Syndication Part 2: 11 Ways To Profit Fr...

thinking Okay… Today’s lesson is a bit difficult to introduce, because it basically came out of nowhere. But, hey, isn’t that where the very best ideas usually come from?

Although Susan Lassiter-Lyons is a brilliant financial strategist, and although her previous Mogul lesson (Raising "Pooled" Capital for Real Estate) is easily the smartest introduction to syndication I’ve seen in a long time, I am not typically in the habit of reflecting on Susan’s financial insights while vacationing in the Gulf of Mexico.

But that’s exactly what happened last week, while I was lounging by the pool in Gulf Shores, Alabama…

And as I reflected on my recent chats with Susan (ignoring the volleyball game to my immediate left), I wondered if my memory was playing tricks on me…

“Did Susan really say that there were eleven ways to profit from organizing your own syndicate?”

“ELEVEN ways?!”

“And, if that’s what she said, did we even mention those methods in Susan’s previous lesson?”

Well, as it turns out, Susan DID mention eleven (yes, eleven!) ways to profit from “pooling” capital via syndication – even with no cash of your own in the deal. And because her first Mogul lesson followed a tried-and-true format (which has served Susan quite well over the years), these supplemental observations were NOT included in the overview.

(Thank-you, serene ocean view, for clearing my mind and reinvigorating my brainwaves!)

11 Ways to Profit from "Pooling" Capital

So, without any further ado, it is my pleasure to now introduce you to the 11 ways you can get paid for being a group sponsor of a syndicated real estate hedge fund:

Sales Proceeds (Derived from the regular disposition of real estate assets)
Performance Fees (Derived from predetermined performance benchmarks)
Consulting Fees (Because the most valuable product of all is a good idea)
Acquisition Fees (As a syndicator of real estate you will typically receive compensation for finding the property, conducting due diligence, and structuring the deal. Acquisition fees can range anywhere from 1% – 5% of the acquisition costs, or it can be a flat fee, such as $25,000. These fees are generally negotiable with the other investors that you bring into the deal. If your fees are too high, other investors might be leery to invest with you, however, finding and structuring deals can be a tedious task, so make sure you are compensated for your time and effort.)
Real Estate Broker Fee (If you're a licensed Realtor)
Cash Flow (Derived from the regular operation of real estate assets)
Property Management Fees (This fee, generally 1% of gross revenue, is typically paid to you as the syndicator of the project because it will be your responsibility to manage not only the property but the syndicate partnership as well. You will need to constantly ensure that the property is being managed and operated efficiently by communicating regularly with the property manager. If the property is under going renovations, it will be your job to ensure that the renovations are completed on-time and hopefully under budget.)
Syndication Management Fees (In addition to managing the investment, you will also be responsible for managing the syndicate. This duty will require you to communicate with your investors regularly regarding their investment, as well as ensuring that they receive their own compensation on a regular basis.)
Ownership Interests in the Fund (You will be compensated through your equity participation in the project. Your equity stake in the project could range anywhere from 5% – 50%, depending upon your experience and the details of the deal. Normally, your investors will receive a preferred rate of return ranging from 8% – 12% or higher, on their invested capital first, then the remaining cash flow and/or equity will be split between you and your investors at whatever percentage that was agreed upon.)
Mortgage Broker Fees (If you're a licensed mortgage broker)
Refinancing Proceeds (If you purchase something in your fund that you're going to be refinancing – such as an office building or a multifamily project – you can even get proceeds or fees when your fund refinances that property.)

Too Good to Be True?

You might be wondering, “Is it really possibly to make money in so many different ways with a syndicated note-buying fund?”

Yes, it is! (That’s why other investors have already formed their own hedge funds.) And that’s why you might also want to join their ranks.

Stay tuned for more details from Susan Lassiter-Lyons. During the next few weeks, Susan will share some pretty incredible case studies to help you see how these theories can be put into practice.

In the meantime…

Research – Click here to check-out Susan’s initial introduction to syndication (Raising "Pooled" Capital for Real Estate).

Understand – Understand that hedge funds and syndicates need managers, and investors will be happy to pay for your management services (as long as you know what you’re doing).

Believe – Believe that syndication is a viable strategy for your own investment portfolio. (Other investors are doing it, so why not you?)