Ideal rate of return for investors

6 Replies

I’m trying to syndicate a deal since I have no money of my own yet. The goal is to syndicate a 30+ unit deal with private money, approximately about 1m for the down. If were to get this funded with private money, what would you say would be the ideal rate of return for the investors from 3- 10 private investors. How can I entice the investors?
@Stephen D. I think the rate of return is on a deal to deal basis.. let's say the intended rate is 10% for investors. That means you need to find a deal that has a cash on cash of much higher.. if you find a deal that is 12.5% cash on cash you can ask for 20% share as the 80% equates to 10%. Or 20% cash on cash which can equate to a 50% equity share.. Hope this helps good luck..

@hai loc gives great advice.  The rate of return requirement will vary by lender.  it just comes down to having a conversation and figuring out how to make the deal a win win.

Typical is 8-10% preferred return with a 70/30 profit split. 

Most passive LP investors are looking for 80-100% roi in 5 years. 5-10% cashflow paid quarterly too.

@Stephen D. imo syndications are not something a new investor should try. We have been investing for 10+ years and only recently felt comfortable taking investors money into our deals. Also we typically front 20-50k in due diligence and related costs to our syndication before we are able to close it. We do get that back at close but if the deal falls apart we are out that money. With a 1mm dollar raise as you indicated these costs could easily be even more. Track record is key. People will accept a lower projected return from me than they will from someone who has done less deals. Taking investors money is a big responsibility and you need to be comfortable with all the variables or you will find it very difficult to raise any cash at all

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