Non-Disclosure / Angel Investor Protection

8 Replies

Greetings to all :)

I am in the process of soliciting potential investors/lenders for a 300 site RV park in a very high demand area. Obviously with the high profit potentials with this deal, many details will have to be covered with investors and lenders in order to have everything nailed down prior to pulling the trigger. What protections are available for someone like me who is doing all the work, against the possibility of being "burned" by someone who may initially network as a potential investor, but once they realize the potential, decide to cut me out of the process and do the entire deal on their own? Would a typical NDA even offer anything, since they wouldnt necessarily have to disclose anything, just do it themselves? Is it even possible to withhold critical details (such a property address, etc) from an investor in order to protect against this? Truly wondering how to navigate this possibility!! I dont want to come across as evasive, or vague when talking with investors, as I truly am willing to offer great investor terms, but I really dont know how to avoid getting scammed. Thank you.

@Bruce West a non disclosure non compete would be a good ideal

The bigger issue is how are you going to protect the investors from getting burned. Are you aware of what it takes to be securities and exchange commission compliant?

@Ned Carey Depending on how the deal is structured, everything would go through an attorney, or broker firm. Terms could be negotiated to ensure investors or partners feel comfortable. The numbers are VERY solid with this project, and of course, risk would have to be balanced with information. I wouldnt be soliciting for anything I wouldnt do myself, and part of the deal would illustrate this. But my main concern is that even with a non-compete, anyone familiar with the process would know that I do not have the resources to fight them if they violated it anyway. I am just curious how to walk that fine line, and build trust with reputable partners.

Originally posted by @Bruce West :

@Scott Mac Can you elaborate a bit more on how you would suggest I go about that? 

Hi Bruce,

If your out of your comfort range with an offer like this, it's best to have a LOCAL attorney guide you on the offer.

That way you know if you can CYA financially if there is a problem.

It's best to not do something you don't COMPLETELY understand how it works; and 

COMPLETELY understand how you can get out of it if you need to; and 

COMPLETELY understand what it will cost you to get out of the contract in your area.

It's best to get LOCAL Attorney guidance on how to draft the offer, and tell you what your RISKS are with something like this.

If you mess it up, it could be very costly to you.

This is a large deal, having an attorney in your corner at this stage to advise you is intelligent. 

Good Luck!

 

@Bruce West if someone is looking to invest with you passively then they are not likely the type to steal the deal from you. The want to invest with you because they don't want to manage a deal or don't know how to pull it off.

I mentioned securities issues and you didn't mention it in your reply. My guess it you are not aware of securities laws and how they can affect you. If your investors are passive and do not have control of the investment then you are creating a security. I know people who have innocently done investments like you and have gone to jail over it.

To response to @Scott Mac s point, most commercial contracts have a due diligence period, this allows you time to not just do due diligence but also to line up the money. You can also simply do an Option contract until you find investors.

Unfortunately when you are new, it is a little bit of chicken and the egg. 

@Ned Carey Thanks Ned! Yes, I am well aware of the securities hurdles to be navigated. Right now I am just trying to figure out the best way to even discuss the project with any potential investors. Obviously I need to give them as much information as I can to convince them to partner, but I am wary that someone would just take my info and do the deal without me. Much of what I have done during my 3 years of market research, feasibility studies, and due diligence has revealed that this deal has an incredible upside, and the potential for high profits is massive. To me, this would seem like a mighty big temptation for someone to just do it without me, as soon as I give them enough info that they could research on their own and find out critical details. For example, the parcel of land is extremely rare, and I can buy it for about 10% of typical market value, but it is also unique, and as soon as I even reveal the major city I would be the park, a little bit of research could easily find it. An "investor" could then just buy it out from under me and do the deal. So my main concern is what protections are available against this, and how do I secure partners without shooting myself in the foot!! Thanks :)

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