Hello BP'ers, I have a question about raising private money and how that works with Dodd-Frank now. I've done a few deals now and I'm looking to raise some private money from some friends and family.
What are the rules about raising money from family and friends? Does it have to be in an LLC? Do they have to be accredited investors? Does that depend on how much they give me? And I read somewhere that the people lending money now have to verify the borrowers ability to pay. Very confusing information out there about these new rules. Any help would be greatly appreciated.
I'm no expert by any means but I'm pretty sure if you want to borrow money from friends and relatives you are free to do so at whatever rate you agree to and for as much as they are willing to lend you. They don't have to verify your ability to repay if they are lending you money on an investment property. The Dodd-Frank rules apply to making loans on owner occupied properties. They don't have to be accredited investors for private lending either. That is only if you are advertising for lenders. Private lending is borrowing money from someone you already have a relationship with so they don't need to be accredited. You don't need to have an LLC either. There are no laws regarding lending money to private individuals, although if you are trying to start a business you might consider an LLC as a way to protect your personal assets. Again I am definitely not an expert, that's just my two cents worth
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