Raising money for a syndication

[Ben Bymaster]

Would it be possible to raise the funds needed for a syndication through an equity placement broker? If so, how would this change the fee structure? For example: there's usually a 1-3% acquisition fee when using privately raised money. Would one still be able to charge fees with money brought in by an equity placement broker?

[Brian Burke]

@Ben Bymaster there's really no such thing as an "equity placement broker" in the context that you are describing. Only a licensed broker/dealer is allowed to sell securities.  A broker/dealer would add around 10% of the equity raise for their commissions, and that's assuming that you pass their third party due diligence, which will cost you $30K to $60K out of pocket.  They'll have some minimum experience requirements and will require that you have certain internal controls and perhaps even auditing.  For a typical small-scale real estate syndication, the commissions, costs, and requirements are impractical.

There are equity brokers out there that charge 1% to 3% of the equity being raised, but they are matchmakers between experienced sponsors and institutional equity sources.  If you have less than 1,500 units and several years of experience it's hard to get much traction with this route.

There are a lot of people, on BP and otherwise, that raise capital for syndication sponsors by joining the sponsor on the GP side and sharing in the fees and promote.  I'm not sure how that all works but I'm sure someone else can elaborate.