Apr 24, 2020
Today we are going to talk about acquisition fees. If you want to get started investing in the Multi-Family business, one of the things I make sure to teach my students is how to get paid to do that.
There is a lot of work involved such as searching for a building, educating your self on what needs to happen and how to make everything work, also how to find investors, how to get your building funded. So you put hours and hours into a deal and sometimes not able to close for some reason.
It could be an environmental issue or you might not be able to get financing, might not being able to raise the capital and different stuff like that. You know its almost like a sales position, you do not get paid for every person you talk to. Sometimes you do work on three or four building and don't work out and the fifth one works out. So that's part of your contribution to your joint venture partners and that is why you get your acquisition fees.
So what we do is when we are working on a building we put the acquisition fees in as a closing cost generally about 1% of the purchase price.
Considering the amount of time and work involved, you are entitled to this acquisition fee and when you are making a deal don't forget to mention it to your investors about your acquisition fees because you need to be as transparent as possible for any deal.
In a nutshell, 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 (i.e. $25,000).
Be reasonable,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.
To find out more, Watch my Facebook live video here.