General Partner vs Limited Partner Roles and Responsibilities in Apartment Syndication

General Partner vs Limited Partner

There shouldn’t be a “versus” in there, i.e. “General Partner vs Limited Partner” because both the sponsor and passive investor are key players in a mutually-beneficial partnership. I write a lot about the expectations for passive investors, or “limited partners” in an apartment syndication deal, however I haven’t written as much about the role and responsibilities of the sponsor, or “general partner.” Let’s balance the tables with this post and shine a light a bit more on what the general partner role is all about.

General Partner vs Limited Partner: Roles and Responsibilities of the GP

The role of the general partner (GP) is the following:

Ready to hear the responsibilities of the GP? Grab a seat, because it’s a three-parter.

1). Pre-Close

Before the syndication can close on a deal, there has to be a property to close on. The GP’s job is to scope out properties. This involves tapping their network of brokers and agents and perhaps other investors to find promising properties they can dive deeper into.

But look - before the GP can even find a property, they have to narrow the field first to a potential target market. It behooves the GP to create a profile of the would-be target tenant as well. Once the market is identified, they can hone in on exactly what they are looking for faster.

Next, the GP would set up a Facebook page and loop in their go-to property management and real estate broker. It’s important to get team members in the loop as early as possible.

And if they don’t have either of those? Well then they better start interviewing competent professionals to enlist to their team pronto. This goes for a professional accountant or CPA, real estate attorney, securities attorney, and loan guarantor as well.

Jeesh, this party is starting to get a bit crowded, and we haven’t even signed our passive investors yet!

With a property in mind and the team in place, the GP can now set investment criteria for deals. This includes determining the GP compensation structure as well as the limited partner compensation structure. 

Depending on what kind of syndication deal this is, the GP will then advertise to passive investors.

Next, it’s time to underwrite the deal and submit the LOI and negotiate the PSA.

Phew, are we done yet?

Nope, but we can proceed to Part II…

securing financing

2). Contract-to-Close 

With the backroom team (attorney, broker, loan guarantor) in place, the sponsor now needs to lock down the front room team (limited partners).

But first, the GP must perform due diligence on the deal.

And then it moves into my favorite territory - creating the investment summary and announcing the deal to my investor list. I like to do the announcement via a conference call or webinar. These are always recorded so even if a potential investor isn’t available for the live version, they can still get in on the deal by listening to the recorded version.

Next, the GP writes up the legal documents and sends it to the list of interested potential investors. 

After that, the GP creates the LLC (the company that will own the property) and accepts the wired funds from the investors.

This is followed by setting up bank accounts, securing financing, and finally... CLOSING! Weeeeee!!!

3). Closing 

Our limited partners are now in place, they’ve sent there money and they want to start seeing some action in the form of:

  • An investor guide (this is basically a guide to our syndication and answers common questions that the investors can refer to anytime they wish).

  • Craft our first monthly update (and every subsequent monthly update until the hold time is up).

And then a few months in, the GP creates the quarterly financial report and sends that to the passive investors. Then once a year around tax season, the GP must send the Schedule K-1 to each passive investor.

Peppered throughout this time the GP:

  • Answers questions from their limited investors

  • Oversees the property management company

  • Oversees renovations of the property

  • Examines market rents in the area to stay competitive

  • Triple-checks the distributions and ensures the correct amount is sent on time to each limited partner.

  • At sale, oversee the sale of the property

cash flow possible

How Much Does the General Partner Earn? 

Okay, so the GP does a lot. You get that now. But how much do they earn?

It can be broken down into the following:

1). Profit Split Deal

In a “split deal” compensation structure, the GP earns a portion of the remaining profits after the preferred return is distributed. For example, the limited partner may receive an 8% preferred return and the profits thereafter are split between the limited partner and GP in a 80/20 split, with the limited partner earning 80% and the GP earning 20% for all profits after the 8% pref.

The profit split promotes alignment of interests as the GP won’t see anything until the profits are above 8%. This works quite dandy for the limited partners, as the harder the GP wants to work and make the syndication profitable, the more the limited partners will earn.

And with an 8% perf, there is a real incentive on the part of the GP to work hard.

2). Acquisition Fee 

The acquisition fee is an upfront, one-time fee paid to the GP at closing. This can be 1%-5%, depending on the size of the property. It’s basically compensation for getting this whole syndication thing off the ground! And in case you forgot what the GP has been doing this whole time, it’s that long list of responsibilities at the top under Part I.

3). Asset Management Fee

This is an annual fee paid to the GP in return for overseeing the operations, property management, and executing the business plan. It could be a percentage of the collected income or a per unit per year fee. This ranges 2% to 3% for the collected income or $200 to $300 per unit.

4). Refinance Fee 

A refinancing fee is a fee that is paid to the GP for the work required to refinance the property. Not every syndication will refinance, so this fee may be moot. But if it does go in effect, the typical range when closing the new loan is 1% to 3% of the total loan amount. 

5). Guaranty Fee 

At closing, this one time fee may be paid to a loan guarantor. If the GP chooses to use a loan guarantor, they are usually someone of high net-worth that can sign the loan, enabling the best terms possible. In which case, a 0.5% to 1% or 3.5 to 5% of the principal balance would be paid to the loan guarantor. 

6). Organization Fee 

This is an upfront fee, usually ranging from 3% to 10% of the total money raised, paid to the GP. For some syndicators, this fee will be built into the acquisition fee. If the GP does decide to charge both an acquisition fee and an organization fee, then your overall return may be reduced.

expectations for passive investors


So you see, it isn’t so much a matter of general partner vs. limited partner as both parties are on the same team. If one benefits, then they both benefit. The GP does a tremendous amount to earn their compensation. And for good reason - you want them to be motivated to give it 100% and get you the best cash flow possible.


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Delphine Nguyen, Investor

Delphine Nguyen is a real estate investor and a licensed real estate broker in Illinois. She learned to be successful from a variety teachers, including her own mistakes. Real estate investing is her passion. Helping others to achieve their goals is another passion that she has. She does what she knows best, therefore, her focus is solely on multifamily and co-living investment types.

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