Invest Your Own Capital in Your Apartment Syndcation?

[Lee Yoder]

So, I've been looking at a smaller apartment building (48 units) in SW Ohio. I want to syndicate this deal. I've heard many say you should invest your own capital in your syndication because it shows that you really believe in the deal and have your own skin in the game. When running the numbers on this specific deal (and I think other deals like this would have the same issue), I don't see how investing my own money makes sense for me. Here are some basic numbers as I see it:

Purchase price: $1,800,000

Down payment: $360,000  

Closing costs and rehab costs (lots of rehab and expecting high turnover) $140,000

Total amount invested: $500,000

Expected annual profit after mortgage: $70,000

Preferred return of 8% to investors ($40,000) and then 70/30 equity split (LPs: $21,000, GPs: $9,000)

So, if I syndicate this deal with a partner (I don't like the idea of syndicating on my own) we would each make $18,000 for the Acquisition Fee, then $2,700 each for the Asset Management Fee, and then $4,500 each as our part of the equity split.

My total profit in year 1: $25,700. I'd be thrilled with this profit. This would feel like a great payoff for all the work I've put in to make this deal happen and then manage the asset as we get it turned around. My profit in year 2, 3, 4 etc would only be $7,000-$10,000 as we get the property turned around, but that's okay because I know I'm building lots of equity in the building which will payoff for myself and all of our investors when we refinance or sell in year 3, 4 or 5. Also, I will be syndicating more deals each year for which I'll be compensated like I was for this deal in year 1.

Now, if I were to invest my own money, say $25,000, my profit for year 1 would be $700 plus my 8% preferred return of $2,000, so $2,700 total. That does not feel like a good payoff for all the work I put in. In this scenario, my only way to really be paid well is to refinance or sell. This means waiting 3-5 years to really see a good profit from this apartment syndication. If I were a guy that had a lot of money to invest, this would not bother me, but I am trying to build my wealth right now. I'm not in a position where I'm simply trying to grow and preserve my wealth like I assume many of my investors are.

Am I thinking about this incorrectly? Is this deal just too small to syndicate?