Partnership Pitch

7 Replies

If you were pitching to a group of potential partners to collectively purchase an apartment. What would you include in the pitch?

Probably a lot about the research I did with my securities attorney about general solicitation and how they will be protected. Also you would want to discuss how they will get paid before you get paid, how their interests will be protected, etc.

Hi Roselynn,

First you need to clarify what you mean by potential partners. Let's assume you are talking about partners that will have equal control over the project. If that is the case then the pitch would be what you can bring to the table and what you are looking for in a partner. RE transactions need four main pieces. Someone with knowledge and experience, someone with time, someone with money, and usually someone with credit. If you are missing any of these, that is what you should be looking for.

If you are looking for equity partners that will have little or no say so as to the conduct of the project, and are just bringing in money, then you need to take a step back. If their money is protected by a first or second deed then you should be OK with the General solicitation. If you are planning on pooling funds then you are treading in SEC waters and need to know the restrictions as to what you can and cannot say in a group that you do not have a significant relationship with. Do a google search on Reg D exemptions if pooling funds is your plan.


@Bryan Thanks for your response. Focusing the conversation on how their interests are protected is very important as you mentioned. I will also look further into working with a securities attorney as the required. Thanks again

@Jeff Greenberg Thanks for your response. The purpose of the partnership is to bring together all the essential resources you mention -- time, money, credit and experience. It is a partnership between people with existing relationships. The funds will be protected using multiple built in strategies. I will also do further research you suggest. Thanks again.

The use of a deed of trust and note doesn't avoid securities issues, not with multiple investors, Reg D mentions the exemption of real estate loans, but further research you'll find that where ever three or more gather together, a note can become a bond and securitization issue.

While you mentioned various strategies, that breezes over a more complicated issue than you're possibly aware of, basing that on the fact you asked the question. Breaking up a security interest in a deed of trust is a securitization function by participation. While it helps to have qualified investors and if not having had past relationships, the slicing up of a security interest is still a problem.

You can have three in an LLC and you could have 3 LLCs, just avoids issues, but you can have 100 members, but it just gets sticky.

I'd suggest you pass it by a securities or financial attorney.

As to your presentation, I'd suggest you line up folks individually and get past the nuts and bolts and not in a group. I use to give seminars looooong ago, when the questions start flying you'll need a very good command of the topic, need to anticipate what your answer will lead to for another question. Providing the return of money as well on money can get complicated quickly, I'd say it's not a group topic.

You can certainly show the dazzel with a group, an overall business plan, talk about tax advantages of owenership and the generalities of owning multi-family, but when it gets to an individual and thier money that should be addressed privately. You'll also find that people don't talk about money issue in public as the conversation can quickly get personal.

My nickle's worth, IMO.

Bill brings up a good point. Many promoters approach investors individually instead of collectively. One bad apple in a crowd can ask a lot of questions that end up polluting the opportunity for everyone. You also want to give each investor individual attention. Private placements are private and people want to be part of something special when they invest in them.

You also don't really want all of your investors interacting if you want to maximize your authority as a promoter. Having functions where they meet will be opportunities for them to do their sewing circle thing if the investment goes sideways for a bit. You want to distribute communication to them quarterly that you control and not have them interacting together too much ideally as the promoter.

Having events with other active investors also risks them forming entities without you being in them. Then you did all of the hard work to put the investors in a room together and they reap all of the benefit from it.

Food for thought...

Bill G. @Bryan Hancock So then IF you were @Roselynn Lewis and had a project that you needed help funding, and were lacking the required skin in the game, experience ,or credit, what would YOU do to put the deal together? Obviously she has the project, but lacks at least the money so Step 1 and so on?

@Bill G were you an attorney in a previous life?

LOL, no, more like a financial cop. By the time I considered going back to law school, I was too old forit to be beneficial! Just an old frustrated financial cop.

Bryan has expanded on some good points. My seminar experiences were with an attorney, stock broker and myself and you don't want to get into crowd control!

I'd also suggest you know who you let in. I made it a sport to attend seminars and sharp shoot'em, not telling the whole story!

People don't open thier wallets in a crowd, they open thier mouths.

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