We are looking to put together a fund for investors… family and friends to begin… this is not a pitch. If anyone has done this, how have you structured the waterfall splits? And have you incorporated an annual, semi or quarterly distribution? These are park owned homes in great areas with near 0 vacancy.
Thanks to anyone that replies!
I would suggest first engaging a securities attorney and perhaps asking what he or she commonly sees for funds. I think it really depends on a variety of factors (skin in the game, track record, experience, etc).
Have done a few JV and syndication deals with waterfall provisions.
Lots of good options depending on the project and the situation. Happy to share ideas if you would like to get in touch.
Preferred return of 9/10/11 yrs 1, 2, 3+ with 50/50 backend LP/GP split. GP collects 2% acquisition fee, 1% financing fee, .5% guaranty fee, 1% disposition fee, 1% asset mgmt fee. We also have a related entity that manages the properties. Our pref is higher than most others we see but we have a large pool of people who have invested with us for a while and this is what they’re used to.
Cott Law out of atlanta is your guy for ppm, legal docs, entity formation, etc. He’s a small shop but extremely well known in the alt space. Can recommend fund administrators and auditors as well. Would highly recommend both for maximal CYA. Also saves you a ton of work on the administrator side.
Thank you. So helpful.
Thank you. May be doing so here in a week!
Very insightful response, just sent you a message regarding a deal we’re working on.
Patrick,
Can I shoot you an email too? I’m on the last leg of approvals from the city on a new development MH park. I’m trying to figure out how to structure the deal if I go get outside money from 1 or 2 family members.
Of course. Happy to share our experience and ideas.
Nice structure. What are your typical GP/LP equity contributions in a deal like this?
Exactly how I started with family and friends. Save yourself time, take your investors investement/ pref return/ divide it out to make monthly set payments that are set on autopay. My earlier splits were determined by what the investors were looking for? passive income immediately/long term larger gains. security/risk. Most people not used to investing will always pick the higher upfront returns over the longterms gains.
LPs contribute all capital. We (GPs) also put money in and participate as LPs.
Thanks Jake.
I should have been more clear with the question - I meant what are your typical % GP/LP equity splits? In other words, in a deal with $1M total equity required, what % would typically be contributed by the GP and what % by LPs?
Its totally up to you and what your docs say. GPs don’t HAVE to contribute anything; its really the point of the fund in general - leveraging OPM.
Example: if we were buying that park for 1m then we’d get a mortgage and raise the remaining + day 1 capex from the LPs. The LPs may contribute all the money on the front end but the back end splits after return of capital and payment of any accrued pref will be 50/50 for us.