I'm looking to setup a real estate LLC for a small group of investors (all known to each other) and from what I've read it appears the Rule 506 best applies (bc we're buying a property out of state). I'm in search of an attorney to draw up the paperwork and so far it seems the prices for doing this are all over the board. if anyone has an attorney they could recommend that prices well for a smaller situation, I'm all ear. I'm in Virginia if that makes any difference.
@John Buchanan have you tried using the Search box? Type in "your city", Virginia Real Estate Attorney and see what pops up. Good luck.
David Lavan at Dinsmore in DC would be a good one to consider.
Jerry (Jerome P.) Friedlander in McLean may be able to help you. I personally haven't used him but he co-instructed a landlord tenant continuing education course with Chip Dicks (Richmond, VA) at Northern Virginia Association of Realtors. Jerry has written extensively on landlord/tenant issues. Chip authors VRLTA legislation in VA. They are the bomb! I take the class even when I'm not required to!
You are wise to obtain legal counsel and this is my opinion of what you will find.
Where the property is located is not the correct question. The real question is are you creating a security?
See SEC v Howey:
A security is defined as
- investment of money due to
- an expectation of profits arising from
- a common enterprise
- which depends solely on the efforts of a promoter or third party
To me the dispositive issue here is the last prong. Are you going be solely responsible for management?
I strongly recommend Gene Trowbridge for Reg D private placements. For an LLC check out AVVO.com.
@Douglas Dowell has made a good point. Talk to an attorney in your state, but based on the limited facts you have given it sounds to me like you should be able to avoid SEC problems by forming an LLC and giving all of the investors a role in making business decisions. I would set up a board of managers and give each investor a representative on the board. Your legal fees would be much smaller than with a private offering.
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