How Does Cash Flow in a Syndicate?

Here is how cash flows in a Syndicate (as drafted by Syndication Attorneys):
On acquisition 
Investor funds are collected in the Investor LLC Operating Account.
When it is time to close on the Property, the Manager LLC (Manager) – Note: this is not the Property Manager; it’s the Syndicate Manager – wires only the funds needed for closing. There should be excess cash remaining the Investor LLC bank account that will be used to pay the Manager LLC for its Acquisition Fees and to reimburse the Manager (or its members) for any out-of-pocket expenses.
From Operations
The Property earns money.
Either the Property Manager or the Investor LLC Manager writes checks for Property Operating Expenses and Debt Service.
Excess cash is swept to the Investor LLC Operating Account.
The Manager writes checks from this account to itself for any Asset Management Fees that are due at that time. Manager’s Fees are described in your Operating Agreement. The Manager LLC distributes its earnings to its members as described in the Manager LLC’s Operating Agreement.
The Manager decides how much to retain in the Investor LLC operating account as Working Capital and Reserves and how much, if any, is Distributable Cash.
If there is to be a Distribution, the Manager follows the Waterfall in the Investor LLC Operating Agreement, depending on the phase of the Company (operations or a capital transaction [re-fi or sale]).
The Manager uses the list of Members from the Investor LLC Operating Agreement to determine who will receive checks, and how much each Member is entitled to receive from the Distribution. The checks are written from the Investor LLC to the Members – using the exact Member names listed in those tables (which should match their Subscription Agreements).
Also, see our article entitled “How to Structure a Real Estate Syndicate.”