6 Ways to Make Money as a Multifamily Syndicator

6 Ways to Make Money as a Multifamily Syndicator

2 min read
Sterling White

Sterling White is a multifamily investor, specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded, Sonder Investment Group, he owns just under 400 units.

Experience
Sterling is a seasoned real estate investor, philanthropist, speaker, host, mentor, and former world record attemptee, who was born and raised in Indianapolis. He is the author of the renowned book From Zero to 400 Units and the host of a phenomenal podcast, which hit the No. 1 spot on The Real Estate Experience Podcast‘s list of best shows in the investing category.

Living and breathing real estate since 2009, Sterling currently owns multiple businesses related to real estate, including Sterling White Enterprises, Sonder Investment Group, and other investment partnerships. Throughout the span of a decade, he has contributed to helping others become successful in the real estate industry. In addition, he has been directly involved with both buying and selling over 100 single family homes.

Sterling’s primary specialities include sales, marketing, crowdfunding, buy and hold investing, investment properties, and many more.

He was featured on the BiggerPockets Podcast episode #308 and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to mindset and scaling a business online. He has been featured on multiple other podcasts, too.

When he isn’t immersed in the real world, Sterling likes reading motivational books, including Maverick Mindset by Doug Hall, As a Man Thinketh by James Allen, and Sell or Be Sold by Grant Cardone.

As a thrill-seeker with an evident fear of heights, he somehow managed to jump off of a 65-foot cliff into deep water without flinching. (Okay, maybe a little bit…) Sterling is also an avid kale-eating traveller, but nothing is more important to him than family. His unusual habit is bird-watching, which he discovered he truly enjoyed during an Ornithology class from his college days.

Education
Sterling attended the University of Indianapolis.

Follow
LinkedIn
Facebook
Instagram @sterlingwhiteofficial
YouTube
SterlingWhite.info

Read More

Join for free and get unlimited access, free digital downloads, and tools to analyze real estate.

You’ve heard the term “real estate syndication” and are intrigued yet a little confused.

What exactly is a syndication, and more importantly, how do real estate syndicators make money?

Put simply, a real estate syndication is a group of like-minded investors who pool their resources (including money and skills) in order to make larger investments than they would have been able to alone.

Like other real estate investment models, there are a variety of ways you can make money when setting up your own real estate syndications. Every syndication arrangement can be slightly different.

Not all will leverage every revenue option below. Some will even come up with their own to add. The degree to which each is leveraged can vary widely, too. It’s up to you and whomever you’re working with to craft your own model.

From experience, investor partners prefer less complexities, so the simpler the structure, the better. Just keep in mind that being a generous syndicating sponsor and leaving plenty of profit for your passive capital investors is going to be key to your ongoing success, referrals, and repeat raises for new projects.

Here are six common ways multifamily syndicators make money.

apartment-first-deal

Related: 7 Ways to Organize & Structure a Real Estate Syndication

How to Make Money as a Syndicator of Apartment Deals

  1. Acquisition Fees

One of the most common fees is an acquisition on the successful closing of a new asset. This is typically a small percentage of the value, like a real estate commission. This covers sourcing deals, screening them, and managing the transaction from start to finish.

  1. Asset Management Fee

Multifamily syndicators typically also make an ongoing asset management fee as a percentage of revenues collected. This is completely different to profit splits, and generally the role oversees operations relating to property, such as property management.

  1. Refinance Fees

There is a lot of work involved in securing a refinance for a commercial property. For long term holds, this is a regular occurrence due to loans that often mature or face major adjustments every five to 10 years.

  1. Disposition Fee

Few syndications buy and hold forever, as most investor partners want to see an exit in the foreseeable future. Assets are regularly recycled to maximize true returns. Some syndications are created specifically for redeveloping and flipping commercial properties after they’ve been renovated and performance has been established.

  1. Loan Guarantor Fee

Even though commercial mortgage loans are mostly asset-based loans, there is often a guarantor to sign off on the loan required. The more experienced and better their credit, the better the terms of the loan. That helps every partner in the syndication. It’s only fair the syndicator gets an extra risk-based fee for that service.

  1. Profit Split

There are many ways you can arrange to split profits with your partners. You can offer preferred returns to them first if you like. You will often put some cash into the deal yourself. Then, net profits will often be split 70/30 or 90/10. What you want to offer to your partners will usually determine the profit split (i.e., 12 percent cash on cash).

Summary

There are many ways to profit as a multifamily syndicator. My advice? Don’t sell yourself short, aim for desirable yet achievable gains, and be competitive but not greedy. 

Hoping to profit through syndicating in some other way? Questions about any of the above structures?

Let me know in a comment.