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A capital raiser for a multifamily syndication is a person or entity that raises money from investors to purchase a multifamily property. Profiting as a capital raiser for a multifamily syndication typically involves earning commissions or fees for your services. The amount of profit that can be made depends on a number of factors, including the size of the property, the amount of capital raised, and the success of the investment. In this post, we will dive into the ways that someone can profit by raising capital for a multifamily syndication.
1. Commissions: Capital raisers often receive a commission based on the total amount of capital they help raise for the multifamily syndication. This can be a percentage of the equity or the total capital raised, typically ranging from 1% to 3% or more, depending on the specific agreement.
2. Upfront Fees: Some capital raisers charge an upfront fee for their services. This fee can vary widely depending on the complexity of the deal and the value of the capital being raised. It’s important to structure these fees in a way that complies with securities regulations and doesn’t create conflicts of interest.
3. Asset Management Fees: In addition to commissions and upfront fees, some capital raisers may also negotiate ongoing asset management fees. These fees are typically a percentage of the assets under management and are paid regularly as long as the investor’s capital remains invested in the syndication (i.e., disposition/sale of the asset).
4. Profit Sharing: In some cases, capital raisers may negotiate a share of the profits generated by the multifamily syndication in addition to their fees and commissions. This can be a way to align their interests with the success of the investment.
6. Referral Fees: Capital raisers may earn referral fees for introducing potential investors to the syndication, even if they don’t personally invest in the deal. These fees can be a one-time payment or a percentage of the investor’s capital.
7. Combination of Fees: It’s common for capital raisers to structure their compensation as a combination of commissions, fees, and profit-sharing arrangements. The specific terms of the compensation package should be negotiated and documented in a legal agreement.
Conclusion
It’s common for capital raisers to structure their compensation as a combination of commissions, fees, and profit-sharing arrangements. The specific terms of the compensation package should be negotiated and documented in a legal agreement. More so, the compensation of the capital raisers should fit with the economics of the deal. In other words, the compensation of the person who is raising the capital should not drastically change the returns of the deal so as to make it no longer worth undertaking.
I’ll note here that Capital raisers may invest their own money in the syndication, becoming equity partners alongside other investors. This can provide them with a share of the property’s cash flow and potential appreciation while still earning their fair share of fees for introducing investors into the syndication.
It’s essential to note that working as a capital raiser for multifamily syndications involves compliance with securities laws and regulations. You may need to obtain appropriate licenses or registrations, and you should always consult with legal and financial professionals to ensure that your compensation structure is compliant and ethical.
If you have any questions regarding the terms and concepts in this post or previous ones, don’t hesitate to reach out to either me (tedi.nati@jpacq.com) or someone on our team so we can help explain what is causing the confusion. If you’re interested in investing with us at JP Acquisitions, you can contact us via email (contact@jpacq.com), LinkedIn, Instagram, or our investor portal to set up a meeting.
As always, I hope you enjoyed reading this post as much as I have writing it. Best of luck!
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About the Author
Tedi Nati is the Managing Partner of JP Acquisitions. In his role he is responsible for broker outreach, establishing deal flow, underwriting, marketing, and assisting in the closing process. In addition to his role at JP Acquisitions, he is an Assistant Equity Underwriter at Cinnaire, a non-profit Community Development Financial Institution (CFDI). In his role at Cinnaire, he is responsible for assisting the underwriting team in evaluating and structuring real estate equity investments and assessing the risks and mitigants associated with such. Tedi earned his Bachelor of Science in Finance from DePaul University, where he graduated Summa Cum Laude. In his free time he enjoys reading, looking for multifamily deals, and working out.
Make sure to always do your own research before making any final decisions on buying/investing real estate, stocks, or other securities. I am not a CPA, attorney, insurance, or financial adviser and the information in this blog post shall not be construed as tax, legal, insurance, construction, engineering, health and safety, electrical or financial advice. If stocks or companies are mentioned, I sometimes have an ownership interest in them – DO NOT make buying or selling decisions based on my posts alone. If you need such advice, please contact a qualified CPA, attorney, insurance agent, contractor/electrician/engineer/etc. or financial adviser.
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