How Does the Sponsorship Team in a Multi-Family Syndication Get Paid

The sponsorship team in a multi-family syndication typically receives a management fee and a percentage of the profits generated by the property. The management fee is a recurring fee that is paid to the sponsor for managing the day-to-day operations of the property, while the percentage of profits is a performance-based incentive that rewards the sponsor for making the deal profitable.

The exact terms of how the sponsorship team is paid can vary depending on the structure of the deal, but some common methods include:

• Management fee: A flat fee, typically around 2-3% of the gross revenue of the property, paid to the sponsor for managing the property.

• Promote or Carried Interest: A percentage of the profits generated by the property, typically 20-30% which is paid to the sponsor after the limited partners receive their preferred return and return of capital.

• Acquisition fee: A one-time fee paid to the sponsor for finding, negotiating and closing the deal, typically 1-2% of the purchase price.

• Asset management fee: A percentage of the gross revenue of the property paid to the sponsor for managing the property, typically around 1%.

It's important to note that the terms of how the sponsorship team gets paid are determined by the Operating Agreement of the LLC or the Partnership Agreement and that these terms should be clearly outlined in the offering memorandum or private placement memorandum.

In addition to the monetary compensation, the sponsorship team also receives the benefits of owning a percentage of the property, such as appreciation and any depreciation benefits.