Asset Management: Fees Explained
Asset management in real estate syndication refers to the sponsor’s efforts in executing the business plan. Syndicators, like Fish Capital Investments, are responsible for identifying lucrative multifamily real estate deals, securing funding, working with passive investors and attorneys, and overseeing the overall execution of the project and business plan. These activities require considerable time, effort, and expertise and, thus, incur costs for the syndicators. In exchange for these efforts, we charge asset management fees that range between 1-3%.
Benefits of Asset Management for Investors
Throughout the lifespan of a project and asset hold, we work closely with our team and vendors to ensure a value-add or development project is executed effectively. After the completion of a major project, we engage property management companies to ensure the smooth operation of the property. At this point, asset management activities include rental rate management, making necessary improvements, optimizing expenses, filling vacancies, and any other tasks in coordination with the Property Manager that contribute to the successful implementation of the business plan. These activities are critical in creating value for all stakeholders involved.
Asset Management Fees: Compensation for Effort & Expenses
Asset management fees cover the costs and effort associated with asset management. These fees are typically a percentage of the asset’s cash flow, ranging between 1-3%.
It is essential to understand that asset management fees are not a means for syndicators to amass wealth. Instead, they support and compensate the general partners for their time, effort, and expenses incurred throughout the project’s lifecycle. Real estate syndication and fund investment is a complex endeavor that requires extensive expertise and resources, and asset management fees are a common characteristic of such deal structures.
Asset management fees are different from property management fees in that they are charged for the efforts in executing a business plan, while property management fees are paid to a professional firm for handling the day-to-day management of the property.
By charging asset management fees, Fish Capital ensures that we can dedicate the necessary time and resources to effectively manage the assets under our care. This enables us to fulfill our commitment to the business plan, maximize returns for investors, and create value for all stakeholders involved.