Cost/fees associated with a Syndication

14 Replies

Interested in syndicating on a smaller size multi family property. I own a few 4 unit buildings so I am not brand new to real estate. I have money to invest myself but I am also thinking of doing a syndication. I am wondering what are the fees and cost associated with doing one. I know it will vary but would be nice for some one to explain a deal they did with cost/fees associated.

thanks!

@Shane Jeanfreau

If you are doing a true syndication the paperwork will be 10-15k. If you just want to raise some private capital from friends and family think about offering a debt position. Something like I'll give you 10% interest for 1 year. Or think about partnering with somewhere where you do all the work and they put up all the capital. Syndication is really for BIG deals. 

If your going to syndicate, make sure its a bigger deal than the normal 4 units you have in your current portfolio. Fees vary by attorney. 

@Shane Jeanfreau The fees associated with syndications can be quite substantial. So you want to ensure it makes sense to take the syndication route for a particular investment (versus a different structure, such as for instance JV.)

I suggest you speak with a securities attorney first prior to making any decision. Happy to recommend one if you need.

Best!

@Shane Jeanfreau I'd definitely recommend not doing a syndication for a 4 unit property. The costs associated with the syndication will eat into your profits. In this case, I'd recommend you discuss a partnership with your attorney.

@Lee Ripma I agree that the costs will vary between $10k-20K depending on the size of the deal and the complexity of the GP/LP sides including various hurdles.

@John Fortes Definitely make sure it is a bigger deal...it's really based on the value of the deal more than the number of units in order to make the costs work with the underwriting.

@Alina Trigub You should definitely be seeking the guidance of a SEC attorney prior to moving forward. Great recommendation!

Thanks for the responses. Im not planning on doing a syndication on a 4 unit. I mentioned I own a few 4 units to show I am not a newbie in real estate trying to borrow money from people. I have had partnerships before and felt like i was the only one doing all the work so I really don't want to go that route. Im looking to buy 50-60 unit complexes and was curious on fees/cost. To get some knowledge I may be a LP in a syndication deal to learn the ropes. I will be at Brad Sumroks event on Aug 18th to try and get more info on these types of financing.

The PPM, Operating Agreement, and Subscription is going to run about $15,000. You'll need to fund the accounts. Lender will require pre-pays for property taxs and insurance. You will need to fund the CapEx reserve, and lender will likely require a few months of debt service in escrow. You might want to fund a few more months than the minimum requirement. Utility accounts will need deposits. You'll obviously need lender app fee, and often enough a good faith deposit. You'll need title and survey fees. You'll need origination fees, and lender legal fees.

That should more or less cover it.

@Shane Jeanfreau get out there and review 100 offerings. Note the "Sources and Uses" to see what costs, fees, etc a deal typically contains. Further, you'll know the difference between a good deal, a mediocre one and a lemon!  It will be valuable education and only cost you some perspiration.

All the best!

Originally posted by @Dan Handford :

@Shane Jeanfreau I'd definitely recommend not doing a syndication for a 4 unit property. The costs associated with the syndication will eat into your profits. In this case, I'd recommend you discuss a partnership with your attorney.

@Lee Ripma I agree that the costs will vary between $10k-20K depending on the size of the deal and the complexity of the GP/LP sides including various hurdles.

@John Fortes Definitely make sure it is a bigger deal...it's really based on the value of the deal more than the number of units in order to make the costs work with the underwriting.

@Alina Trigub You should definitely be seeking the guidance of a SEC attorney prior to moving forward. Great recommendation!

All solid points and great sound advice Dan! God bless!

Hi - I am a securities attorney. We charge between $10k and $20k for a syndication depending on the complications of the deal and how much money you are raising. I am happy to answer any questions. Feel free to reach out. 

Originally posted by @Jillian Sidoti :

Hi - I am a securities attorney. We charge between $10k and $20k for a syndication depending on the complications of the deal and how much money you are raising. I am happy to answer any questions. Feel free to reach out. 

 Guys, Jillian is handling a PPM for us right now. While you can find someone to do the Reg D offering for less, from experience - you get what you pay for. @Sam Grooms and I have been very pleased with Nancee, Jillian, and the rest of their team. Clean paperwork. Strong communication. And their depth of knowledge is top shelf. Highly recommend.

Just understand - the $10,000 - $20,000 you'll sped on the PPM is a drop in the bucket relative to all-in costs.

Wow awesome information! I appreciate all these responses and will for sure hold off on a syndication for now. I may just be a LP in a few syndication deals and keep attending MF events.

Originally posted by @Shane Jeanfreau :

Wow awesome information! I appreciate all these responses and will for sure hold off on a syndication for now. I may just be a LP in a few syndication deals and keep attending MF events.

 I am not sure if attending events is the ticket, but being an LP certainly gets you a look into the sausage factory :)

Feel free to reach out with more questions.