A colleague of mine manages a $125M real estate portfolio on behalf of his family. He is primarily involved in value-add multifamily redevelopment projects. He typically purchases properties with a mixture of cash/debt and funds the rehabs solely with cash. We're interested in using Crowd Funding platforms as a means by which to fund future deals.
I have calls next week with a number of platforms, but was hoping those here would have raised capital can share with me what sort of Fees these platforms charge Sponsors?
pretty well mirror what a HML will charge... a little less in some markets but about the same
Zoran, I am new to this game of syndication or crowd funding. I will be watching for some answers.
Typically there will be an acquisition fee to pay for a lot of the work being done upfront that is lumped into the raise as a cost. On an ongoing basis there will be a management fee (typically sponsors are also the PMs though much of the work work is done through onsite staff is the project is big enough). The rest are not really fees but more of a split typically in some type of waterfall fashion similar to the way other it would look for sponsors investing in whole companies.
So in short I like to look at it as the sponsor is covering their costs with the relatively small fees but only really making money after I do on some type of split. Anytime this is not the case I personally would have an issue with it.
Fees are really dependent on the deal type. They're not a whole lot different than normal private equity type fees and most deals are structured with some carry with investors getting preference on distributions. This is necessary to attract capital and is a prudent and fair way to structure deals.
Zoran, I just completed a three month in-depth review of the hundred plus sites in the industry. I'm doing it from the point of view of an investor, but I did also record the fees charged to sponsors, and they vary hugely and widely, depending on the platform. The final results should be ready in about two weeks. If you want to be notified when that happens, send me a private message with your email address.