They will eventually arrive at a "fair" value - that they determine.

We see typically 1-3 % for acquisition fees (keep in mind money is spent by sponsor in due diligence that can be lost if determined not to purchase so some risk there for GP), 1-3% for asset mgt fee to manage the property manager and ensure the business plan gets implemented, disposition fee of 1% optional.

I am new to Real Estate investing and trying to determine what market works best for me.  

On that note, this website has really useful calculators that you can use to create a sort of 'analysis' that can help you determine up front as an investor if the property is going to have a decent rate of return on investment.

If he has no experience how has he determined what the best answer is?

Simple as that.If you are funneling funds from a plan funded transaction into an arrangement elsewhere that benefits you, that would be in violation of the IRS rules and could result in very severe tax consequences for your plan.  

Everyone has to determine for themselves what their comfort level is, but you also need to be critical of your own motivations, are you investing to maximize your profits, or looking for a hobby to spend your Saturdays on?

In order to monetize, you really need to determine the status of title.

You will cut a check to the IRS for $1,428k, leaving you with $2,652k or a after tax cash on cash of 7.8%Rental property investment:$34k down payment on a $150k building.

@Brett Snodgrass thank you for the advice; I definitely will be sure to determine what my values are and uphold them to ensure a long, reputable career.