When it comes to negotiation skills, small children are the natural masters. They seem to have an intuitive understanding of how to achieve what they want – whether it’s a cake or a new toy. According to my father, bribery is only bribery if it’s encouraging people to do the wrong thing. Otherwise it’s just “incentivisation”.
The same applies in many fields of life, including property investment structures and joint ventures. Investors generally want and expect the people on whom successful delivery of the venture depends, to be strongly incentivised.
In relation to property investment syndicates, we’re often asked what financial reward the ‘founders’ of the syndicates can expect to achieve. Obviously it’s a matter for negotiation, and the value and nature of the underlying venture will have a big influence. But here are some numbers we typically see:
- A finder’s fee of 1% to 2% for sourcing the property/project;
- If appropriate, a mark-up on development costs;
- If appropriate, lettings management fees; and
- Annual fees for monitoring the syndicate, of 1% to 2% of the value of the project per annum.
It is also common for the founder(s) of a syndicate to receive a profit share of 20% of the overall pre-tax profit achieved by the syndicate members.