LaRock Capital Partners’ Post

Transcript

Want to know how everyone gets paid in a real estate syndication? In my last video I talked about the role of a general partner and limited partner. Today I'm going to give you the top five ways a general partner gets paid and #5 is very important in a multifamily syndication. General partners typically earn their compensation through these five ways #1 acquisition fee and upfront fee, usually a percentage of the properties purchase price as compensation for all the work that goes into identifying, evaluating and acquiring the property. Number two, straight split. This is simply the way that the cash flow and profits are divided between the general partner and the limited partners. Typically it's 20 to 30% to the general partner and the rest to the limited partners #3 asset management fee. This is a recurring fee, typically a percentage of the properties gross monthly income which compensates them for overseeing the properties, operations, financial performance and business plan #4 promote or carried interest. Sponsors may receive a promote or carried interest which is a share of the profits. Generated by the investment which exceed a certain level and #5 Co investment sponsors sometimes invest their own money alongside the investors demonstrating their commitment to the project. They earn returns on their Co investment just like any other investor, but it's dependent on the size of their investment. We do this at Larock Capital as a way to put our own skin in the game so our investors know that we are alongside them for the ride. It is important to note that compensation structures vary from 1 syndication to another and the terms are. Subject to negotiation based on factors like sponsor experience, track record and the complexity of the deal, is recommended to thoroughly review the syndication agreement and discuss the compensation structure with the sponsor to fully understand how they will be compensated.