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Raising Private Equity: How to Use “Reg A” to Raise Investment Capital

by Ankit Duggal on March 19, 2014 · 5 comments

Raising Investment Capital

Have used up your own personal Rolodex of investors for raising capital for a new deal?

This is a common problem that most real estate investors face at some point in their investment career.

Traditionally, real estate investors have used Regulation D (504, 505, and 506) to raise capital for their deals. Two common complaints of Regulation D that investors raise are the inability to advertise the offering and take in capital from unaccredited investors. JOBS Act under Title II has helped remove/reduce the obstacle surrounding advertising the offerings but the second complaint still lingers.

There is a little known Regulation that can help solve the two remaining problems. It is known as Regulation A.

Related: Simple Rules for Raising Capital

What is REG A?

Regulation A is a security offering that bridges the gap between a private offering and a public offering. The issuer under this regulation is allowed to engage in general solicitation from both accredited and unaccredited investors for up to $5 million every 12 months (subject to increase to $50 million with JOBS Act under Regulation A+ offerings). That means an investor can publicly advertise their next investment offering through ads, billboards or whatever mean the issuer deems appropriate. The general solicitation combined with little to no qualifications required for capital investors can make this a useful capital raising tool for real estate investors.

Why REG A?

The best part of the REG A offering is that you can do what is called “testing the waters” before spending a ton of money and time completing FORM-1A. Under the “testing the waters” premise, issuer may advertise for investors prior to even filing with the SEC. This allows the issuer to gauge demand and interest for their offering before taking on the legal and accounting costs involved with filing FORM 1A.  The issuer can advertise the offering but must stop short of taking money from investors until the SEC approves the offering.

Why Not REG A?

The two biggest drawbacks of Regulation A are the cost and the SEC review. Regulation A offerings are costly to complete as they are labor intensive for attorney firm (cost upwards of $50,000 to complete) and can take up to 1 year to complete due to the SEC review and comment requirement.

Related: Simple Rules for Raising Capital, Part 2 (Now It Gets More Complicated)

Any investors looking for new capital partners in the third circle of influence should consider Regulation A.

Have any of you considered using Regulation A? What are your thoughts?

Happy Investing!

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{ 5 comments… read them below or add one }

Nick March 19, 2014 at 1:54 pm

Great Article Ankit.

I’m just curious, would you recomend a Reg A for more of an experienced syndicator/equity raiser compared to somebody is just breaking into that arena?

The objections to the typical 506 reg D you made are great but the added time and expense of the reg A I can also see as cripling to the new syndicator.

I was just interested in your thoughts regarding this and if you have ever seen a reg A used by a newer equity raiser.



Ankit Duggal March 19, 2014 at 2:49 pm


I would not recommend Reg A to a first time issuer unless they have a large deal that they will be syndicating and have a lot of buffer in the deal for the added syndication costs. Thanks for the read.

Happy Investing


Matt Buckels March 21, 2014 at 9:06 am

Nice article. We did a Reg A a few years back. Took 15 months for SEC to qualify it. For what its worth, we spent more on advertising than the capital we brought in from the ads. The serious capital we raised came from people we already knew or networking, not ads. The plus to it, is it gives you more credibility than a Reg D offering does.


Mikal P. March 23, 2014 at 8:35 am

Just wondering if any body has used rule 505 to raise capital, which allows you to take in funds from up to 35 non accredited investors… You’d have to convince your investors to lock up their money anywhere from 6-24 months but I think the positive to that is you can put together an entire investment program and prove a track record instead of doing a single deal.



Tony Delisi March 30, 2014 at 5:06 am

Thanks for your article. I am a Realtor in IL who is starting to invest in properties as well. I have gone as far as I can on my own money and need ways to put investors together. This was very helpful.


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