What is a GP/LP fund structure in real estate?

A GP/LP fund structure is a limited partnership with two kinds of partner. The general partner (GP) sponsors and runs the investment and carries unlimited liability; the limited partners (LPs) provide most of the capital, take no part in day-to-day decisions, and can lose no more than they invest. Profits are split between them according to the partnership agreement, usually through a preferred return and a distribution waterfall.

GP vs. LP: who does what

Criteria	General partner (GP)	Limited partner (LP)
Role	Sources the deal, raises capital, manages the asset and reports to investors	Passive investor
Capital	Usually a small co-investment (often 1–10% of equity)	Most of the equity
Control	Makes operating and investment decisions	Votes only on major matters defined in the agreement
Liability	Unlimited for the partnership's obligations (often held through an LLC)	Limited to the capital committed
How they earn	Fees plus a share of profits above the preferred return (carried interest or promote)	Preferred return, then a share of remaining profits

How a GP/LP structure works

Formation: the GP forms a limited partnership (or an LLC with a manager and members) for a deal or a fund.
Capital raise: LPs commit capital and sign the partnership or operating agreement; the GP co-invests alongside them.
Investment: capital is contributed up front or called over time, and the GP acquires, develops or improves the asset.
Operations: the GP manages the asset, charges the agreed fees and reports to investors.
Distributions and exit: cash flow and sale proceeds are distributed through the waterfall until the investment is wound up.

How much capital flows through GP/LP structures?

Most private real estate capital is raised through GP/LP vehicles. In 2025, private real estate funds raised $222.2 billion, up 29% from $172.4 billion in 2024 and the first year-on-year increase since 2021, according to PERE's full-year 2025 fundraising report. Raising took longer than ever: funds that closed in 2025 spent an average of 25 months in market.

Across all industries, fund issuers reported $2,118.3 billion sold in 17,593 new Regulation D offerings in 2025, the private-placement route most US real estate funds and syndications use to raise from LPs (SEC Regulation D statistics).

How profits are split: preferred return, waterfall and carry

The partnership agreement sets the order in which cash is paid out. A typical distribution waterfall first returns LPs' capital, then pays a preferred return (often 6–8% a year), and then splits the remaining profit between LPs and the GP. The GP's share above its own capital is called carried interest, carry or the promote. Some agreements add a catch-up that lets the GP receive a larger share until it reaches its target split.

A worked example

Illustrative figures only. LPs contribute $9.5 million and the GP $500,000 to a $10 million equity raise, with an 8% preferred return and a 70/30 split after that. After a sale, $16 million is available. First, all $10 million of capital is returned pro rata. Next, partners receive the unpaid preferred return on their capital. The remaining profit is then split 70% to the partners pro rata and 30% to the GP as carried interest, on top of the GP's return on its own $500,000.

Fees in a GP/LP structure

Management fee: an annual fee, usually a percentage of committed or invested capital, for running the fund or asset.
Acquisition fee: a one-time fee when an asset is purchased.
Asset management or property management fees: for ongoing operations, sometimes paid to an affiliate.
Disposition fee: a one-time fee when an asset is sold.

Fees and the waterfall together determine how aligned the GP is with investors. LPs typically compare the fee load with the GP's co-investment and the hurdle the GP must clear before earning carry.

Common variations

LLC instead of LP: many US real estate syndications use an LLC, with a managing member in the GP role and members as LPs. The economics work the same way.
Share classes: one investment can have several classes of LP interest with different preferred returns or fees.
Deal-by-deal vs. fund: a syndication raises for one property, while a fund raises a blind pool and invests in several.
European vs. American waterfall: carry is calculated across the whole fund, or deal by deal.

What is the difference between a GP and an LP?: The GP manages the investment and carries unlimited liability; LPs provide most of the capital, stay passive, and their risk is limited to what they invest.
How much does a GP usually invest?: It varies by deal and sponsor, but GP co-investments of roughly 1–10% of the equity are common. LPs often see a meaningful co-investment as a sign of alignment.
What is carried interest in a GP/LP structure?: The GP's share of profits above its own capital, paid after LPs receive their capital and preferred return. It is also called carry or the promote.
Can an LP lose more than they invest?: Generally no. An LP's liability is limited to the capital it commits, as long as it does not take part in managing the partnership.
Is a GP/LP structure the same as a syndication?: A syndication is the act of pooling investors into one deal; the GP/LP structure is the legal and economic framework most syndications use to do it.

Doing this in Covercy

Covercy One handles the GP side of a GP/LP structure in one place:

Set up share classes for a holding, each with its own preferred return.
Record management fee terms per share class, and derive the charge schedule from them.
Run distributions with preferred returns and multi-hurdle waterfalls, calculated pro rata across investors.
Keep a capital ledger of each investor's commitments, contributions and distributions.
Give LPs a portal dashboard with their holdings and recent activity.

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Sources

PERE, Fundraising Report: Full Year 2025, 2026-01. Accessed 2026-11-03.
U.S. Securities and Exchange Commission, Regulation D Offerings: Statistics, Data through 2026:Q2. Accessed 2026-11-03.