BiggerPockets

I remember awhile back being told that if you are small-time, say a few hundred thousand dollars borrowed, there is an easier/cheaper registration process.

Can anyone point me in the right direction? I have a dozen single family homes all cash flowing nicely, but I'm about to run out of spare cash to buy and need a partner. I buy $20k-$35k houses that rent for $700-$900/month, and the lost opportunity is killing me!!

Thanks

Dan Inc, send me an email (in signature line). I may be able to help. For solicitation, I believe you can run ads that require accredited investors and intrastate (NC residents) for amounts less than $1M per year... per SEC Q&A page

BE CAREFUL when advertising for PML. Know the SEC guidelines. It is not illegal to advertise, however GENERAL solicitation IS!!! The following items are not allowed ever:

==> Advertising in newspapers, Craigslist, radio, billboards
==> You an NEVER guarantee ANYTHING! (Nothing is guaranteed)
==> You can NEVER say 'SAFE' (IE Your money is Safe with our investment) (This is kind of along the lines of guarantee. Nothing is ever safe. Nothing is ever guaranteed.)
==> You can NOT advertise your returns. (IE Make 10% or more on your money by investing with me now!)
==>You can NOT come out and say 'I'm Looking for Investors!'

If you solicit with fliers, make it about teaching someone about how to become the bank, or how to transfer their sitting 401K funds from old jobs into a self directed IRA to invest wherever they want and the requirements for doing so.

The first and best way is to tell everyone you know personally about your business and the opportunities that are out there. You can solicit the particulars ONLY if you have a personal relationship with them, meaning, you know their financial situation is and have qualified them as able to do private lending (some states only allow 10% of a person's net worth to be used for private financing). Examples are Coworkers, neighbors, your doctor, lawyers, CPAs, other investors or entrepreneurs, etc. Here are some legal and accepted ways to advertise for private lenders.

Here are 3 simple ways to legally and safely advertise
*Luncheons (Keep it GENERAL,like I explained above for advertising)
*Work with a mortgage broker (one that specializes in investment property financing) (they act as a middle person to find the private lenders. They'll examine the offering and market it to their private lenders for you)
*Online Marketing (if you do that, its fine, you MUST make sure not to DETAIL your offer!) Mention what your COMPANY does, successes; BUT password protect your OFFERINGS and documents. People must have to jump through hoops to get to your offering! (This is why I'd be careful what you put on a flier)

THE RULE OF 45: It you are cold calling (meaning trying to get someone you do not know to do private lending with you), there is a 45 day wait period, in which you MUST have communication with the person on at least 3 occasions (can be email, direct mail, etc) but ONE of them must be in person or by telephone within the 45 days.

You mentioned partner. Is that different than soliciting for cash investors?

If you have a partner that buys with you and assumes the same kind of liability than would a partnership agreement be enough?

I don't disagree with some of Zion's post. Avoiding the word 'guarantee', front end web sites, etc., are very good practices and good advice. Personally, in NC, I would always target accredited investors just to be safe. The 10% net worth stuff is not applicable to NC from a statutory perspective.

I'm going from NC state specific information since the OP claims he is in NC. I am also an NC resident. The fact is that unless Dan Inc is brokering for someone else's properties (his post say these are his properties), he will meet state securities exemptions**. I assume his post is accurate in that he anticipates financing less than $2.5M and as an issuer (and not a dealer) per our state securities law. On a federal level, see the link I posted before for Q&A, specifically the "Intrastate Offering Exemption". As the SEC says, "This exemption facilitates the financing of local business operations." The SEC doesn't want to stomp on private enterprise... just follow the rules and don't defraud people. To qualify for the intrastate offering exemption, your company must:

* be incorporated in the state where it is offering the securities;
* carry out a significant amount of its business in that state; and
* make offers and sales only to residents of that state.

That's not too hard to do for financing a single deed of trust.

**Per NC state law, the following transactions are exempted from G.S. 78A-24 (Registration requirement) and G.S. 78A-49(d) (Rules, forms, orders, and hearings):
Any transaction in a bond or other evidence of indebtedness secured by a lien or security interest in real or personal property, or by an agreement for the sale of real estate or chattels, if the entire security interest or agreement, together with all the bonds or other evidences of indebtedness secured thereby, is offered and sold as a unit.

Be careful, I would just look for partners in real estate. Perhaps run and ad stating "experienced real estate investor looking for cash or credit partners to expand business."( I would still tread lightly though.)Good luck!

I know what my answer would be, but I'll resist, the better part of valor....
You're treading into a very regulated area and shouldn't take the word of BP members imo. Go seek professional advice from someone in this field that will back up his answers in writing for you. Rich

Dan Inc, I'm still waiting for an email:), per my 04/22/2011 post. I'm still looking for low LTV investments for my SDIRA.

Regarding solicitation, I provided my opinion (prior posts) for the SEC and the state. We (meaning others in the BP nation) are clearly not all on the same page. I'm just reading the SEC's own text about exemptions like Rule 504, which says:

"Rule 504 provides an exemption for the offer and sale of up to $1,000,000 of securities in a 12-month period... in general you may not use public solicitation or advertising to market the securities... However, you can use this exemption for a public offering of your securities and investors will receive freely tradable securities under the following circumstances:

* You register the offering exclusively in one or more states that require a publicly filed registration statement and delivery of a substantive disclosure document to investors;
* You register and sell in a state that requires registration and disclosure delivery and also sell in a state without those requirements, so long as you deliver the disclosure documents mandated by the state in which you registered to all purchasers; or,
* You sell exclusively according to state law exemptions that permit general solicitation and advertising, so long as you sell only to "accredited investors," a term we describe in more detail below in connection with Rule 505 and Rule 506 offerings."

(Note, I added the emphasis above.)
Bullet 1: NC doesn't require publicly filed registration statement for exempt transactions
Bullet 2: Disclosure in NC not applicable for exempt transactions
Bullet 3: Sell to accredited investors, as permitted by NCGS 78A-49.(d) for exempt transactions

For those who don't know, an accredited investor == high net worth investors.

The short answer to "...does anyone actually actively solicit and feel confident that they are in full compliance?" is Yes. Until I see case law or a document from an SEC page showing otherwise, I've outlined my view. I like Zion's approach to luncheons and password protecting pages. I already to the latter. The former is a technique Allen Cogwell and others use. Probably a good idea if your "sell" is impeccable. Helps if you are also an accredited investor or have an incredible (and verifiable) track record.

And yes, I think you should be careful in your ads. Seek you own legal guidance if you feel compelled because I am not an attorney. For sure the "safe" routes are do nothing or do a full registration. I believe both are not ideal ideas given your context... but I'm not you.

I think a lot of people reading this post will see the OP say "I have a dozen single family homes all cash flowing nicely, but I'm about to run out of spare cash to buy... and the lost opportunity is killing me!!" followed by "...I'm still waiting for an email... I'm still looking for low LTV investments for my SDIRA." followed by "You know, it sounds like a lot of work, and I probably don't want it bad enough to go through the hassle..." and wonder what the RE market has come to.

Sign of the times, I guess.

bump