Closing fees and management fees on a $5.8MM deal

investor profile

February 12, 2021

by an investor from Baylor University in Aledo, TX 76008, USA

Hey Guys,
I have a deal under LOI at a $5.8MM purchase price. I am trying to determine a reasonable closing fee and ongoing annual management fee for this size deal. My research indicates a very wide range, so I wanted to see if I could get some capital providers to provide me some insight as to what would make you feel comfortable and aligned when funding a sponsor. I will be going to investors I know, most of whom are in the commercial real estate space or oil and gas. I want to balance making sure that the investors FEEL GOOD about our alignment while also making sure I make enough money to support my family needs.

Thanks so much for your input.

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commentor profile
Reply by a professional
from New York University in New York, NY, USA
Troy -- good work on getting this far! You should think of the economics as a total package: closing fee, management fee, and carry. How much you get from each matters less than the overall deal, both to you and your investors. Happy to discuss specifics and market trends offline if you are interested: redacted
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Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA
Depends on your business model. Closing fee/management fee is not market for self funded search deals. If it is an independent sponsor deal, you may be able to a 0-5% closing fee and 3-6% of EBITDA annual management fee, but your equity participation will likely be much lower than what a self-funded searcher might get.
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