You can raise money from others to begin your multifamily property investing.
But remember, there are specific more government regulations that dictate what you can, and cannot do, when raising money from others. So do your due diligence and consult a good attorney so you stay out of trouble.
When you invest in multifamily properties and raise money from others to fund it, you enter a whole new world of government regulations that dictate what you can and cannot do while raising that money
Advertising for investors
“In the wake of the JOBS Act, when advertising for investors became legal under Regulation D, Rule 506(c), crowdfunding platforms like have sprung up to meet investor demand for access to the types of investments that institutions, pension funds and other larger entities have secretly enjoyed for years. No matter their size, in today’s market investors are looking for high cash returns, tax advantages, and equity growth. Many also prefer the hard asset of real estate, as opposed to stocks, bonds, etc., and the ability to use leverage in their deals to enhance investor returns,” writes attorney Kim Lisa Taylor on her blog.
I have been very fortunate to work with Kim for the last 10 years, she is one top Professional Syndicator attorney. My team and I have done 26 syndications so far and are moving into a $50 Million Fund in 2018 as the Market is getting tougher and it’s wise to have the money committed/raised as the opportunities arise that are conducive to syndication. You see the Cash-on-Cash needs to be in the 12-12.5% range for the deal to be able to syndicate; as we pay out to the Investors who are Class A of the LLC that owns the asset and we pay them 8-9.5% per year.
“Another plus that has arisen post-JOBS Act is that with platforms posting their deals online, investors and syndicators have a gauge to see what others are doing that they never had when all such offerings were “private” under the original Regulation D, Rule 506 [now 506(b)], which is still alive and well.
As a refresher, Rule 506(b) doesn’t allow any form of advertising or solicitation, but you can include both Accredited and Sophisticated Investors, and there are a lot more Sophisticated Investors than there are Accredited, so there is still a need for private offerings under this rule for those willing to take the time to develop pre-existing relationships before making offers to investors,” she writes.
This is another reason that my company, Moneil Investment Group is launching our $50 Million Equity Fund in Jan 2018, in this fund, we will be able to Advertise freely. One very important fact about this 506 (C) fund is that only Accredited Investors can only participate and invest in it.
What is an ‘Accredited Investor’
An accredited investor is a person or entity that can deal with securities not registered with financial authorities by satisfying one of the requirements regarding income, net worth, asset size, governance status or professional experience.
The term is used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who are financially sophisticated and have a reduced need for the protection provided by regulatory disclosure filings. Accredited investors include natural individuals, banks, insurance companies, brokers and trusts.
To be an accredited investor, a person must have a net worth of $1,000,000 or more excluding the equity in the primary residence or demonstrate an annual income of $200,000, or $300,000 for joint income, for the last two years with the expectation of earning the same or higher income. … Also, if an entity consists of equity owners who are accredited investors, the entity itself is an accredited investor.
A sophisticated investor is a type of investor who is deemed to have sufficient investing experience and knowledge to weigh the risks and merits of an investment opportunity. For certain purposes, net worth and income restrictions must be met before a person can be classified a sophisticated investor.