So I may be putting together a fund/line of equity for continual purchases of property for an acquantaince who buys and rents out homes. Is 3% equity in the properties fair to ask for?
My responsibilities are basically to put together a good presentation of his current business and pitch it to friends of mine to try to drum up commitments of about $2M a month to cover the majority of the equity that needs to be put down to purchase the properties. I may have to assist in the process of getting a system in place for tracking the investments, automating people's payouts etc.
4% seems a bit steep, but these properties are getting huge returns and the capital introductions are valuable. What do you think?
I would say industry standard for equity raise is a 3-5% fee of committed capital...getting equity in the deal itself is not the norm. Only time I have seen it done is when the sponsor is counting every last dollar and wants to leave the fee in the deal, or if the sponsor is friendly with the person who did the capital raise and allows them to reinvest their fee. Much of this is going to depend on your relationship with the sponsor and how sophisticated they are. Just go in knowing that you likely are asking for above market compensation, but probably not so much that they will laugh you out of the room.
OK. I've only worked as an analyst on the buy side, so I'm not familiar with being an intermediary, except just the process of dealing with IB's on debt or equity offerings related to financing a whole company, not a specific income producing asset.
Yeah I guess if say I were raising $30M, at 4% that's $1.2M. If I'd be allowed to invest that in the deal, I would take that all day.
The person I'm raising for is a friend, the people I'd be raising from would be primarily friends.
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