How to get investment opportunities to qualify for IRA funds?

Question

I'm starting a home equity crowdfunding startup of sorts. It's intended for long-term hold periods (5-10 years) and allows non-accredited investors, so IRA money would seem to be the ideal source of capital. However, I know little about how to make my program eligible for such funds. Any pointers on where to start on this?

Taylor L. · Answer

Self directed IRAs are very open. The main restrictions that most investors run into are self-dealing/disqualified persons. There are assets you can't invest in such as art and life insurance but most real estate and private businesses are acceptable.

Crowdfunding isn't the slam dunk it looks like. Many crowdfunding platforms have gone under. From my experience, the most experienced syndicators have long lists of well-qualified investors and do not need crowdfunding sites in order to fill their equity needs.

Daniel McNulty · Answer

@Chris Seveney @Nikhil Nirmel

There are separate regulations than 506b for crowd funding that do allow non accredited investors. Last I checked, they still had an income and net worth test, but even lower middle class people could qualify.

That being said and to Chris's point, regulatory filings and operating costs on such a venture can add up.

Assuming you have already enlisted a strong securities attorney to prepare your offering documents, which you will no doubt need to legally operate and raise capital, IRA's are a perfectly viable source of capital. Mind you retirement assets come with many other compliance burdens, especially if you have enough to be considered a fiduciary.

Good luck with your new venture!

Danny McNulty

Financial Advisor

Jay Hinrichs · Answer

Loans on Owner occ would require licensing in WA and all states for that matter.. Non owner occ are expempt in WA but NOT Oregon. Oregon has strict laws for loans under 50k though.

Chris Seveney · Answer

I am shocked if you had an Someone who specializes in security laws review that and say that this is ok to solicit non-accredited investors to pool money and play a passive role.

On the flip side selling “options” to homeowners who have equity - if you are giving them $ and it needs to be paid back it’s a loan, call it what you want. If you are not following Dodd frank and other regulations on the lending side that’s another issue.

Love to get @Jay Hinrichs take on this

Bryan Hancock · Answer

What do you mean by "crowdfunding startup"? Do you mean marketplace? White label solution? Other?

There are companies already specializing in this you should try to find. I visited with a company in Austin doing this about 4 years ago, but haven't followed how they fared. They were specializing in IRA investments in 1031 exchange projects.

Chris Seveney · Answer

@Nikhil Nirmel

You should start a fund and follow reg d 506(b) if you want non accredited investors. You can have up to (I think) 35 non accredited investors in the fund.

Be aware though that these types of funds cost around $10k to create and you also have to have a yearly 3rd party audit which will run you another $10-15k. Thus they are not cheap. They are only recommended for very experienced investors who know how to run a business as that is what you are doing.

Not saying you are not this person - just saying anyone off the street with $10-20k shouldn’t be running out starting a fund

How to get investment opportunities to qualify for IRA funds?

How to get investment opportunities to qualify for IRA funds?

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