Part of our pillar guide: Mobile Home Park Investing: The Complete Guide →
Before I was a sponsor, I was somebody else's LP.
I invested in numerous deals and funds. I anchored funds. I've spoken to dozens of sponsors over the years, and I've seen fee structures across the whole spectrum. So when I talk about what sponsors charge, I'm not describing it from the outside. I've paid these fees, and now I charge them.
That's an unusual seat to write from, and it's why I'm willing to put our own numbers on this page. Most of what you'll find about syndication fees is written by sponsors explaining why their fees are reasonable. Very few pages are written for the person actually wiring the money.
Chapter 1
Why I Ended Up Here in the First Place
I got into mobile home parks because I was tired of paying ordinary income tax on nearly every dollar I earned, and I was looking for something more tax efficient.
What I found was unusual. You get a cash on cash return. You get substantial depreciation, as much or more than any other real estate asset class. And you get a path to return of capital within a few years, three, four, five, six years depending on the deal, where you pull your money out through a refinance and still own the property.
The Trifecta
Cash flow, heavy depreciation, and a path to getting your capital back while still owning the asset. I've yet to see another asset class that offers all three.
There's also the diversification piece. The stock market is extremely high right now, and I don't want complete market exposure. I like that this isn't correlated to the S&P 500. And the recycling mechanic is powerful as you get older. Buy a park, refinance, get your capital back, buy another one. Do that over ten, fifteen, twenty years and you own a substantial portfolio paying you a really nice dividend, which is great passive income heading into retirement.
Chapter 2
The Fees, in the Order They Hit Your Money
Here's what you'll typically run into.
Acquisition fee
Paid at closing and taken out of the equity raised, before you start earning your preferred return. Usually quoted as a percentage, but pay attention to the base. Some sponsors charge it on purchase price, others on total cost.
Property management fee
Ongoing, normally a percentage of collected revenue.
Asset management fee
Ongoing, and this is where you have to read carefully. Some sponsors charge it on invested equity, some on collected revenue, some on NOI. The same headline percentage produces very different dollar amounts.
Refinance fee
Charged when the property refinances.
Disposition fee
Charged when the property sells.
Construction management fee
Charged on capital projects.
The promote
The sponsor’s share of the profits, expressed as a split like 70/30 or 60/40. This is the big one, and the conditions attached to it matter far more than the number.
Chapter 3
What I've Actually Seen
On the promote, the range is wide.
I've personally invested in deals where the sponsor takes 70/30 after return of capital. That's the structure I'd call normal and fair, and it's what I've paid as an LP.
I've also seen sponsors try for 60/40 and 50/50. And some try to take their split off the bat, meaning they're clipping every dollar from day one rather than waiting until your capital and your pref have been paid.
I was very surprised the first time a sponsor told me they take 50/50 and charge an acquisition fee in excess of 3%, plus a property management fee of 8%, plus a separate asset management fee on top of that, plus disposition fees, plus construction fees.
When you start to see all those different fees, they add up, and it gets to be very suspect to me. I understand you're a good operator. But there's fair and there's gouging, and there's a fine line in there.
Chapter 4
What We Charge at Dayan Capital
I'll just tell you.
Our Fee Structure
| Acquisition fee | 2% of total cost |
| Property & asset management | 6% of collected revenue (covers both) |
| Separate asset management fee | None |
| Refinance fee | None |
| Disposition fee | None |
| Construction management fee | None |
| Promote | 75/25 up to 60/40, tiered by check size |
| Promote conditions | Return of capital, pref paid, and MOIC hurdles met first |
| Our own capital | 10% GP capital plus a substantial share of the LP capital |
The fees we could charge and don't
We don't charge a separate asset management fee and we don't charge a disposition fee.
The reasoning is simple. If you do a good job and you really over perform, you're going to make your money on your promote. I don't think those other fees are necessary. Loading them in just means getting paid whether or not the deal works, and that's the part I'd object to as an LP.
We try to be as simple as possible from a fee perspective. Fewer line items, less to argue about, less for you to have to decode.
Chapter 5
Why That Tiered Range Isn't What It Looks Like
A 60/40 split sounds worse than the 70/30 I've paid as an LP. Read the number by itself and you'd think we're the more expensive option. So here's the part that actually matters.
Every one of our tiers sits behind three conditions.
We return your capital
Your invested principal comes back to you before any promote tier applies.
We pay your preferred return
Your pref is paid on top of that return of capital.
We hit MOIC hurdles
We have delivered a multiple of your invested capital, sometimes two to two and a half times, before the higher promote applies at all.
So our entry tier of 75/25 is better than the 70/30 I've paid elsewhere. And our top tier of 60/40 only comes into play after you've already gotten your money back, your pref, and a two to two and a half times multiple on what you put in.
The Point
A 60/40 from dollar one and a 60/40 after a 2.5x are not the same deal. They aren't close. But they look identical on a term sheet, which is exactly why the split alone tells you very little.
I'd describe our structure as aggressive, and I want to be clear about what I mean by that. Aggressive in the LP's favor. We get paid late and we get paid for performance. You can see it in our waterfalls. On some of our projections we don't make any money at all unless there's a sale in year five or year seven.
Chapter 6
The Thing That Matters More Than the Fees
Here's where I'll disagree with how most people evaluate this.
Look at the net IRR. Look at what you're actually going to get.
If someone charges 20% and delivers a deal with a 5% IRR, and someone else charges 50% and delivers 18% to 20%, obviously you're better off paying the higher fees for the better deal. Some hedge funds charge huge fees and still deliver the most outsized returns out there, every single year.
High fees can turn someone away, and sometimes they should. But a low fee on a bad deal is still a bad deal. The fee is a cost, not an outcome.
“I can get 80/20 at a hedge fund or private equity deal”
I hear this one, and it's worth answering directly.
Mobile home parks are a different animal. It's much more labor intensive. And we don't take our money up front, we take it after return of capital. Factor in that timing and our structure is meaningfully better than 80/20, because 80/20 on every dollar from day one is not the same as a promote that only starts once your money is back in your pocket.
Timing is the part people skip. Two deals with identical headline splits can pay the sponsor very differently depending on where in the waterfall the promote sits.
Chapter 7
The Deal I Passed On
It was a 50/50 deal, and it scared me away.
In hindsight I would have made a lot of money on it. But my reasoning still holds. If a deal is a home run, 50/50 is fine. What happens if the deal doesn't perform and you're still stuck at 50/50?
That's why I look for structures where the promote steps up after a performance threshold. If I'm getting a 25% or 30% return on my money in a year, great, take 50%. But if it's a 10% or 15% IRR, why should the sponsor get 50% for delivering an average deal?
The promote should be a reward for outperformance, not a flat toll.
For what it's worth, I've never been in a deal where the sponsor made promote and I didn't, because I won't do a deal where the sponsor gets paid before my capital and my pref come back to me. I've been in deals that didn't perform, where the sponsor collected property management fees along the way, but they didn't earn a promote. That's the structure working correctly.
Chapter 8
What I'd Ask a Sponsor
If I were the LP, these are the questions.
Are the returns you’re showing me net of your fees?
Ask it plainly and get a plain answer.
How is each fee structured, and what’s the base?
A 1.5% asset management fee on invested equity, on collected revenue, and on NOI are three different numbers. Same goes for an acquisition fee on purchase price versus total cost.
When does your promote start?
On every dollar, or after my capital and pref are returned? Are there MOIC or IRR hurdles above that? This single line of questioning changes the economics more than the split does.
Why is there an acquisition fee?
I think that’s a fair question and it deserves a real answer, so here’s mine. How many deals are you doing? How many deposits have you lost? How many third-party reports have you paid for on deals that didn’t close? A sponsor takes that risk over and over. You might be looking at this one deal, but we’re paying those costs repeatedly, and it takes months to close and months to do diligence. That’s what an acquisition fee compensates. If a sponsor can’t explain theirs in those terms, that tells you something.
How much of your own money is in the deal?
See below. I think this one matters more than any individual fee.
Chapter 9
On That Last One
At Dayan Capital we're typically the largest check in every deal. We put up the 10% GP capital, and then we also put up a substantial percentage of the LP capital. Our check is usually seven figures or more.
I think that matters more than any individual fee. We have direct oversight of the deals and direct oversight of property management. We have the ability to dictate the outcome. And if something happens to investor money, the same thing is happening to our money, because we're the biggest check in the deal.
That's an element of protection you're not going to get in a lot of other investments. Somebody with a direct say over the outcome who is fully aligned with you.
Related: we've been fortunate not to have capital calls, and to the extent we can, we'll always step in the middle and try to avoid one, even if we have to shore things up ourselves.
Chapter 10
Where I Differ from Other Sponsors
I'm aligned with most sponsors on a lot of things. But I'd say a lot of sponsors are looking to make money quicker.
We're looking for a longer term play. We want stability, and we want to build a business that can withstand the test of time. If we have to forego short term profit for long term sustainability, that's what we're going to do.
The clearest example is rents. A lot of operators come in and jack rents and say, well, we're below market, we're just getting to market. We'd rather not raise rents fast, keep our tenants, and avoid the problems that come with turnover. I don't share that same philosophy, and it does cost us something in the short run.
Bottom Line
How I'd Judge a Fee Structure
Understand the fees, ask why they're structured the way they are, and pay close attention to when the sponsor gets paid relative to when you do.
Then look at the net number. In manufactured housing there's a lot of work involved, it's a long term process, and it takes time to earn the fees. The right question isn't whether the fees are low. It's whether the structure pays the sponsor for actually doing well by you.
On the figures above: Fees vary by deal and every deal is different. The figures stated are general and can move within a range of roughly 5% to 10% of what is shown depending on the specific transaction. The governing documents for any particular offering control. Nothing on this page is an offer to sell securities or a solicitation of an offer to buy, and nothing here is investment, tax, or legal advice.
FAQ
Frequently Asked Questions
What fees do real estate syndication sponsors charge?
The common ones are an acquisition fee paid at closing out of the equity raised, an ongoing property management fee on collected revenue, an ongoing asset management fee, a refinance fee, a disposition fee at sale, a construction management fee on capital projects, and the promote, which is the sponsor’s share of profits. Not every sponsor charges all of them, and the base each fee is calculated on matters as much as the percentage.
What is a typical sponsor promote or profit split?
Across the deals I have invested in as an LP, 70/30 after return of capital is the structure I would call normal and fair. I have also seen sponsors go to 60/40 and 50/50, and some try to take their split from dollar one rather than waiting until investor capital and the preferred return have been paid. The timing matters more than the number.
What does Dayan Capital charge?
A 2% acquisition fee calculated on total cost, and a 6% property management fee on collected revenue that covers both asset and property management. There is no separate asset management fee, no refinance fee, no disposition fee, and no construction management fee. The promote is tiered by check size from 75/25 up to 60/40, and every tier applies only after return of capital, payment of the preferred return, and MOIC hurdles are met. Fees vary by deal.
Is a 60/40 split bad for investors?
It depends entirely on when it applies. A 60/40 from dollar one and a 60/40 that only kicks in after investors have received their capital back, their preferred return, and a two to two and a half times multiple on invested capital are not remotely the same deal, even though they look identical on a term sheet. Always ask where in the waterfall the promote sits and what hurdles precede it.
Should I just pick the deal with the lowest fees?
No. Look at the net IRR and what you actually receive. A sponsor charging 20% who delivers a 5% IRR leaves you worse off than one charging 50% who delivers 18% to 20%. Some hedge funds charge high fees and still deliver the most outsized returns out there, every year. A low fee on a bad deal is still a bad deal. The fee is a cost, not an outcome.
What questions should I ask a sponsor about fees?
Are the returns you are showing me net of fees? What base is each fee calculated on — invested equity, collected revenue, NOI, purchase price, or total cost? When does your promote start, and are there MOIC or IRR hurdles ahead of it? Why is there an acquisition fee? And how much of your own money is in the deal?
Continue Learning
Mobile Home Park Investing
The pillar guide: economics, operations, tax advantages, return profile, and how to evaluate a deal.
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MHC Bonus Depreciation
The depreciation half of the trifecta. Why manufactured housing carries one of the most favorable profiles in real estate.
Qualified Nonrecourse Financing
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Risks of MHC Investing
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Dayan Capital MHC Investments
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