All Forum Posts by: Kim Lisa Taylor

Thanks for the mention, @Gino Barbaro. There are some great answers in this thread. 
To defend a charge of acting as an unlicensed broker, you have to be able to prove you had an active role in management other than raising money, and that’s what you got compensated for. What’s illegal is “transaction-based compensation” based on the amount of capital you raise. The more GPs there are in a deal, the harder this is to defend. 

Further, you must be admitted to (or employed by) the company that is selling the securities, as the securities exemption being claimed, usually Regulation D, Rule 506, only applies to the “issuer” of the securities. 

Bottom line: make sure you have an active, documented role in management, and you don’t get compensated using any formula that plugs in the amount of money that you raised.

Please join Attorney Kim Lisa Taylor for the next Raise Capital Legally podcast as she interviews expert real estate investor David Lindahl, who will share insights on navigating and succeeding in the evolving multifamily housing market. Lindahl, known for his strategies on real estate investing and market cycles, will delve into key trends, challenges, and opportunities that professionals in the industry should prepare for as 2025 approaches. Whether you're a seasoned investor or just starting out, this episode will provide practical tips and future-forward strategies to help you stay competitive and thrive in the multifamily space.

Join us for the next Raise Capital Legally podcast as our host, Attorney Kim Lisa Taylor, chats with Austin Prevost and Ryan Bakke, CPA, about the complexities of taxation for Limited Partners (LPs) and General Partners (GPs). We'll cover key differences in how LPs and GPs are taxed, strategies for tax savings, and the impact of state taxes. Austin and Ryan also share their expertise in managing both partnership and individual returns, offering valuable advice for anyone involved in partnerships or syndications. Tune in to the live podcast to get your questions answered in real time by Kim and her guests. Our free monthly podcasts typically last for an hour.

I haven't analyzed the data, but it wouldn't surprise me if this is correct. There are MANY real estate trainers teaching an army of people how to syndicate; mostly multi-family. We do have a lot of first-time syndication clients, most of whom raise money from their own family and friends for their first few years, or team with other experienced syndicators if the deal will be advertised. All of them have to start somewhere. 

Our advice to clients is that they shouldn't try to advertise for investors or start a fund that will acquire multiple properties until they have 5-6 deals under their belts, which could take them several years to achieve. It's always good practice to ask the Syndicator how many deals they've done and to closely examine the experience of their team - making sure that those with the experience are meaningfully participating in the deal. 

The primary reason a lot of people move on to bigger deals (80 units plus), is that it's possible to own larger properties in markets that make economic sense but may be far from where you live. 80 Units seems to be the target so you can hire your own full-time property manager and maintenance person, versus relying on local property managers to manage smaller multi-family properties on your behalf. If you can find local deals (within 2 hours of where you live) that make sense, they can be gold mines. 2 hours seems to be the max that most people would drive if you HAD to do your own showings or move-in prep and local management proves unreliable. If you can't find local deals that make sense, you might want to expand your market area to include nearby secondary or tertiary markets, or even consider bigger properties farther away. If you are going to expand your market or consider bigger properties, I suggest you investigate some multi-family training programs like that offered by @Gino Barbaro. 

We have many multi-family syndication clients. All of them who have gone on to do more and bigger deals have started our with a real estate trainer/coach. @Gino Barbaro has an excellent education and coaching program. I suggest you reach out to him. 

I can refer you to some of my seasoned self-storage clients if you send me a direct message. 

A rule of thumb I use to advise my clients is: 1) the loan guarantee is worth 20-25% of the deal, 2) finding and vetting the deal is worth 25%, 3) executing the business plan for the property is worth 25% (i.e., overseeing contractors/property managers, etc.), and 4) contributing the money is worth 25-30%. Think of it like a pie with 4 slices or quadrants. Everyone gets a piece of each quadrant that they participate in. If the partner with the credit score won't be participating in any of the other quadrants, then you could get the entire 75%. However, if this is a true "joint venture", all members must be actively involved in generating their own profits so the credit partner would also need to participate in decisions regarding the property such as which contractors to hire; handling issues that arise, etc. 

If this is a securities offering (with passive investors contributing funds), then the "issuer" of the securities has an obligation to inform prospective investors of all material facts necessary to make informed consent prior to making their investment decision. An omission of a material fact known to the issuer that wasn't disclosed to investors could be considered fraud or misrepresentation, which is illegal in a securities offering.

After the raise, if the issuer has sold passive interests in a company such as a limited liability company, the LLC Act of the state where the entity is formed may have additional laws regarding fiduciary obligations, fraud, misrepresentation, good faith and fair dealing, that may also be applicable if management knowingly conceals material facts from the members. As others have stated, a well-drafted LLC operating agreement should have language that would prevent management from withholding material facts and/or removal provisions for a manager who doesn't comply. Bottom line, the specific facts pertaining to the transaction would have to be examined to know when or whether an illegal act has occurred, and what remedies are available to investors who were harmed as a result.

It's always best practice to keep investors informed of all relevant information related to their investment (good or bad), both before they invest and during the period of ownership of the investment.

Please join the host of the Raise Capital Legally podcast, Attorney Mola Bosland, as she interviews Syndication Attorneys’ longtime clients Jake Stenziano and Gino Barbaro about their new educational course, "Passive Investing Pro.” They have created this course to help passive investors learn how to protect themselves and their hard-earned investment dollars when evaluating group real estate investment opportunities.

Jake and Gino will share with the audience what their passive investing course entails and how it can help ensure an alignment of interests between passive and active investors in syndicated real estate projects.

Tune in to the live podcast to get your questions answered by Mola and her guests in real time. Our free monthly podcasts typically run for an hour.