Here is a simplified illustration of the numbers for a syndication loosely based on my first deal.
Property purchase price
Acquisition and investment
Down Payment: $500,000
Repairs budget: $350,000
Closing Costs: $150,000
Total: $1,000,000 to close
10 Investors invest $100,000 each, and own 8% of the LLC each, total 80%. The Sponsor owns 20%.
Year 1 Cash Flow: $98,000 (Net Operating Income of $198,000 less interests on loan of $100,000 (5% of $2,000,000) .
Each Investor will receive $8,000 year 1.
Executing the business plan, we increase the Cash Flow of $18,000 per year.
In 5 years, the resale value is $3,750,000 and the total Cash Flow for the Investor is $54,000 over 5 years.
Resale profit after sale costs ($225,000) and loan repayment: $1,525,000; each Investor will receive $122,000.
Total for the Investor: $176,000, a 76% gain in 5 years.
Download the Excel sheet to experiment for yourself!