As a real estate sponsor, Fish Capital leverages its experience and knowledge to create opportunities for investors in part through the acquisition of multifamily real estate assets. In real estate investing, there’s a saying that “You make money when you buy, not when you sell,” and for the most part, that’s true. The acquisition process involves considerable due diligence and negotiation to ensure we get the best deal and set our investors up for success. An acquisition fee is charged as compensation for the efforts made during the acquisition process.
What are Acquisition Fees?
Acquisition fees are a standard feature of real estate syndication deals, designed to compensate the real estate sponsor or syndicator for their efforts in locating and creating investment opportunities for investors. They are a one-time expense made upon the closing of a deal. Fish Capital Investments, like other syndicators, charges an acquisition fee that typically ranges from 1% to 3% of the purchase price.
Why are Acquisition Fees Charged?
Sourcing and purchasing multifamily investment deals takes considerable time, effort, and resources. First and foremost, the acquisition fee compensates Fish Capital for the extensive months of physical and financial due diligence undertaken during the property search and evaluation process. Our team’s meticulous efforts in identifying viable investment opportunities are crucial for ensuring the profitability and security of investors’ capital.
Additionally, the acquisition fee provides Fish Capital Investments with the necessary running capital to continue compensating team members fairly. We engage skilled professionals who work tirelessly to conduct market research, perform property inspections, negotiate deals, and handle the intricate details of the acquisition process.
Lastly, Fish Capital relies on the acquisition fee to cover the ongoing operational expenses required to maintain a successful real estate syndication business. These expenses encompass a wide range of activities, including investor relations, legal compliance, marketing efforts, and administrative overhead. By allocating funds from the acquisition fee to cover these costs, Fish Capital Investments can operate efficiently and deliver optimal results to its investors.
Acquisition Fee Example
Suppose Fish Capital Investments closes a deal with a purchase price of $10,000,000, and the agreed acquisition fee is 2%. In this scenario, Fish Capital would receive $200,000 upon closing, which would be considered an operating expense for the syndication partnership. This sum not only compensates Fish Capital for our expertise and effort in securing the investment opportunity but also allows us to recover the costs associated with the acquisition process.
Acquisition fees are standard practice within real estate syndication compensation structures. They act as a means to compensate and reimburse sponsors for finding and acquiring great deals. However, it’s important to understand that an acquisition fee does not act as an incentive for the sponsor to find and acquire more deals than necessary. Sponsors profit most when investors profit most, meaning that our energy is best allocated toward finding great deals with high returns, even if that means fewer properties.
Menu