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A fund manager is judged on questions that a shop or a service firm never faces. How much does the management company need before the first fund closes? Which securities rules govern the raise? What pays the staff while investors are still being signed up? How much of the revenue comes from fees that recur, and how much from deals that may not happen? A generic template has no answers to any of these.
This article walks through a complete sample plan for a private real estate fund manager in Austin, Texas, section by section. It covers the executive summary, the investor and regulatory analysis, the raise itself and the five-year financials, ending with a downside case.
Inside, you will find:
- The executive summary: see how to describe a fund business, its funds and its own capital needs on one page, so a seed partner or lawyer can tell what is being asked
- The rules of the raise: learn which offering and adviser questions belong in the plan, and which to hand to counsel rather than guess at
- The fund-raising schedule: map closings, purchases and fee start dates against each other, so revenue is tied to events that can be checked
- The start-up budget: find out how much cash a manager must hold before fees arrive, and why most of it is a reserve
- The fee mix: separate recurring fees from deal-driven ones and from carried interest, and see how long recurring fees take to cover the payroll
- The five-year profit, cash flow and balance sheet: follow each hire and each acquisition through to the numbers
- The downside case: have an answer ready for "what if the funds raise 20% less?", along with the steps the founder takes in response
The firm and its funds are fictional. Take the structure and the reasoning, and replace the fee terms, schedule and costs with your own.
In this plan
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Executive Summary
Harrison Investment Solutions, LLC is a private real estate investment manager in Austin, Texas. It sponsors limited partnerships that buy older apartment communities in the Austin area, renovate them and hold them for about four years. Investors put money into the funds. The management company earns fees for finding, financing, renovating and running the properties, and a share of profit if a sale clears an investor return hurdle. Founder Jeremias Harrison owns 80% of the management company and a seed partner owns 20%.
The management company needs $550,000: $300,000 from Jeremias and $250,000 from the seed partner. Of that, $375,000 is held as a cash reserve, $111,000 pays for fund formation, adviser-status advice and filings, $40,000 buys equipment and fit-out, and $24,000 pays for the launch. The funds' own capital is separate and is raised from investors: $28.5 million for Fund I from January 2027 and $66.5 million for Fund II from 2028.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $660,000 | $1,174,167 | $1,877,500 |
| Net income after start-up costs | ($207,573) | $116,898 | $441,545 |
| Closing cash | $272,777 | $368,016 | $677,537 |
Revenue comes from three fees and, at the very end of the plan, one carried-interest payment. Year 1 depends on two property purchases, in May and October 2027, which together bring in $440,000 of acquisition fees. Recurring asset management fees cover only 24% of the firm's operating costs in Year 1 and 83% in Year 3, and pass 100% only in Year 4, so the firm needs the next fund to keep closing. Year 2 is the first profitable year.
The plan tests itself. If revenue runs 20% below plan, and Jeremias delays hiring, cuts marketing and his own pay, stays in the first office and pays no distributions, cash stays positive in every year.
The firm has no track record as a manager, and that is stated openly. It offers a narrow strategy, one asset type in one metro, and an investor reporting schedule written before the first closing.
The Manager and Its Funds
Legal name: Harrison Investment Solutions, LLC, a Texas limited liability company. Owners: Jeremias Harrison, 80%; seed partner, 20%. Office: 1,200 square feet of leased space in downtown Austin. Start date: 1 January 2027. Fund I's offering documents are in draft and conversations with likely first-close investors began before that date.
Two entities, three roles
The management company employs the team and earns the fees. Each fund is its own limited partnership, with a general-partner entity controlled by Jeremias. Investors are limited partners of the fund, never of the management company. This plan models only the management company. Keeping them apart limits what an investor can claim against the manager and shows a lender or lawyer which entity owes what.
The funds
| Fund I | Fund II | |
|---|---|---|
| Target equity | $28.5 million | $66.5 million |
| Assets | 3 apartment communities of about 100 units | 7 communities of about 100 units |
| Equity per asset | $9.5 million | $9.5 million |
| First closing | April 2027 | May 2028 |
| Last purchase | March 2028 | February 2031 |
| Offering exemption | Rule 506(b), accredited investors only | The same |
Where the revenue comes from
| Fee | Basis | Year 1 share of revenue |
|---|---|---|
| Asset management | 2% of invested equity a year | 26% |
| Acquisition | 1% of purchase price | 67% |
| Capital project management | 5% of renovation budgets | 7% |
| Carried interest | 20% of profit above a preferred return | none until Year 5 |
The terms are illustrative. Each fund's offering documents set its terms, and investors with larger commitments may negotiate them.
What the firm will not do
The firm does not advise individuals on their portfolios, hold client money outside the funds, or sell products on commission. It does not pay finders for investor introductions. Anyone who takes a fee for finding investors may need to be a registered broker-dealer, so counsel signs off before any such arrangement is considered.
The first two years
- Close Fund I at $28.5 million by February 2028, from about 95 investors.
- Buy three assets for Fund I by March 2028 and finish the first renovation programme.
- Hold the first closing of Fund II by May 2028 and buy its first asset in August 2028.
- Reach a monthly break-even on recurring fees plus acquisition fees during Year 2.
Austin and the Rules of the Raise
Why a manager like this is needed
The assets in this plan are mid-sized apartment communities, bigger than most individuals would buy alone. Local sponsors pool money from a few dozen investors to buy them, and Harrison Investment Solutions is one such sponsor. No Austin market-size figure is used here. The raise depends on Jeremias's relationships and on what the funds can show investors, not on how large the local market is. Rents, vacancy and values differ by submarket, and each acquisition is underwritten from current local data, not from a figure in this plan.
The offering rules
Both funds are offered under Rule 506(b) of Regulation D. The SEC describes it this way: no general solicitation or advertising, no cap on the number of accredited investors, and sales to no more than 35 non-accredited purchasers in any 90 days. This firm sells only to accredited investors, which avoids the extra disclosure duties that come with non-accredited ones. The issuer files a Form D within 15 days of the first sale. Texas treats a Rule 506 offering as a federal covered security. As the Texas State Securities Board describes it, the issuer files a copy of its Form D through the NASAA electronic filing system and pays a fee of one-tenth of 1% of the offering amount, capped at $500. The Board's page puts the cap at $500 per offering, and the firm budgets that amount for each fund and confirms the current fee at filing.
Rule 506(c) is the alternative. It allows advertising, but every purchaser must be accredited and the issuer must take reasonable steps to verify that. The firm does not use it, because its investors come from existing relationships and verification adds cost and friction at a $150,000 minimum.
Whether the manager is an investment adviser
This is the question most likely to change the firm's shape, and only counsel can settle it. If the funds are private funds under the Advisers Act, the manager may rely on the private fund adviser exemption, which the SEC describes as available to an adviser that advises only private funds and has under $150 million in assets under management. An adviser relying on it files as an exempt reporting adviser, and the SEC notes that it may also face state registration or reporting requirements. Whether a fund that holds apartment buildings directly counts as a private fund at all depends on how it is built, and counsel advises on it. The firm sets aside $22,000 at launch for management company set-up, an adviser-status opinion and a compliance manual.
The $150 million line matters here. Form ADV tells an adviser to treat all of a private fund's assets as a securities portfolio, whatever they are, valued at fair value plus any uncalled commitments. Seven assets bought at $22.0 million come to $154 million at cost when the seventh closes in month 35 (November 2029), before any uncalled Fund II commitments are counted. The line is therefore crossed in Year 3. Fair value would differ from cost, and counsel decides whether the line applies at all. The firm plans for it anyway. The compliance and finance manager joins in month 28. Professional fees rise to $115,000 in Year 3 and $135,000 in Years 4 and 5, and include an outsourced chief compliance officer at about $35,000 a year, about $20,000 of Form ADV and Form PF support, and the audit and custody-rule work that the funds do not absorb. SEC registration would also bring examinations and a heavier compliance routine than the exempt reporting adviser route, which is why the budget carries it before it is certain.
The Investment Company Act
A fund that is not registered as an investment company relies on an exclusion in Section 3(c) of the Investment Company Act. Section 3(c)(1) covers an issuer whose securities are beneficially owned by no more than one hundred persons. Section 3(c)(7) covers an issuer whose securities are owned exclusively by qualified purchasers and that makes no public offering. Fund I, at about 95 investors, sits close to the first limit. Fund II, at an average commitment of $300,000 and $66.5 million, would have about 222 investors, so it cannot use 3(c)(1) and needs 3(c)(7) or another exclusion. Whether a fund that owns apartment buildings directly needs any exclusion is a further question. Counsel confirms the route for each fund before its offering documents are drafted.
Who else investors can choose
| Alternative | What it offers | Why an investor picks it | How Harrison differs by design |
|---|---|---|---|
| Other local sponsors | Single-property or small-fund syndications | Established local track records | A pooled fund of three to seven assets and a fixed reporting schedule |
| National private real estate managers | Large diversified funds | Scale and brand | A single metro, with the founder at the closing table |
| Listed and non-traded real estate trusts | Liquid or semi-liquid exposure | Easy to buy and to sell | Direct ownership of specific buildings, with no liquidity before a sale |
| Buying a building directly | Full control | No fees | No need to find, finance or manage the building |
The table describes categories, not named firms. No competitor fee levels are quoted because the plan could not verify any. Fund terms vary widely and each manager publishes its own to prospective investors.
What helps and what hurts
| Strengths | Weaknesses |
|---|---|
| Founder has run acquisitions and asset management at an Austin owner-operator | No audited fund track record of his own |
| One asset type in one metro, easy to explain and to underwrite | Revenue before Year 4 leans on acquisition fees that stop when buying stops |
| Seed capital carries the Year 1 loss | Two people hold all investor relationships at launch |
| Opportunities | Threats |
|---|---|
| Investors from Fund I re-investing in Fund II | Rising rates or falling values slowing purchases and sales |
| A second fund raising on the strength of the first | A delayed closing that pushes fees out by months |
| Fee income from properties the funds already own | Regulatory change, including the $150 million adviser line |
Who Invests
The accredited investor in Austin
The typical investor is an owner or former employee of a technology or professional services business who has liquid wealth to place and wants exposure to property without managing it. Accredited investor status is defined in Rule 501(a) of Regulation D; the investor questionnaire tests for it, and no threshold is repeated here. Commitments run from a $150,000 minimum, with an average of $300,000. About eight investors are expected to commit $500,000 or more.
What they ask before signing
How the manager is paid. What the manager has invested alongside them. When they get information and how often. What happens if a property underperforms. When they can expect their capital back.
Fund I's investors
| Fund I | |
|---|---|
| Target equity | $28.5 million |
| Average commitment | $300,000 |
| Investors | About 95 |
| Stage 1 (April 2027) | $9.5 million from about 32 |
| Stage 2 (September 2027) | $9.5 million from about 32 more |
| Stage 3 (February 2028) | $9.5 million from about 31 more |
Re-investing
Fund I investors are the likeliest source of Fund II commitments. The plan expects Fund II's first closing of $19.0 million draws mainly on them, and the investor relations associate hired in month 22 widens the pool.
Raising Fund I
From introduction to commitment
An introduction, a one-to-one meeting with Jeremias, a briefing pack, a call with the investor's lawyer or adviser if they want one, then a subscription agreement and investor questionnaire. The investor relations and operations manager handles the paperwork. Jeremias takes every first meeting in Year 1.
The schedule
| Event | Month | Cumulative commitments | What it triggers |
|---|---|---|---|
| First closing | April 2027 (month 4) | $9.5 million | First purchase the next month |
| First purchase | May 2027 (month 5) | $9.5 million | Management fee starts; $220,000 acquisition fee |
| Second closing | September 2027 (month 9) | $19.0 million | Second purchase in October |
| Third closing | February 2028 (month 14) | $28.5 million | Third purchase in March |
How the investment is pitched, and how it is not
The briefing pack describes the strategy, the team, the fees and the risks. It carries no target return and no projection of distributions. Any performance information in a later fund's materials would follow the offering documents and counsel's review.
Pace of purchases
Each asset is bought within a month of a closing. If a closing is delayed, the purchase is delayed with it, and so are the acquisition and management fees. The 20% case in the financial section treats such a slip as a fee haircut.
| Year-end | Assets held | Invested equity | Purchase cost of assets |
|---|---|---|---|
| 2027 | 2 | $19.0 million | $44.0 million |
| 2028 | 4 | $38.0 million | $88.0 million |
| 2029 | 7 | $66.5 million | $154.0 million |
| 2030 | 9 | $85.5 million | $198.0 million |
| 2031 | 9 | $85.5 million | $198.0 million |
The first Fund I asset is sold in February 2031 and the last Fund II asset bought the same month, so the count stays at nine. Invested equity sums each fund's equity in the assets it still owns.
Reaching Investors Lawfully
The constraint
Rule 506(b) bars general solicitation. The firm may not advertise the offering, post it on a public website or promote it at open events. It may speak to people with whom it has a pre-existing, substantive relationship, and it may publish the firm's description and market commentary that carries no offer. The marketing budget is therefore spent on building relationships and on information, not on reach.
What the money buys
Year 1 marketing is $99,000: $24,000 of launch spend from start-up capital and $75,000 of operating spend. That is 15% of Year 1 revenue. The share falls to 5% in Year 3 and 3% in Year 5. Fund I's first two closings raise $19.0 million from about 63 investors in Year 1, so the cost is about $1,570 per investor, or 0.5% of the capital committed.
| Item | Year 1 | Purpose |
|---|---|---|
| Brand and website (launch) | $11,000 | A site that describes the firm and its team but carries no offering terms |
| Briefing pack and data room (launch) | $6,000 | The document set sent after a first meeting |
| First investor events (launch) | $7,000 | Dinners for existing contacts |
| Investor dinners, briefings and property-tour days | $26,000 | Invitation-only groups of existing contacts, hosted by Jeremias |
| Conferences and memberships | $12,000 | Attendance only; the offering is not presented or discussed |
| Written updates and market commentary | $9,000 | A quarterly letter that carries no offer |
| Events for attorneys, CPAs and wealth managers | $14,000 | Hosted briefings. No fee is paid for any introduction |
| Presentation materials and video | $6,000 | Used in meetings after a relationship exists |
| Second-closing and Fund II preparation events | $8,000 | Keeps the existing investor base informed |
Guardrails on events
Events are where an offering is most likely to be advertised by accident. Each dinner, briefing, tour day or conference appearance is invitation-only, limited to people with whom Jeremias or the investor relations manager already has a substantive relationship, and recorded in the contact log with how the relationship began. No offer is made or discussed at the event, no terms are shown on slides, and nobody is asked to commit. Fund discussions happen afterward, one to one, with the briefing pack. Securities counsel reviews the format of each event series, the website and the quarterly letter before first use. The $14,000 spent on events for attorneys, CPAs and wealth managers pays for room hire and food, never for introductions.
Marketing milestones
- January 2027: website live, briefing pack ready.
- April 2027: first closing, $9.5 million.
- September 2027: second closing, $19.0 million.
- February 2028: third closing, $28.5 million.
Running the Manager
The Austin office
1,200 square feet downtown, set at $55 a square foot a year ($66,000 in Year 1, a Class B rate and not a quoted rent), with room for six desks, one meeting room for investors and a display for property presentations. The lease is five years. The firm moves to about 1,500 square feet in Year 4.
From search to closing
The acquisitions associate screens listings and broker packages, and Jeremias reviews every underwriting before an offer. A deal that passes goes to diligence: appraisal, environmental assessment, property inspection and legal review. About two deals fail at that stage for every one that closes, at roughly $4,500 each paid by the firm, so $9,000 of unrecoverable cost per closing.
After the purchase
The construction and project manager, hired in month 5, scopes and bids the renovation, supervises contractors and reports progress against the budget, which is what the 5% project fee pays for. The asset manager sets the operating plan with the property manager, tracks monthly operating reports against the business plan, and prepares a quarterly report for investors. The firm earns the capital project fee for overseeing renovation. Property management itself is contracted to a third-party operator, not carried out in-house.
Does the fee load work at the property?
A test of one stabilised year at a single asset, to see how much of its cash flow the manager's fee takes. The inputs are illustrative and the test is about fee load, not a forecast of what investors earn.
| 100-unit asset, one stabilised year | Amount |
|---|---|
| Gross rent at $1,900 a unit a month | $2,280,000 |
| Vacancy and concessions at 6% | ($136,800) |
| Operating costs at 40% of collected rent | ($857,280) |
| Net operating income | $1,285,920 |
| Interest-only debt service on $14.3 million at 6.0% | ($858,000) |
| Cash flow before manager fees | $427,920 |
| Asset management fee (2% of $9.5 million) | ($190,000) |
| Cash flow after the fee | $237,920 |
Debt service cover is 1.5 times. The asset management fee takes 44% of the cash flow before fees, and what remains is 2.5% of the fund's $9.5 million of equity. At this price and rent level an investor's outcome therefore depends mostly on the eventual sale, and investors with large tickets can be expected to push on the fee. Lower fee terms would reduce every revenue line in the plan, which is what the 20% case tests.
Systems and reporting
Investor portal and subscription tracking, accounting software for the management company, underwriting and market-data subscriptions, and a secure data room. Software costs $22,000 in Year 1 and $36,000 by Year 5. Fund accounting and annual audits are performed by outside firms and charged to the funds.
Compliance and insurance
- Rule 506(b) offering for each fund, a Form D within 15 days of the first sale and the Texas notice filing.
- An adviser-status opinion from counsel and, depending on the answer, an exempt reporting adviser filing.
- A written compliance manual and an annual review.
- A Section 3(c) exclusion for each fund, chosen with counsel, and a check of holder numbers at each closing.
- An outsourced chief compliance officer from Year 3, and Form ADV and Form PF support if the adviser line is crossed.
- Directors' and officers', errors and omissions, general liability and cyber insurance, budgeted at $24,000 in Year 1.
- Background checks on the principals, since the offering rules disqualify some people with disciplinary histories. Counsel confirms the details.
Outside providers
Securities counsel, an outside accountant for the management company, a fund administrator and auditor engaged by the funds, and a property manager at each asset. Replacing any of them takes weeks, not months.
Team and Oversight
Jeremias Harrison, founder and managing principal
Jeremias moved from California to Austin in 2015 and spent the next eleven years in acquisitions and asset management at a local apartment owner-operator, rising to lead its acquisitions team. He holds no securities licences. He is paid a salary and nothing per investor raised, and counsel confirms that structure before the first offering, because he owns 80% of a firm that earns acquisition fees and takes every first investor meeting. His $300,000 is the proceeds of selling his California property and his savings. The seed partner knows him through the Austin investor community.
The first hires
The investor relations and operations manager in month 2, the acquisitions associate in month 4 and a construction and project manager in month 5. The asset manager follows in month 14, ahead of the third purchase, an investor relations associate in month 22, a compliance and finance manager in month 28 and a second senior asset manager in month 44, ahead of the ninth purchase. Each is timed to work the firm already has.
Where the team is thin
Jeremias has not run a fund as its sponsor and has not built a compliance function. The plan covers these gaps with outside securities counsel from month 1, the compliance and finance manager from month 28, and a quarterly review of the numbers by an outside accountant.
If Jeremias is out
Key-person risk is real: investors are backing him as much as the strategy. The funds' partnership agreements are drafted with a key-person provision that gives limited partners a vote on what happens if he is no longer active in the funds. The management company carries key-person life and disability cover on him.
The seed partner and the co-investment
The seed partner holds 20% of the management company and has no role in the funds' decisions. Their $250,000 earns 20% of owner distributions: $130,000 over Years 3 to 5, or 52% of the amount invested, plus the stake, which left unvalued here. A shareholders' agreement sets out how distributions are shared and what happens if either owner wants out.
Jeremias intends to invest about 1% of each fund's equity alongside investors: $285,000 in Fund I and $665,000 in Fund II, paid as assets are bought. The money comes from his personal resources outside this plan, and investors will ask for evidence of it.
Fees, Costs and Cash
The statements cover the management company only. The funds it runs are separate partnerships with their own books, and their investors' money never passes through these tables. The inputs come first, then the statements built from them.
Paying for the management company
| Use of funds | Amount |
|---|---|
| Fund I formation: offering memorandum, partnership agreement, subscription documents, Form D | $85,000 |
| Management company set-up, adviser-status opinion and compliance manual | $22,000 |
| Entity filings, Form D and Texas notice filing, background checks | $4,000 |
| Laptops, monitors, phones and a conference-room display | $14,000 |
| Office fit-out and furniture | $26,000 |
| Launch: brand, website, investor deck, first investor events | $24,000 |
| Cash reserve to carry the firm through the fund-raising ramp | $375,000 |
| Total uses | $550,000 |
| Source of funds | Amount |
|---|---|
| Jeremias Harrison's capital | $300,000 |
| Seed partner (minority stake in the management company) | $250,000 |
| Total sources | $550,000 |
Jeremias Harrison puts in $300,000, which is 55% of the total. A seed partner puts in $250,000 for a 20% stake in the management company and receives 20% of the owner distributions. Nobody lends to the firm: a bank is unlikely to lend against fees that depend on closings not yet held. Of the $550,000, $375,000 stays in the bank as a reserve. The firm pays its team for four months before the first fee arrives, and the lowest month-end balance is in April 2027, before that fee. Jeremias also intends to commit about 1% of each fund's equity alongside investors, $285,000 to Fund I and $665,000 to Fund II. That money is not in this plan, and a seed partner or an investor would ask where it comes from.
Fee terms and other inputs
- Each fund asset is a 100-unit apartment community bought at $22.0 million, about $220,000 a unit, with 65% borrowed at the property. The fund puts in $9.5 million of equity per asset: $7.7 million down payment, $660,000 of closing and loan costs (3% of the price, including the manager's acquisition fee), a $1.0 million renovation budget ($10,000 a unit) and a $140,000 property reserve. Price per unit, loan-to-value and renovation budget are illustrative inputs, not Austin market data.
- Fund I raises $28.5 million across three closings: $9.5 million in April 2027, $19.0 million cumulative in September 2027 and $28.5 million in February 2028. It buys one asset in each of May 2027, October 2027 and March 2028. At an average commitment of $300,000 and a $150,000 minimum, that is about 95 investors, 32 at each stage.
- Fund II raises $66.5 million across four closings (May 2028, February 2029, November 2029 and July 2030) and buys seven assets, one every five months from August 2028 to February 2031. At the same average commitment that is about 222 investors. No Fund III is modelled, so revenue flattens in Year 5. A third fund would normally be launched in Year 4.
- The asset management fee is 2% of invested equity a year, charged monthly from the month an asset is bought: $15,833 a month per asset. The acquisition fee is 1% of the purchase price, $220,000 per asset, paid by the fund at closing. The capital project fee is 5% of the renovation budget, $50,000 per asset, earned evenly over the 12 months after purchase. Each fund's offering documents set its terms, and investors with larger commitments may negotiate them. These are inputs for the example and not a market survey.
- Carried interest is a mechanical placeholder: $190,000 in Year 5, equal to one year of the asset management fee on a single asset, from the sale of Fund I's first asset in February 2031. It marks where carry would appear in the statements. It is not an expectation of what any fund will return to investors, and Year 5 is also shown without it in the profit and loss notes.
- Receivables average 20 days. Management and project fees are billed to the funds monthly or quarterly, and acquisition fees are paid at closing, so 20 days is a blended figure. Fees carry no cost of sales.
- Payroll adds 27% to wages for payroll taxes, health cover, retirement match and workers' compensation. Wages in the personnel table are launch rates, and Austin salary levels were not checked against a published survey. Annual pay raises of 3% are charged as a separate line from Year 2.
- Rent is set on 1,200 square feet of downtown Austin office at $55 a square foot a year ($66,000), a figure chosen for Class B space, then 1,500 square feet at $57 from Year 4. These are planning figures and not quoted market rents. Insurance covers directors' and officers', errors and omissions, general liability and cyber policies, and rises as the funds grow.
- Acquisition costs that fall through are charged to the firm: about $4,500 for each deal that reaches diligence and fails, with two failures counted for every closing. That is $9,000 per closing, $18,000 in Year 1.
- Professional fees step up from $60,000 in Year 1 to $115,000 in Years 2 and 3 (Fund II formation in Year 2, adviser-registration preparation in Year 3) and $135,000 in Years 4 and 5. The later amounts include an outsourced chief compliance officer at about $35,000 a year and about $20,000 for Form ADV and Form PF support, plus audit and custody-rule work not recharged to the funds.
- Texas franchise tax is left out of the model. The Comptroller lists a no-tax-due threshold of $2,650,000 of revenue for report years 2026 and 2027, and Year 5 revenue is $2,227,500. The model treats the threshold as holding. Federal tax is charged at the 21% corporate rate with the early losses carried forward, a cautious placeholder for what would normally be a pass-through entity.
- Owner distributions of $100,000, $250,000 and $300,000 are paid in Years 3 to 5, only from cash the model shows the firm can spare. The seed partner's 20% share is $20,000, $50,000 and $60,000, so $130,000 over three years, 52% of the $250,000 invested, plus the stake itself, whose value this plan does not estimate.
Revenue by fee type
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Asset management fees (2% of invested equity) | $174,166 | $617,500 | $1,092,500 | $1,535,833 | $1,725,833 |
| Acquisition fees (1% of purchase price) | $440,000 | $440,000 | $660,000 | $440,000 | $220,000 |
| Capital project management fees (5% of renovation budgets) | $45,834 | $116,667 | $125,000 | $116,667 | $91,667 |
| Carried interest on one realised sale | $0 | $0 | $0 | $0 | $190,000 |
| Total revenue | $660,000 | $1,174,167 | $1,877,500 | $2,092,500 | $2,227,500 |
| Growth on prior year | – | 78% | 60% | 11% | 6% |
Asset management fees recur every month once an asset is owned. They are 26% of Year 1 revenue and 77% of Year 5. Acquisition fees dominate Year 1 at 67% because the firm buys two assets before it has many to manage. They fall to 10% by Year 5 as buying slows. Capital project fees are a small, steady line, and carried interest appears once, at the end.
The first twelve months
| Month | Asset management fees (2% of invested equity) | Acquisition fees (1% of purchase price) | Capital project management fees (5% of renovation budgets) | Carried interest on one realised sale | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $0 | $0 | $0 | $0 | $0 | ($60,505) |
| Feb 2027 | $0 | $0 | $0 | $0 | $0 | ($60,505) |
| Mar 2027 | $0 | $0 | $0 | $0 | $0 | ($60,505) |
| Apr 2027 | $0 | $0 | $0 | $0 | $0 | ($60,505) |
| May 2027 | $15,833 | $220,000 | $4,167 | $0 | $240,000 | $179,495 |
| Jun 2027 | $15,833 | $0 | $4,167 | $0 | $20,000 | ($40,505) |
| Jul 2027 | $15,833 | $0 | $4,167 | $0 | $20,000 | ($40,505) |
| Aug 2027 | $15,833 | $0 | $4,167 | $0 | $20,000 | ($40,505) |
| Sep 2027 | $15,833 | $0 | $4,167 | $0 | $20,000 | ($40,505) |
| Oct 2027 | $31,667 | $220,000 | $8,333 | $0 | $260,000 | $199,495 |
| Nov 2027 | $31,667 | $0 | $8,333 | $0 | $40,000 | ($20,505) |
| Dec 2027 | $31,667 | $0 | $8,333 | $0 | $40,000 | ($20,505) |
Nothing is earned from January to April. May and October are the only months with positive EBITDA, because each carries an acquisition fee. In every other month the firm spends more than the recurring fees it collects, which are $20,000 to $40,000. Month-end cash is lowest in Apr, at about $133,000, after allowing for the 20 days funds take to pay. Costs in the monthly table are the Year 1 total spread evenly, so the first four months do not step up as the hires of months 2, 4 and 5 arrive. The fee months are exact.
Payroll and hiring dates
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and managing principal | $140,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Investor relations and operations manager | $80,000 | Month 2 | 1 | 1 | 1 | 1 | 1 |
| Acquisitions associate | $90,000 | Month 4 | 1 | 1 | 1 | 1 | 1 |
| Asset manager | $105,000 | Month 14 | – | 1 | 1 | 1 | 1 |
| Construction and project manager | $90,000 | Month 5 | 1 | 1 | 1 | 1 | 1 |
| Investor relations associate | $75,000 | Month 22 | – | 1 | 1 | 1 | 1 |
| Compliance and finance manager | $115,000 | Month 28 | – | – | 1 | 1 | 1 |
| Second senior asset manager | $110,000 | Month 44 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $432,858 | $654,050 | $846,138 | $940,858 | $1,022,350 |
Jeremias is the only employee in January. The investor relations and operations manager joins in month 2 to run subscriptions and investor reporting. The acquisitions associate follows in month 4 and a construction and project manager in month 5, the month of the first purchase, because the project fee is earned by someone running the renovation. The asset manager starts in month 14, ahead of the third purchase, when two assets are owned. An investor relations associate joins in month 22 for the Fund II raise, a compliance and finance manager in month 28, and a second senior asset manager in month 44, ahead of the ninth purchase, when eight are held. Headcount is 4 at the end of Year 1, 6 at the end of Year 2, 7 at the end of Year 3 and 8 from Year 4. Jeremias's $140,000 salary is already in payroll, so the profit lines are what remains after he is paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $660,000 | $1,174,167 | $1,877,500 | $2,092,500 | $2,227,500 |
| Direct costs (none: fees carry no cost of sales) | $0 | $0 | $0 | $0 | $0 |
| Gross profit | $660,000 | $1,174,167 | $1,877,500 | $2,092,500 | $2,227,500 |
| Payroll incl. on-costs | ($432,858) | ($654,050) | ($846,137) | ($940,858) | ($1,022,350) |
| Rent | ($66,000) | ($68,000) | ($70,000) | ($85,500) | ($88,000) |
| Utilities | ($4,200) | ($4,300) | ($4,400) | ($5,400) | ($5,500) |
| Marketing | ($75,000) | ($70,000) | ($95,000) | ($80,000) | ($70,000) |
| Insurance | ($24,000) | ($26,000) | ($30,000) | ($33,000) | ($36,000) |
| Professional fees | ($60,000) | ($115,000) | ($115,000) | ($135,000) | ($135,000) |
| Software subscriptions | ($22,000) | ($26,000) | ($30,000) | ($34,000) | ($36,000) |
| Travel, property tours and investor meetings | ($18,000) | ($24,000) | ($30,000) | ($34,000) | ($36,000) |
| Costs of acquisitions that do not close (third-party diligence) | ($18,000) | ($18,000) | ($27,000) | ($18,000) | ($9,000) |
| Licences, memberships and training | ($6,000) | ($8,000) | ($9,000) | ($10,000) | ($10,000) |
| Equipment replacement and new-hire kit | $0 | ($6,000) | ($4,000) | ($6,000) | ($4,000) |
| Annual pay raises (3% a year) | $0 | ($19,622) | ($51,530) | ($87,243) | ($128,314) |
| EBITDA | ($66,058) | $135,195 | $565,433 | $623,499 | $647,336 |
| Depreciation | ($6,514) | ($6,514) | ($6,514) | ($6,514) | ($6,514) |
| Interest | $0 | $0 | $0 | $0 | $0 |
| Income tax | $0 | ($11,783) | ($117,373) | ($129,567) | ($134,573) |
| Net income before start-up costs | ($72,573) | $116,898 | $441,545 | $487,418 | $506,249 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($135,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($207,573) | $116,898 | $441,545 | $487,418 | $506,249 |
Year 1 loses $72,573 before start-up costs and $207,573 after them. Year 2 is the first profitable year: net income is $116,898 and the EBITDA margin 11.5%. Year 3 reaches 30.1% on three purchases, the most in any year, and Year 4 holds at 29.8%. Year 5 shows 29.1%, but $190,000 of that year's EBITDA of $647,336 is the carry placeholder. Without it, Year 5 EBITDA is $457,336 on revenue of $2,037,500, a margin of 22.4%, and $166,000 below Year 4. Acquisition fees fall to one purchase and no new fund replaces them. Income tax starts in Year 2 at a small amount and rises once losses are used.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($237,223) | $95,239 | $409,521 | $482,151 | $505,366 |
| Equipment and fit-out | ($40,000) | $0 | $0 | $0 | $0 |
| Funding received | $550,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | $0 | $0 | $0 | $0 |
| Owner distributions | $0 | $0 | ($100,000) | ($250,000) | ($300,000) |
| Net change in cash | $272,777 | $95,239 | $309,521 | $232,151 | $205,366 |
| Closing cash | $272,777 | $368,016 | $677,537 | $909,688 | $1,115,054 |
The lowest year-end balance is Year 1, $272,777. The lowest month-end balance is April 2027. The model cannot show the within-year lumpiness of acquisition fees after Year 1. Distributions begin in Year 3. Year 5 cash from operations is $505,366, of which about $150,000 is the carry after 21% tax. Without it, about $355,000 remains, which covers the $300,000 distribution 1.2 times.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $272,777 | $368,016 | $677,537 | $909,688 | $1,115,054 |
| Accounts receivable | $36,164 | $64,338 | $102,877 | $114,658 | $122,055 |
| Equipment and fit-out (net) | $33,486 | $26,971 | $20,457 | $13,943 | $7,429 |
| Total assets | $342,427 | $459,325 | $800,871 | $1,038,288 | $1,244,538 |
| Bank loan | $0 | $0 | $0 | $0 | $0 |
| Paid-in capital | $550,000 | $550,000 | $550,000 | $550,000 | $550,000 |
| Retained earnings | ($207,573) | ($90,675) | $250,871 | $488,288 | $694,538 |
| Total liabilities and equity | $342,427 | $459,325 | $800,871 | $1,038,288 | $1,244,538 |
Break-even and fee cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -10.0% | 11.5% | 30.1% | 29.8% | 29.1% |
| Net margin (before start-up costs) | -11.0% | 10.0% | 23.5% | 23.3% | 22.7% |
| Payroll incl. pay raises as share of revenue | 66% | 57% | 48% | 49% | 52% |
| Revenue per full-time equivalent at year end | $165,000 | $195,695 | $268,214 | $261,563 | $278,438 |
| Average monthly revenue | $55,000 | $97,847 | $156,458 | $174,375 | $185,625 |
| Monthly revenue needed to cover operating costs | $60,505 | $86,581 | $109,339 | $122,417 | $131,680 |
| Debt service cover (EBITDA / interest + principal) | – | – | – | – | – |
The last two measures show where the firm stands each year. Year 1 averages $55,000 a month against $60,505 needed. Year 2 clears the line, at $97,847 against $86,581, and the margin widens after that. There is no debt, so no cover ratio applies. A tougher test fits funds of this kind: the share of operating costs (revenue less EBITDA) met by asset management fees alone. Those fees cover 24% of costs in Year 1, 59% in Year 2, 83% in Year 3, 105% in Year 4 and 109% in Year 5. Until Year 4, the firm relies on acquisition fees to pay for itself.
If fees come in 20% lower
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $528,000 | $939,334 | $1,502,000 | $1,674,000 | $1,782,000 |
| Net income before start-up costs | ($137,079) | $37,677 | $291,749 | $260,975 | $332,049 |
| Net income after start-up costs | ($272,079) | $37,677 | $291,749 | $260,975 | $332,049 |
| Closing cash | $215,503 | $237,156 | $504,588 | $762,652 | $1,095,298 |
This case takes 20% off every revenue line in every year. That is a fee haircut, for example lower fee rates or fees delayed, and not a smaller fund: a fund that closed at $22.8 million instead of $28.5 million would also buy fewer assets, and its fees would fall by more than 20% in the years when purchases are missed. The response: the investor relations and operations manager starts two months later, every hire from month 13 starts six months later, the second senior asset manager is dropped, marketing is cut by 20%, Jeremias takes a 20% pay cut, the firm stays in its first office and no distributions are paid. On those terms the firm ends every year with cash in the bank, at no less than $215,503, and is profitable from Year 2. Equity ends Year 1 at $277,921. Run with the same revenue and none of the levers, closing cash is $25,833 at the end of Year 2 and negative, at ($129,538), by Year 5.
Sources
- SEC, Rule 506(b) of Regulation D: general solicitation ban, limit of 35 non-accredited purchasers, Form D within 15 days of the first sale.
- SEC, Rule 506(c) general solicitation: verification of accredited investor status.
- SEC, Investment advisers: capital raising building blocks: private fund adviser exemption below $150 million, exempt reporting advisers and state requirements.
- SEC, Form ADV general instructions (SEC 1707, 07-24): regulatory assets under management, private fund assets and uncalled commitments.
- Cornell Legal Information Institute, 15 U.S.C. 80a-3: Investment Company Act Section 3(c)(1) and 3(c)(7).
- Texas State Securities Board, Filing requirements for Regulation D offerings in Texas: Form D notice filing and fee, as the Board's page described them when checked; the amount is confirmed at filing.
- Texas Comptroller, Franchise tax: no-tax-due threshold of $2,650,000 and rates for report years 2026 and 2027.
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