5 • 1.1K Ratings
🗓️ 2 May 2023
⏱️ 13 minutes
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Welcome back to this week's segment of the No Limit Minute! This week we're discussing how syndicators get paid. We'll look at the specifics of cashflow in these deals, acquisition fees, and more!
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0:00.0 | What is happening everybody? Welcome back to this week's segment of the no limit minute, |
0:08.8 | obviously trying to keep it brief, but I always feel like I end up going way over the three |
0:12.7 | to five minutes that I initially anticipated this segment to be, but that's because we |
0:16.6 | got good solid info that we're giving out. So what I want to talk about today is something |
0:21.2 | that a lot of people have wanted to chat with me about in recent weeks, recent months. |
0:27.6 | Who was just wanting to know more about the specifics of cash flow? And what it actually looks like, |
0:36.0 | if you as an investor, as a sponsor, someone who's actively going to go and syndicate a potential |
0:44.6 | large scale commercial deal, what is the cash flow legitimacy look like for the GPs? How much |
0:51.4 | money can basically be made through the fees, through the equity? How much of this legitimately |
0:57.5 | passive versus how much needs to be extremely active? So I want to try to break that out, |
1:03.3 | just a little bit of my handy dandy calculator with me here today to try to do some math with you |
1:09.6 | guys. So let's use an example investment deal of $5 million. Let's say we're buying whatever, |
1:17.9 | 50 units, property that is worth $5 million. And we have to raise a million dollars of equity |
1:27.2 | for this deal. So million dollars of equity we got to raise $5 million deal. The very first way |
1:34.4 | use a sponsor are going to get paid is by charging what's called an acquisition fee. I'm sure most |
1:40.2 | of you have probably heard of this fee before. Most of you have probably have maybe been in an |
1:46.0 | investment before that has charged something of this caliber, but we don't entirely understand |
1:50.2 | how it actually functions, how it operates, or what the industry standards are for percentages |
1:56.5 | for what's usually charged. So an acquisition fee, industry standard is in between one to three |
2:01.6 | percent of the purchase price being charged, basically to your investors and you as the sponsor, |
2:08.6 | as the the syndicator will be paid that fee at closing. Once you raised all the cash, you've done all |
2:14.7 | the due diligence, sourced the deal, you've got done everything you needed to do, get the loan, |
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