Alan Carr
02/24/2023
A preferred return is the share the limited partners or passive investors are entitled to before the sponsor receives a single dollar from the investment. The preferred return is a risk mitigation measure to ensure that the sponsor or general partner is performing as expected. For example if the limited partner invests $100,000 with a 6% preferred return then the limited partner / passive investor is owed $6,000 before the syndicator can be paid. After the return threshold is met and the passive investor receives their 6% in a given year, the remaining profit is split 60/40 with 40% going to the sponsor and 60% going to the passive investor.
