How does a real estate Promote work?
I've read a lot about investors pooling money to create a small fund where one is the GP and the investors are the LP. Generally, the GP only invests 1-10% of the acquisition or development costs and structures the deal where the LP's get a fixed IRR. The GP for finding the land/ deal would receive a promote as well as an IRR. I am wondering how this is structured, is there a profit share, what happens during a sale (is everyone prorated their portion invested) and why would an LP agree to pool resources into a deal where there is a ton of upside for the GP with little capital invested?