The 6 Crucial Roles on a Multifamily Real Estate General Partner Team

Acquisitions

This is the person who finds the deals. They’ll form broker relationships, get on broker deal distribution lists, underwrite deals based on what the broker provides, etc. They’ll be crucial in deciding what to offer and how to negotiate. Oftentimes, this person is also the lead GP. They make sure all the other roles are in place and will handle the closing process.

Underwriting

This role is sometimes done by the acquisitions person, but other times done by someone who you would consider the numbers person. They are detail oriented, very familiar with the underwriting spreadsheet, analyze historical data on the market and use conservative numbers for their projections. They will get accurate bids from the property manager on what expenses will cost along with official property tax and insurance estimates. They’ll look at comparable properties to determine what rents are possible in the event of a renovation. One of the most important roles for the underwriter is to be able to walk away from deals if the numbers don’t make sense. They must not change the assumptions like the rent escalation or exit cap rate just to make the numbers seem like they work. If the numbers don’t work, they are willing to move on.

Capital Raiser

Many people steer away from saying that this is a role even when it is. The reason they do this is because you can’t act as a broker dealer. You have to be a GP first in the deal and then raise capital. The key to stay in compliance with SEC regulations is to not have a sliding scale of your GP interest based on how much you raise.

For example, you may agree to raise $1 million along with doing other GP responsibilities for 5% of the GP equity split. If you end up raising $2M or even $500K, your position cannot legally change from the 5% equity split. If your split changed based on how much you raise, that is performance based compensation which is illegal with the SEC.

This is one main reason there is a barrier to entry in becoming a GP. It can be difficult to raise capital when you first get started. If a new person gets a GP spot and only raises 10% or less of what they promised to raise, they’re obligated to still get the same split as if they raised 100% of what they promised. This can make experienced GPs hesitant to bring on new people. Sometimes the lead GPs will get some kind of verbal agreement with co-GPs to start. Then at a later stage in the raise, they'll sign an official agreement for the split compensation.

With the capital raising role, you’re also going to have to participate and contribute to another role listed in this section. You can’t have capital raising as your only job.

Investor Relations

This person leads the communication between general partners and limited partner investors. They’re often known by many people in the industry and are easy to get along with. If there are investor events or webinars, they often plan these out. They also know how to calm investors down in times of uncertainty and reveal both good and bad news. They’ll be in charge of creating templates for monthly reports and be in charge of investor K1s. Once these templates are made, direct communication is typically done between the limited partner and the specific general partner they invested with.

Asset Management

This is your hands on person. They will need experience managing renovation projects that are similar to the one you perform. In the underwriting process, they will collaborate with the acquisitions person and underwriter to create a feasible business plan. The asset manager will have the most direct contact with the property manager. They will be hands-on in due diligence, overseeing the renovation project, and direct operations of the deal if need be. They will also have a call with the property manager weekly about the performance of the property.

Every two weeks or every month, the asset manager will have a zoom meeting with the other general partners. The asset manager will lead the communication at these meetings. Physical property visits need to be done once a month at the minimum by the asset manager.

Loan Guarantor Role / Key Principal (KP)

This person is crucial in getting the loan for the property. What’s needed from the key principal is to have either a high net worth and/or liquidity for the loan qualification. On most agency loans, the net worth of the combined general partner team must be equal to the loan amount. The general partner team also must have 10% or more of the loan amount in liquidity post closing. You can bring in multiple KPs if needed.

Sometimes KPs will sign onto non-recourse loans for little to no compensation. The reason for this is because they want to build up a resume of being a GP on a deal and signing on an agency loan. They get their Fannie or Freddie card which makes it much easier for them to do deals in the future. Being a KP is a way for someone to get their foot in the door if they want to be GPs themselves.