What are the ways in which you end up getting paid if you raise a small fund and work to execute x investment strategy?
For simplicity's sake let's say you're just running this on your own, with help from whatever necessary third parties - if you were able to raise $20m in equity for a mulitfamily fund that would make 2 acquisitions and look to complete 2 development projects - how would you get paid?
You'd "take home" your 2 acquisition fees and then 2 dev fees upon completion of construction? Along with whatever split you work out with your investors?
If anyone has any experience or info on smaller fund comp structures like this I would really appreciate any input
You could do a percentage on the equity raise itself, then on the acquisition, then the property management IF you run it yourself, also an asset management fee. Also pay yourelf a developer fee and incorporate fees you would normally pay out of pocket like payroll, acounting, legal.
would this not start to become dilutive of your investors returns right out of the gate? I assume you would be paying yourself directly from the 20m that you've raised - have investors ever been vocal about this issue?
They're pretty standard fees - someone is going to get paid regardless, why not you?
Lots of vertically integrated firms take an AM/PM/Dev fee in addition to whatever their share of the negotiated return structure is.
Throw in a PG fee of 1% on the debt as well. I have seen that in a family/friends fund.
sorry, what do you mean by PG? or you just meant OG for origination fee?
personal guarantee
PM Fee % AM Fee % (on equity) AM Fee % (on NOI) CM Fee % (on TIA/CapEx) Dev Mgmt Fee % (on Dev budget HCs)
Plenty of ways to structure.
Yes these fees are dilutive to your LPs unless they are under the tent with you.
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