ANSWER

If the syndicate is focused on value-add and distressed properties, then the bulk of the profits will be realized at sale. Before entering an agreement, understand what assumptions the sales proceeds are based on. Be sure that the assumptions include the exit net operating income, exit capitalization rate, the closing costs, and the remaining debt. For the exit capitalization rate – be sure it is higher or lower than the purchase cap rate; higher than the purchase cap rate is the more conservative assumption.

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