BHB Group LLC - How do Syndicators get paid?

Why Not? Real Estate Podcast

Whats up all of our "Why Not Real Estate" peeps? In this edition of the Golden Nuggets we are going to unpack "How do you syndicators get paid?"
1. Profit split:
The profit split, and the syndication is the split between the general partners who are bringing the deal to the table in the limited partners who are investing in the table. The general partner can invest into the deal, the same as a limited partner would. Then the general partner would receive the same carve out on the split that the limited partners proportional to the capital contribution. If the typical deal is a 30/70 split, with 30%, being the general partner, and 70% being the limited partners, then the GP general partner side of the car vote is 30% of the deal with 70% of the deal going to the limited partner.
2. Acquisition fee:
The acquisition fee is an upfront fee paid to the general partner at the closing table for bringing the deal together and all of the moving parts involved with closing the deal. A typical industry standard for an acquisition fee is 1% to 5% of the total purchase price of the property. The general partner sometimes will take the acquisition fee and put it into the deal as capital contributions to receive a car vote on the profit split.
3. Asset management fee:
The asset management fee comes from the sponsor managing the property manager. On a weekly basis, they will get on a call, a zoom call, or even fly down in person to meet. During these meetings, the property manager will benchmark the progress on the business plan to improve the property. The asset manager will then disseminate that information to the investors to keep them apprised of the situation. The asset management fee could be 2% of the collected monthly income, or it could be set as a flat rate fee of $150 up to $250 per unit annually. This is a fee to manage the property manager and disseminate reports and information to the limited partner investors.
4. Refinance fee:
The refinance fee is paid to the sponsor to cover the expenses for the amount of work required to engineer the institutional refinance of the property. This typically is a range of .5% to 2% based on the new total loan amount. If there are hurdle targets set in the operating agreement, for example, 50% of the investors capital is returned upon the refi of the property, then the refinance fee could kick in. This can be triggered by a tiered agreement. It all depends on the size of the deal, the amount of the refinance amount, the amount of equity achieved in the refinance, and any target hurdles outlined in the operating agreement.
5. Guarantee Fee:
The guarantee fee is typically a one time fee paid to the loan guarantor at the time of closing the deal. Bringing on a guarantor for the loan can help secure better terms on the financing. For larger deals lenders will require the general partner to have a sponsor on the team with the net worth to cover the loan amount plus the property reserves required by the lender. This can be one sponsor with the total net worth, or a combination of the general partners with the combined net worth. But the net worth should be equivalent to that amount. The guarantee fee can be as low as half a percent, and as high as 2% or as high as 3 1/2% to 5% of the principal balance of the loan. All the general partner may offer the guarantor, a percentage of the general partner portion of the deal. That again could be anywhere from half a percent to 30% of the general partners profit split. Or this could be a combination of both a guaranteed fee in addition to or instead of a profit split in the deal.