Real Estate Syndication 101: A Guide for Accredited Investors
GPs and LPs, the capital stack, hold periods, returns and the questions that matter, explained plainly.
Read →Short answer
Sponsors are paid through fees and a share of profits. Typical ranges include an acquisition fee of 1-2% of the purchase price, an asset management fee of 0.5-1.5% of equity per year, and a disposition fee of 1-4% at sale. Profits usually flow through a waterfall: investors get their capital back, then a preferred return (often around 6-10%), and remaining profits are split, commonly 70/30 or 80/20 between LPs and the sponsor.
Key takeaways
- Acquisition fees are often charged on the whole deal, not just equity, so they can equal about 3% of invested equity on a leveraged deal.
- The preferred return is a hurdle, not a guarantee.
- Compare total fee load and how much the sponsor earns only if you do well.
- In our $100K example, the LP receives $168K and the sponsor's promote is $12K.
What fees do syndication sponsors charge?
| Fee | Typical range | Paid when | What to watch |
|---|---|---|---|
| Acquisition fee | 1–2% of purchase price | At closing | Charged on total deal size, so it's a larger share of equity |
| Asset management fee | 0.5–1.5% of equity per year | Ongoing | Is it paid before or after the preferred return? |
| Disposition fee | 1–4% of sale price | At sale | Paid even if returns disappoint? |
| Refinance fee | Varies | At refinance | Often criticized when a third-party broker is also paid |
| Promote (carried interest) | LP/GP split 80/20 typical; 60/40 to 90/10 range | After the preferred return | Hurdles and catch-up provisions |
Ranges from White Coat Investor's review of private real estate fees. Every deal differs; read the PPM.
How does a distribution waterfall work?
- Return of capital: LPs get their invested capital back.
- Preferred return: LPs receive the stated annual hurdle (for example 8%) on their capital.
- Catch-up (if any): some deals let the sponsor catch up to its share.
- Split: remaining profits are divided, for example 70% LP / 30% GP.
Example: where $180K of distributions goes on a $100K investmentIllustrative model
5-year hold, 8% simple preferred return, 70/30 split, no catch-up
In this example the LP receives $168,000 (1.68x) and the sponsor's promote is $12,000, on top of any fees paid along the way. Change the inputs in our LP Waterfall Calculator.
How to compare fee structures across deals
- Add up all fees as a percentage of your equity over the expected hold.
- Check whether the preferred return is cumulative and whether it compounds.
- Prefer structures where most of the sponsor's upside comes after you hit your hurdle.
- Ask whether the asset management fee is subordinated to the preferred return.
Model a waterfall
Open the calculator →Enter a deal's terms and see LP vs sponsor payouts.
Frequently asked questions
Preferred returns commonly range from about 6% to 10%, with some deals higher. White Coat Investor cites a broader 6% to 15% range across private real estate. A preferred return is a priority in the waterfall, not a guarantee.
The promote (or carried interest) is the sponsor's share of profits above the preferred return. A 70/30 split means LPs get 70% and the sponsor 30% of profits after the hurdle.
Individual LPs rarely negotiate fees, but larger investors sometimes receive different classes or terms. Comparing fee structures across sponsors is the more practical lever.
A fee paid to the sponsor at closing for finding and closing the deal, typically 1-2% of the purchase price.
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Sources
This guide is educational and is not investment, tax or legal advice, or an offer to buy or sell any security.
