How do you make money via syndication? (Buy and hold)

[Travis Doyle]

Hey folks--trying to setup a fund to attract some private capital and was thinking of two options to structure it.

A) we dilute our investors equity and cut ourselves some, maybe 20%

B) offer them a preferred return

It seems like most people go with option B, but how?

Let's say I am working with a 12 cap, bought for 100k, 12k in NOI with a 10% pref return, where I split profits above 10% with investors 50/50. *I am not invested at all.* How do I make money on this? Am I thinking about this correctly?

1) I pay 10,000 to the investors

2) I then pay the remainder of the profits until everyone is paid back

3) once everyone is paid back 100%, then I start my profit sharing after the 10% hurdle is reached and pay myself 1,000

The problem being is that we do not have a "liquidity event" to speak of after we purchase the home, we just hold...so as a sponsor, am I supposed to wait years down the line until everyone is paid back in full before profit sharing after the 10%?

Why would anyone do this? I would have to wait years to make 1,000 dollars off this deal.

If you have experience in this field and would love to chat, I am all ears. Just let me know!

Thanks