crowd funding and investor requirements

[Donovan Keim]

Hello everyone, I'm looking to make the move into getting investors to help me start my commercial real estate business. but I'm wondering what requirements if there are any on the paperwork and income. I'm getting ready to talk to family members to invest in my company but I want to make sure the all my ducks are in a row. for instance: if my aunt were to loan me $100,000 are there any SEC specific regulations that I need to follow or can it be just a basic operations agreement between my company and my aunt on basic payback stipulations, interest rate growth etc?

[Priyanshu Adathakkar]

@Donovan Keim every lender has their own requirements depending on the property type. You could either form an LLC with you as the managing member regardless of your share (you could be a minority partner but still in charge) Have a lawyer draft the operating agreement. Alternately your investors can just lend you the money and you sign a note.

[Donovan Keim]

@Priyanshu Adathakkar that's what I was hoping would be the case, but I keep hearing podcasts and other discussions of people saying that you need to adhere to the SEC regulations for their criteria of (250k +income, 1 mill in assets etc..)  so I wasn't sure if that is over ever scenario or only for accredited investors etc. 

[Amy Wan]

it depends on how you're structuring your deal. This is... a longer discussion with a lot of specific questions than can be answered through a web forum. After all im sure your aunt isnt giving you an unsecured loan...

PM me if you want to chat.

[Jared Fontenot]

Like the other posts have already said it depends on how you are structuring it. If you are using crowdfunding as the source then you would be offering securities and therefore would subject to Reg Crowdfunding. You gave the example of your aunt giving you 100,000-well she would have to have an annual income of 1.2 million in order to give all of that to you in exchange of securities in your REIT. (At least this is the way I understand reg crowdfunding to work. I never took securities law in law school but I actually did a presentation on how crowdfunding could impact the growth of franchises while taking Franchise Law. So unless the SEC has updated the Regs again I think I'm correct.) In addition to this there are some other guidelines to abide by including making offerings through one online portal which must be registered with SEC and FINRA and filed on EDGAR. I know a ton of acronyms right? What I've posted here is a VERY rudimentary amount of information. So if you'd like to know more you can always look it up on the SEC's website. My guess is you were just looking to find out which avenue to pursue without wasting a bunch of time. I hope this helps.

[Jillian Sidoti]

@Donovan Keim - Amy is the person who can help you on this. Yes, there are some stipulations and you also want to start off in the right direction. It's always about PROPER DISCLOSURE. Did you tell the investor exactly what was going to happen? How you were going to use their money? What the risks were associated with the investment opportunity?

Best of luck!