With the new rules can you send out solicitations for private RE Investors?

6 Replies

What can't you say when soliciting for Investors under the new rules. I heard you can't say things like guaranteed returns but you can say fixed returns of 10%. What else can you say?

Thanks

That I know of until now you are only allowed to solicit what are known as accredited investors, that is someone with a history of two or more years of earning $200K/yr or have a net worth of $1M. Then you have to have a way of verifying that. Otherwise you cannot solicit investors. I would strongly suggest you contact a real estate attorney or a securities attorney for clarification. 

Originally posted by @Donald Williams :

What can't you say when soliciting for Investors under the new rules. I heard you can't say things like guaranteed returns but you can say fixed returns of 10%. What else can you say?

Thanks

 Where are you in the process of fund raising. Have you had a 506 (c) PPM drafted by a securities attorney? That's the document you would need to provide to potential investors before raising funds. Has it been properly filed with your states secretary of state/department of corporations?

Raising private capital from investors is a regulated enterprise, and not following the rules and laws that govern the activity can get you into serious legal trouble.

You can say whatever you want as long as it is factual and it won't get in sued later on.  Anything you say, write, advertise, etc. becomes PART OF THE OFFERING and would need proper disclosures to go with it.  You have to be very careful when citing returns or doing pro formas.  Everything needs to be documented and it would be best to have your securities counsel review it.  

There is no way to market only to accredited investors if you advertise.  That is why there are heightened accreditation processes you have to go through to determine that someone is really an accredited investor.  You can no longer rely strictly on "self-certification" like you could with the old 506(b) rules.  You should consider hiring a third party accreditation service to do this for you.  They are not all created equally and there is a lot to choosing one correctly.  If you choose one that is too strict you'll filter out all of your investors because nobody wants to turn over all of the information the gov-mint wants to invest a small amount of money in a crowdfunded offering.  If you choose one that is too liberal you risk being the plaintiff in the case law that determines what reasonableness means.  

Guarantee and investment should NEVER go in the same sentence.  You can't ever guarantee anything.  I wouldn't even use "fixed".  I would use words like "projected" and other non-committal terms.  A good securities attorney will go through your offering and remove any adjectives or superlatives.   If things ever go sideways the plantiff's attorney, with the benefit of 20/20 hindsight, will blow those phrases up in 30-point font and display it for the jury while trying to hang you out to dry.

The bottom line is that you need a good securities attorney.  Don't try to do anything on your own.  There is simply too much risk in screwing it up.  You could lose your ability to sells securities in the future or GO TO JAIL if you do it wrong.  Pay the money.  

This is a questions that should be directed to your lawyer.  The fact that you are asking it means you need a lawyer.

The only group that is allowed to guarantee a return is the government.  I guess if everything else goes wrong they can always make good and just print more money.

Originally posted by @Bryan Hancock :

You can say whatever you want as long as it is factual and it won't get in sued later on.  Anything you say, write, advertise, etc. becomes PART OF THE OFFERING and would need proper disclosures to go with it.  You have to be very careful when citing returns or doing pro formas.  Everything needs to be documented and it would be best to have your securities counsel review it.  

There is no way to market only to accredited investors if you advertise.  That is why there are heightened accreditation processes you have to go through to determine that someone is really an accredited investor.  You can no longer rely strictly on "self-certification" like you could with the old 506(b) rules.  You should consider hiring a third party accreditation service to do this for you.  They are not all created equally and there is a lot to choosing one correctly.  If you choose one that is too strict you'll filter out all of your investors because nobody wants to turn over all of the information the gov-mint wants to invest a small amount of money in a crowdfunded offering.  If you choose one that is too liberal you risk being the plaintiff in the case law that determines what reasonableness means.  

Guarantee and investment should NEVER go in the same sentence.  You can't ever guarantee anything.  I wouldn't even use "fixed".  I would use words like "projected" and other non-committal terms.  A good securities attorney will go through your offering and remove any adjectives or superlatives.   If things ever go sideways the plantiff's attorney, with the benefit of 20/20 hindsight, will blow those phrases up in 30-point font and display it for the jury while trying to hang you out to dry.

The bottom line is that you need a good securities attorney.  Don't try to do anything on your own.  There is simply too much risk in screwing it up.  You could lose your ability to sells securities in the future or GO TO JAIL if you do it wrong.  Pay the money.  

This is what I was asking. Of course I need a Lawyer when raising money but I was talking about marketing and advertising to people similar to the way you do on your website. I'm not saying send me money but do you want more information about making a return investing in real estate.

Also, if I talk to a friend about investing in real estate to get a return on his money, would I need a Lawyer or could I just have him fill out a Promissory Note secured by a Mortgage.

If it is a friend that you have a personal relationship with and you have him lend on the project you probably don't need a securities attorney.  You probably should have an attorney prepare the loan paperwork though.  

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