Real estate sponsors who chase acquisition fees instead of building cash-flowing properties end up misaligned with investors and desperate for the next deal. When compensation is tied to sale rather than cash flow, sponsors work for free while the property sits, forcing them to constantly hunt new acquisitions to survive.
I have a name for those people. We call them acquisition fee junkies. They're junkies. Yeah. You know, they're jumping after the next fix because the last property isn't cash flowing or it doesn't cash flow for a very long time. And part of that's the way they structure their deals too, though, because when you do that, you misaligned your interests with the investors. And now, you know, your reward comes at sale and they like the cash flow, so they want to keep the deal. And you have a fiduciary responsibility to put their interests ahead of your own. And all of a sudden you end up working for a very long time for free. So now you're, you know, jonesing for the next deal, right? You got to go get another acquisition fee to, you know, make your house payments. So that's not a good position to be in.
