How Do Limited Partners Get Paid in a Multi-Family Syndication Deal
Limited partners in a multi-family syndication deal typically receive a share of the profits and cash flow generated by the property, as well as a return of their initial investment. The exact terms of how limited partners are paid can vary depending on the structure of the deal, but some common methods include:
Distribution of Net Operating Income (NOI): The limited partners receive a percentage of the property's net operating income (NOI) on a regular basis, usually on a monthly or quarterly basis. The NOI is calculated by subtracting operating expenses from rental income.
Preferred Return: The limited partners receive a preferred return on their investment, usually a set percentage such as 8-10%, before any profits are distributed to the general partner.
Profit Participation: After the limited partners receive their preferred return, they may also receive a percentage of the remaining profits.
Return of Capital: Limited partners may receive a return of their initial investment at the end of the investment period, typically after a specific period of time, such as 5-7 years.
It's important to note that the terms of how the limited partners get paid are determined by the Operating Agreement of the LLC or the Partnership Agreement and that the general partner can have different terms than the limited partners.
In addition, the limited partners also receive regular updates on the performance of the property and the status of their investment, and have the ability to vote on major decisions related to the property, such as refinancing, selling the property and more.
