7 Ways to Get Paid in Multifamily Syndications

One of the biggest benefits of multifamily syndication is that general partners (GPs) can generate multiple income streams beyond just property appreciation. Unlike single-family rentals where you primarily profit from rent and appreciation, multifamily syndications offer various ways to earn income throughout the lifecycle of a deal.

Here are the seven primary ways syndicators get paid:

1?? Acquisition Fee – ?? Paid at Closing

The acquisition fee compensates the syndicator for finding the deal, underwriting it, negotiating the purchase, securing financing, and raising capital. This is essentially the "finder’s fee" for all the upfront work required to close the transaction.

?? Typical Range: 1% - 5% of the purchase price.

?? Example: On a $10M property, a 2% acquisition fee = $200,000.

?? Key Considerations:

• Smaller deals often have higher fees (3-5%), while larger deals tend to be lower (1-2%).
• Lenders will not approve excessive fees, as they want to ensure alignment between the GP and LP investors.

2?? Asset Management Fee – ?? Ongoing Revenue Stream

Managing a large multifamily property is a hands-on responsibility that requires oversight of property managers, financials, and execution of the business plan. The asset management fee compensates the syndicator for overseeing the property’s performance and ensuring investor returns.

?? Typical Range: 1% - 3% of gross revenue.

?? Example: If a property generates $1M annually, a 2% asset management fee = $20,000 per year.

?? Key Considerations:

• Paid annually or quarterly throughout the life of the deal.
• Ensures the GP remains engaged with property performance.

3?? Construction Management Fee – ?? For Value-Add Projects

If the property requires significant renovations, syndicators can charge a construction management fee for overseeing the rehab process. This fee covers tasks like contractor selection, budgeting, and ensuring renovations stay on schedule.

?? Typical Range: 5% - 10% of the total renovation budget.

?? Example: If renovations cost $2M, a 7% fee = $140,000.

?? Key Considerations:

• Justified when the GP is actively managing renovations, rather than hiring a third-party firm.
• Helps compensate for the extra time and risk involved in a value-add business plan.

4?? Refinance Fee – ?? Capturing Equity While Holding the Asset

Once a property has been stabilized and increased in value, the GP may refinance to return capital to investors. In these cases, a refinance fee compensates the syndicator for structuring and executing the new loan.

?? Typical Range: 1% - 2% of the refinanced loan amount.

?? Example: If a property is refinanced with a $5M loan, a 1.5% refinance fee = $75,000.

?? Key Considerations:

• Refinancing is not always part of the plan, but when used strategically, it can boost returns.
• Limited partners (LPs) love refinances because they often get a partial return of capital while still maintaining ownership in the deal.

5?? Disposition Fee – ?? Paid at Sale

The disposition fee compensates the syndicator for handling the sale of the property, including negotiating with buyers, managing due diligence, and working with brokers to maximize the exit price.

?? Typical Range: 1% - 2% of the sale price.

?? Example: If a property sells for $15M, a 1.5% disposition fee = $225,000.

?? Key Considerations:

• Some operators waive this fee if they are already making substantial profits from the sale.
• The fee aligns with GP incentives to maximize the sale price for investors.

6?? Profit Split (Equity Participation) – ?? The Biggest Wealth Builder

Most syndicators earn a share of the property’s profits through an equity split with investors. This is where the real money is made. The profit split comes from both cash flow during the hold period and appreciation at sale.

?? Typical Split: 20% - 40% of profits to the GP (after preferred return to investors).

?? Example: In an 80/20 split, LPs get 80% of profits, while GPs receive 20%.

?? Key Considerations:

• Investors typically receive a preferred return (7-8%) before the GP earns a profit split.
• The GP’s share increases when hurdles (higher IRRs) are met, which incentivizes strong deal performance.

7?? Loan Guarantee Fee (KP Fee) – ?? Getting Paid for Taking Loan Risk

If a syndicator signs on the loan as a key principal (KP) or guarantor, they may charge a fee for assuming risk. Many commercial loans require a non-recourse carve-out guarantor or someone with a high net worth to meet liquidity requirements.

?? Typical Range: 0.5% - 2% of the total loan amount.

?? Example: On a $10M loan, a 1% KP fee = $100,000.

?? Key Considerations:

• Not all GPs qualify for loan guarantees, so they often bring in a high-net-worth partner.
• The fee compensates the loan signer for risk exposure, since lenders can come after personal assets in case of fraud or default.

Final Thoughts: Stacking These Income Streams

The best multifamily syndicators don’t rely on just one fee—they stack multiple revenue streams to generate consistent income before, during, and after the deal. Here's a typical timeline of when these fees are earned:

? Before Closing:

? Acquisition Fee

? Loan Guarantee Fee

? During the Hold Period:

? Asset Management Fee

? Construction Management Fee (if applicable)

? Cash Flow & Profit Split

? At Refinance:

? Refinance Fee

? At Sale (Exit):

? Disposition Fee

? Final Profit Split

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