More Good News: Multifamily Profit Sharing!

Part 7 of a 10 Part Series

The news just keeps getting better and better doesn’t it?

In Part 2, we discussed how passive investors receive regular payments called preferred dividends at a pre-determined rate. Then we explained in Part 3 how investors typically make their biggest chunk through capital appreciation when the property is sold at the end of the holding period. Now it’s time to discuss the third way you can make money in multifamily: profit sharing.

As a limited partner (LP) in a multifamily, you will receive a split of the profits with the general partners (GP). For example, you may split the profits 50/50, but the split can differ vastly based on the risk of the project, the level of the preferred dividend, the overall business strategy, and the experience of the GPs. There are dozens of combinations. No two deals are alike. Generally, the less seasoned the GPs, the more favorable the split will be to the LP. These are great questions to ask while doing your due diligence. Regardless of the mix, the LPs should receive their dividend payments before any profits are split.

I hope that you found this helpful in your quest to find the best place to invest your nest egg. We at East Light Investments would love to discuss the possibility of partnering with you. Please don’t hesitate to contact me directly if you have any questions.

Karen Oeser, CFA

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