Regulation D

4 Replies

Hello Bigger Pockets folks!

I am having issues finding an answer to my question about regulation D as it pertains to real estate investing.

I have done quite a bit of reading/research on regulation D, but I still have a few unanswered questions. 

When exactly are you required to file form D?

If my grandfather decided to give me a $25k loan at 3% due in 5 years, would that require me filing form D? 

What if it wasn't a family member, rather a friend of mine?

In the above example, if he gave me $25k for 10% equity, I'm assuming that would be considered selling securities and would require compliance with the SEC.

I'm just having a difficult time understanding what constitutes selling securities when raising capital. I'm a newer investor and have only used my own money to do deals. I hope in the future that I will venture out and raise capital, and at that point I will seek professional legal counsel. Even though I will be paying a lawyer, I still want to be educated on the topic.

Any help is greatly appreciated!

Rule 505 states you can sell up to 35 'other persons' than accredited investors and be exempt from registration.

So, take that how you want. Not legal advice or tax advice.

Luka Hi Here is some Information hopefully this answers your questions.

http://www.sec.gov/answers/rule506.htm

JOBS ACT April 2012

Securities exemption

REG D

506 (C)

this is Not any Legal advice an I'm Not an attorney or Play One.

Regulation D is not your only concern, Blue Sky Laws vary from state to state. I am a securities company technically and even though we are investing in real estate there are many many very minute lines you have to be cautious of. To put it in perspective we don't even look at issuing securities for less than $250,000.00 just due to the sheer headache and cost. We do operate under exemptions and just the start up cost of the contracts and other information you are going to need from an attorney are going to cost $10,000.00 or more. Operating in this style is very expensive although it can be very profitable at scale. You will also run into the accredited investors issues as well. If they are taking equity in a specific project, they are a partner and not an investor. Make sure you structure the deal to show this (i.e. a land trust with the main person as trustee for title). 

As I have said and always say, check with a very qualified securities attorney with regards to your state laws and exact circumstances. Be prepared to start cutting some big checks if you decide to move forward down this route.

Thank you everyone. I appreciate the responses.

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