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Updated over 3 years ago on . Most recent reply

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Steffany Kluttz
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Typical cut for a syndicator

Steffany Kluttz
Posted

With the help of a consultant, I'm working towards my first syndication deal.  I have a family member that is leery of it being to good to be true.  Of those of you that have syndicated multiple deals, would you share your cut from the deal on average for me to show him that this is standard stuff?  (I know each deal is different making this questions challenging.)  I'm looking at 80 to 100 units.

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Greg Scott
  • Rental Property Investor
  • SE Michigan
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Greg Scott
  • Rental Property Investor
  • SE Michigan
Replied

There really isn't a "standard". 

I prefer a straight percentage.  Our last deal we took 20% plus 5% of revenue for property / asset management.  That is fairly rare.  Many syndicators use what is called "waterfall" with preferred returns for the Limited Partners but if the deal does really well, the bulk of the profit shifts to the syndicator.  You need to understand how that works.

Frankly, you need to be really careful when investing in syndications.  I've seen a number of deals where the syndicator is getting paid fees for just about everything they do, closing the deal, managing the asset, managing construction, refinancing the deal, and selling the deal.  In those cases, the syndicator is getting rich even if the Limited Partners lose money.

Caveat Emptor.  Read the fine print

  • Greg Scott
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