Nov 4, 2024
In this episode, Nico from the Small Axe Communities explains the various ways multifamily investors, specifically General Partners (GP) and Limited Partners (LP), get paid. Nico discusses the income sources for GPs, including acquisition fees, asset management fees, capital event fees, and disposition fees, offering practical insights from personal experiences. The episode also covers how LPs earn returns based on their investments, typically receiving an 8% preferred annual return, paid monthly, prior to any GP profits. Additionally, it touches on profit splits when returns exceed the preferred rate and the structure of 'waterfall' payouts. Listeners are encouraged to understand deal structures thoroughly and to reach out for further advice, concluding with a call to action for sharing and reviewing the show.
00:00 Introduction to Multifamily Investing
00:41 Understanding General Partnerships
01:08 The Role of Acquisition Fees
01:58 Justifying Acquisition Fees
04:02 Asset Management Fees Explained
05:01 Challenges in Asset Management
06:03 General Partners' Compensation Breakdown
08:14 Limited Partners' Earnings Explained
09:42 Preferred Returns and Incentives
11:22 Waterfall Structures in Deals
11:50 Final Thoughts and Contact Information
12:00 Closing Remarks and Gratitude