to pay a finders fee, commission, or fee by any other name to someone for bringing an investor to buy a security (which is what investing in a passive real estate deal is). 

There are two exceptions to this. The first is that a commission can be paid to a licensed broker/dealer, so if you have the proper securities licenses and are employed by a broker/dealer you can be paid a commission. Typical buy side is 4-6%. You don’t see many broker/dealer transactions in the syndication space for multiple reasons that could fill a whole other post. 

The second exception is you can be paid a fee to make an introduction. But the introduction can not be contingent on the introduced investor actually investing, nor can it be tied to how much they invest. So this introduction isn’t worth much. I would pay $0 for it.

If you are part of the general partner team you can raise capital and be paid for it either with salary or a profit share in the deal. But you have to be careful because regulators could examine if you had any other duties besides raising capital, and if you don’t it could be found that your compensation was actually a disguised commission, which is illegal. This is a case by case situation and nuances matter. So get good legal advice before proceeding.