GP vs LP in Real Estate: Who Does What, and What an LP Should See

What is the difference between a GP and an LP in real estate?

In GP vs LP real estate deals, a partnership has two kinds of partners. The general partner, or GP, runs the deal. The limited partners, or LPs, fund most of it.

The GP finds the property, arranges the loan, sets the business plan, hires and oversees the property manager, and reports to investors. LPs supply most of the equity and own a share of the entity. They do not run the building.

That is the whole structure. Everything else in this guide is about what it means for the person who is not in the building.

I am a sponsor, so I write this from the GP's chair. I operate 1,500 units across 48 properties in 7 states. This page is education, not an offer to invest and not advice. For the wider picture of how a deal is put together, see my guide to multifamily syndication.

What does the GP do?

A GP carries the work and the accountability. In a typical apartment deal the sponsor:

• Finds and underwrites the property, then decides whether to buy it
• Signs the loan and is responsible for meeting its terms and deadlines
• Writes the business plan: what to renovate, what to charge, how long to hold
• Hires the property manager and holds them to a standard
• Reports to the limited partners

Look at the last two. The property manager does the daily work, but the GP answers for the result. A sponsor who cannot tell you how they hold their manager accountable has told you something.

Rejecting bad deals is part of the job too. We underwrote 195 deals last year and bought none, because the sellers' prices did not match the numbers. Ask any sponsor how many deals they reject for each one they buy.

What does an LP do?

An LP supplies capital and takes a share of the entity. LPs do not vote on leasing, pricing, or vendors. That limited role is why the structure usually limits an LP's liability to the money they put in, though the entity documents and the loan decide the details.

Limited control does not mean no rights. The operating agreement sets what an LP can ask for, what needs LP approval, and what the GP can do alone. Read it before you commit, and have your own attorney read it too.

How do GPs and LPs get paid?

Every deal writes its own terms, so the private placement memorandum is the only source that counts. In general, LPs receive a share of the property's cash flow and a share of the proceeds when it is sold or refinanced. GPs earn fees for specific work, plus a share of profit once investors clear a stated hurdle. The written order in which cash is split is the waterfall.

The full walk-through is in multifamily syndication. The point for this page is narrower: the GP is paid for running the property, so the LP's best protection is how well the GP reports on it.

What should an LP see from the GP?

An LP cannot walk the building, so the report is the window. A good report lets you check the GP's story against numbers that are hard to dress up. Ask for these:

• Physical and economic occupancy, side by side. A building can be 95 percent full and still collect far less. The gap is a collections problem. Economic occupancy explains how to read it.
• Delinquency. What residents owe, and whether it is shrinking.
• Lease expirations. How many leases end in the next 90 days, and what the plan is for them.
• Income against expenses. Net operating income against the plan, with a note on every large variance.
• A current rent roll on request. The rent roll lists every unit, its lease, and what it pays.
• Progress against the business plan. Renovations done, rents achieved, and what is behind schedule.

The test of a report is whether it tells you something unwelcome when something is wrong. A report that is always green is a marketing document. If you want the one-page format I use, the owner reporting template is free.

How do you vet a GP before you become an LP?

Start with the checks that cost nothing. Search the sponsor's name with the words SEC and lawsuit. Ask which properties in the track record they still own and which went back to the lender. Ask to see a sample report before you commit, not after.

Then hold every sponsor to the same standard, including me. The free operator vetting prompt runs a structured research pass on any sponsor in about 15 minutes. The underwriting discipline checklist shows the gates a disciplined sponsor applies before buying.

Do I need to be accredited to be an LP?

Usually. Most private apartment offerings rely on Regulation D. Rule 506(c) requires every investor to be accredited and verified. Rule 506(b) allows a limited number of non-accredited but sophisticated investors, and it bars public advertising of the offering. Rules change and your situation is your own, so confirm with your attorney before you commit any money.