Let's face it, we syndicate not
just because it's fun, but
because we want to make money.
And not just money for our

investors, but money for
ourselves. And the work that you
put in as a syndicator should be
paid, and you should be paid

well. But any complexity that
comes in on fees or promote,
will start to scare away
investors. So we're gonna go

through the different ways that
you get paid, whether that's
through fees, or broker fees, or
the promote. setting this up,

right. And understanding this,
when you start putting a deal
together leads us into a
conversation that we'll have in

the next module, talking about
financial analysis. But right
now, we need to understand what
the whole gambit is in terms of

fees, in order to be able to
have those conversations with
investors, and know that we're
going to be not wasting our time

in putting this deal together.

When it comes to fees, and
promote, I have seen some pretty
complicated setups, one of the
things that we share on through

our altitude syndication
founders club is we went through
a whole bunch of PMS, that had
all of the fees laid out and had

all of the Promote laid out so
that we could see that whole big
range that exists between good
and bad, and what some people

are charging and what others
aren't, to try and see what kind
of what kind of mechanisms exist
out there. Now, I've seen what

works, and I've seen what
doesn't work. And I've heard
from investors, what they're
looking for. And I've heard from

investors, what they've gotten
scared by, you would be very
surprised at what some of the
tops indicators are getting

being incredibly generous for
themselves. And also some great
syndicators that leave
significant amount of money on

the table, and don't take that
for themselves that they totally
could. So let's dive right in
and start talking about fees

first. When it comes to fees, I
will let's add a little bit
broader topic. I like to break
this up into three different

categories. We have fees, we
have broker fees. And we have
the promo. I do this because
fees are what you earn on a

recurring basis for the work
that you put in, as the deal is
going and after, you know, after
it's closed, all that money that

you'll be making. There's also
money that takes place at the
very beginning. But this is for
your direct labor, you can think

of this as your income, right?
income and wages. You were
basically hiring yourself, in
order to do these things at

whatever that rate is the broker
fees, I think of sort of as a
bonus. So it's a crossover
between what you do as a

syndicator. And what you may be
doing as a real estate agent. So
this can add a significant pop
to the to what you get in terms

of income. But it is also still
your income and wages. And then
the third category is the
promote. And so I call it the

Promote, this is the money that
you're making, basically on the
equity of the deal. It's the
participation that you're

getting as part of the of doing
that deal. So let's look at them
in. Let's look at how these kind
of play up. So fees, we're just

gonna list out a bunch of common
fees that people get. And I'll
give you a basic range. But
again, these are the fees, the

broker fees, and the Promote are
radically different from deal to
deal. There are some that are so
different. It would be hard to

encapsulate it in the same
scheme that we're talking about
here, but are totally doable and
some syndicators have been very

successful at making a
significant amount of money. So
the first and probably the
easiest to think of fee that

that exists is property
management fees And I should
also say that any of the fees
we're talking here do not need

to be charged. So these are all
your options that exist, that
isn't anything that you have to
take or that will necessarily

even work with your deal. So
Property Management feeds now
this is the day to day
operations of the property,

collecting rents, making sure
that cams are getting are
getting paid, that work is being
done making sure there's any any

tenant concerns or repairs are
getting done. All those things
that a property manager does.
Typically, this is between three

and 5% of gross income. But it
depends on property type. That's
the typical property management
fees, yours could be higher or

lower, often very closely
related to property management,
is your construction fees. In
this oftentimes in an existing

building is managing your T eyes
and capital improvements. Now I
see most of the time, I guess,
between five and 10%, I should

put a percentage here.

grossing 5%, five to 10% of
construction budget. Normally,
this is hard costs.

Then we have your asset
management fees. Now this is for
the work that you do as a
syndicator. So it's, you know,

making sure that the accounting
gets done the communications
with investors, all those things
that we do, as in order to run

the asset or the portfolio of
assets, typically, this is
between one to 2% of noi, or
I've even seen it as like 0.5%

to 1.5% of the equity. Now,
typically this will be much
higher. But it really boils down
to your deal and what you think

makes the most sense. You know,
if I would, we'll talk about how
to come up with these numbers in
the financial analysis section.

But this is, this is the typical
range for them. Now, a lot of
times there is an acquisition
fee. And the acquisition fee is

for all that work that takes
place as the buyer of the
property, you still have to
coordinate all of your

inspections and make sure all
the things get set up that need
to get set up. A lot of times
this is one to 2% of the

purchase price. And this is very
common a lot of times to I'll
see the acquisition fee charged,
and then sunk back into the

investment to buy you equity in
that deal to buy you your own
membership units. So it's money
that's that's paid, but it's not

paid as cash that you've
necessarily put in your pocket.
And with any of these, you
really do have that choice as

well be a little bit different
on the recurring things, but
your acquisition fee absolutely
could be then you have a

disposition fee. And this is
also one to 2% of sales price.
And this is putting together all
the due diligence materials and

helping to select the who's
going to be the buyer. And then,
lastly, is your finance fee.
This is a little bit less

common. It definitely is it
takes place. But maybe it's in
maybe 25% of the deals that I
see. So it's not a huge number,

but it is it's certainly not
uncommon. And this is oftentimes
1% of the loan amount. And this
could also be looked at as a

kicker in order to say, you
know, in exchange for me signing
on the loan, I get this
additional money as well. So I

get that 1% Because I'm signing
on the loan. So those are the
typical fees that we see. Now I
like to separate that from

broker fees because they're kind
of different Right fees as a
syndicator is you as a
syndicator. Whereas your real

estate agent fees, those are
fees that you are making as a
real estate agent. So you can be
wearing two different hats at

the same time as a broker or
real estate agent, I mean, we've
got our acquisition or
acquisition fee

or disposition fee

and our leasing. And a lot of
people ask, Is it okay? Isn't it
a conflict of interest to be
taking a real estate commission,

at the same time that I'm I'm
taking the money as a
syndicator, it absolutely is a
conflict of interest. However,

that doesn't mean you can't do
it, you just have to disclose it
and make sure it's really clear
all the money that you're going

to be getting as a syndicator.
So that way, the investor can
make an informed decision for
themselves whether or not to

make that deal. They know where
it is. But still, you should act
as a fiduciary first to your, to
your investors. And then you can

think about those fees for
yourself. At the end of the day,
you do need to make money, but
you got to do it in a fair way,

and you are a fiduciary first.
So in terms of acquisition fee,
you probably know this, this
tends to be one to 3% per side,

it is probably a little
disingenuous to do an
acquisition fee, in Act, to take
from a seller of a property to

for a selling agent, and to be
the buyer's agent. So basically,
to double end the deal. The way
I've done this in the past is I

didn't take an acquisition fee,
when I represented the seller, I
just took a much, much larger
oops, acquisition fee, in order

to make up for those real estate
agent fees. So that's how I did
it. That way, the seller didn't
feel like I was taking advantage

of them by asking for a real
estate commission, because I
really wanted that deal. So I
did it in through there,

disclosed everything, of course,
and made sure that everybody
knew look, I'm not going to be
making a real estate commission.

And so I am going to be
charging, I think I charged 4%
of the purchase price as an
acquisition fee on that end. And

at the time of disposition, I
would be selling that property
and repping as you know,
according to market rates, which

is one to 3% per site. Now, is
it ethical to double and a deal
on the disposition? Probably not
but really take a look at your

local rules, it probably isn't
equitable in order to do that,
now you can double land the deal
sometimes if the buyer is not

represented, and lets you just
take the total commission and
then there's your leasing
commissions as well, which runs

hugely depending on what kind of
property it is. But really we're
looking at two to 3% of the
total lease value for your site

as the the owner site

these are the typical fees that
we see in a syndication now when
it comes to promote. Promotes
can get extremely complicated

with waterfalls with 13
different levels and 42
different share types and
classes and subclasses I think

my opinion I think it gets
overly complicated and the more
overly complicated you make it
the more it's going to scare

investors off. But here is the
the three ways that I see the
Promote most often. The first is
my favorite and I call it the

sponsors equity this is
basically you getting a share of
the deal right from the get go.
So say there is a building that

you're buying and you've got
three investors and you rather
than splitting this out up a
third, a third, third, sponsors

equity basically says, Okay, in
this scenario, it would be
something like, well, we're
actually going to give the

sponsor 10%. Equity in the in
the deal from the very
beginning. And so the the
investors are all getting 30%

rather than the 33%. What this
does, just so we're clear is it
front loads all of the ink all
of the money to you. So there is

no downside risk to you, because
you've gotten 10% of the value
of that property from the very,
very first day. So just know

that going in, because your
investors will probably ask you
about it. And they certainly
have asked me about it when I do

these kinds of deals. And I'm
very upfront about it, I do not
hide it whatsoever. And the
reason why I can do this is

because this property that I've
identified here is a really good
property, it's worth
significantly more than the very

day that we're buying. And so I
put in all this work and putting
this deal together. And so
therefore, I'm entitled to get

that property, I'm also incented
to make sure the property is run
as efficiently as possible in
order to maximize the investment

not only for you, but my
interests are completely
aligned, because I want that I
want that property as well. So

the second way to do it is what
I call the harvest promote. In a
harvest promote is very similar.
But let's say at the time of

disposition is when we see at
the most. So at the time of
disposition, we returned back to
the investors, the amount of

capital that they paid in,
right, so we return that
capital, and then

we pay 10%. For example, if
that's what the amount is, of
the rest of the money of the
total profit to you the

syndicator.

And then we split the remainder
we'll put that the net that's
the remainder

to your investors. So this is a
good deal because it takes a
gets you paid right away no
matter what on the appreciation

of the property. So you are more
in line than than other
structures. But then you are
still returning that capital. So

it's not the the the 10%
basically free money that you're
getting right here. It's it's
10% of that profit that takes

place there. Now can you do both
a harvest per mil and a
sponsor's equity at the same
time? Absolutely. It would look

something like well, I'm going
to get 10% of the shares in
exchange for it. And I'm going
to get also 10% of the income

after the contributed capital
gets paid back. Most of the time
when we do it, by combining it
will say give a different buy in

amount. So say I will buy in for
5% but I'm actually getting 10%
So I'm getting a discount on
that amount. So basically I'm

getting sponsors equity of 5%
there and then as a as something
on top, then I get 10% of the
money here. So then I'm still

getting that 10% kickback that I
bought for 5% that took place
here as part of that capital
return. But then I also am

getting this syndicator that's
10% of the net as my harvest
promote. And the third is your
preferred return

and or water All. I don't really
break these out. Because, though
extremely common, probably way
more prevalent than the other

two mechanisms, there's a lot of
different ways to do it.
Typically, what you'll do is
you'll say, you've got this

building at the time of sale, or
actually really at any time 8%,
let's say I have an 8% pref.

My clients make, I make sure
that they get 8% Off the top
right away of their contributed
capital, as on an annual basis,

so a percent, and then anything
that's left, so say there's an
additional 2% gets split 5050
And then a 5050 split.

This is where people get really,
really complicated. And I don't
think it really does anybody
much good. In my own personal

opinion, you may decide
otherwise, and you're perfectly
welcome to do it. I just found
it gets so confusing with

investors seeing too many
numbers, they just don't get it
and it to me that time scares
investors away. Your mileage may

vary. And so something like that
may look like, Okay, well,
there's going to be an 8% an 8%,
preferred return. And then

everything from from the eight
to 10%. And that that's just a
straight across the board
preferred return everything on

the eight per eight to 10%
preferred range. So as soon as
we get above eight, and we get
10% on the deal, then we've got

a split of, say 80% to the
investor. And then and 20% to
syndicator. And then maybe from
10, to 12, maybe it's 65% to the

investor 25 to the syndicator.
I'm sorry, 35 to the syndicator.
And then anything above 12. It's
split 5050. To me, that just

gets way too complicated and and
just makes more of a mess than
anything else. It investors get
really confused unless you have

a CPA or a finance majors or
engineers as your investors,
they probably won't like it
getting this complicated. This

isn't bad. This makes sense.
This is what they see every day
anyway. So those are totally
acceptable. Just be cautious

when you start getting too
complicated, because it just
doesn't do a lot of good. So
think about what makes the most

sense for you and for your
investors. And because you're
going to be using these numbers
when we do our financial

analysis. So we can try and find
a deal that you can really put
together that will make you as
much money as possible, but also

has a good fit with your founder
investment theory are a fit with
your fit, and also something
that your investors would be

naturally drawn to and want to
invest into