Does anyone have any examples of GP ownership % breakdowns from syndicators- in terms of what % of the GP a given party by doing a given part of the deal? Like finding the deal, managing deal operations on ongoing basis, raising money, etc.
Example, in the GP relationship the person who brings the deal is entitled to X% ownership, the person who manages property gets Y% ownership, person who raises money gets Z% ownership and so on.
Would love to see some examples of typical percentages for doing a given part of the deal from other syndicators.
The last two deals purchased were structured as follows: Sponsor (myself) found the deal, negotiated contract, did all due diligence; fronted the earnest money (returned from investor funds at closing). Investors receive 8% preferred return on net cash flow until all of their principle is returned. Cash flow over 8% is split 80/20 between investors / sponsor. After investors receive all principle back the split goes to 50/50 on cash flow. Investors will receive return of principle at the refinancing within 4 years. hope that makes sense.
After 4 year refinance, do investors remain equity partners, or is that a cash out event for them?
My understanding is that they are all negotiable. Like @DCinvestor, I also would appreciate some logical way to arrive at a % breakdown for each person involved.
Excellent question. Most of the syndications/funds that you see out there have a preferred return plus a split (8% plus a 70-30 split, for example) but there are always several other associated fees (off-site property management, acquisition, disposition, rehab management, refi, etc.). I’ve wondered what is actual percentage of the profits that an investor receives after all the fees (I’m not trying to say any or all of those fees aren’t justified BTW). If a sponsor didn’t take out/charge any fees and did all that work themselves, would an investor make more or less money on their investment if they bought into a deal at say 25% (so they’re supplying all the down payment) and got 25% of all profits? Probably too many variables to answer that question.