Slice of the pie

[Brian Woolery]

What is the best way to determine the number of investors you want to get in the investment? Note: I don’t want to put any money or little more up front in the investment.

For example, I submitted an LOI for an apartment complex for 6 million dollars. How do you determine the number of investors you want to get in the investment? Down payment @ 25% (1.5 million), $600k of repairs.

Note: I don’t want to put any money or little up front in the investment. 

Is there a way to reverse engineer the process?

TIA

[Don Konipol]

Quote from @Brian Woolery:

What is the best way to determine the number of investors you want to get in the investment? Note: I don’t want to put any money or little more up front in the investment.

For example, I submitted an LOI for an apartment complex for 6 million dollars. How do you determine the number of investors you want to get in the investment? Down payment @ 25% (1.5 million), $600k of repairs.

Note: I don’t want to put any money or little up front in the investment. 

Is there a way to reverse engineer the process?

TIA

You’re asking the wrong question(s).
‘The first question is can I obtain 75% institutional financing if as sponsor syndicator I have none of my own money invested?    

‘The second question is assuming the question above is answered positively, can I raise $2,100,000 plus contingency fund from investors I have no relationship with if I am not investing any of my own money in the deal?

‘Having syndicated over 400 properties and mortgage loans over the last 20 years I will tell you my own experience.

Accredited Passive investors with any experience or knowledge look for three things beyond the numbers projected and property itself. 1.  A complete offering package in compliance with SEC Regulation D offering including a professionally prepared Private Placement Memorandum, Operating Agreement and Subscription Agreement financial projections detailed and prepared by a Certified Public Account, filing of Form D with the SEC and compliance with state specific notifications, a full appraisal prepared by an appraiser holding the MAI designation, a clean title report or attorney’s opinion of title, and an ALTA survey.  2. The track record of success in real estate investments by the sponsor 3. The amount of his own money, capital or risk (skin) the sponsor has invested in the deal.  

So, if as sponsor you have little or none of your own money invested, you would need a pretty impressive track record of real estate investing success to interest passive investors.  As for 1. above unless the deal is very small or the investors very small and investing small sums Reg D compliance is required as a cost of entry into the syndication field.  The alternative of relying on the 1934 general exemption for private placements is totally impossible to comply under if you are going to solicit investors in any way shape or form.  In other words unless you already have an existing relationship for 6 months or more with an individual investor, they can not invest in your syndication (legally) under the general exemption, you must use SEC Regulation D 504 C.  The penalties for non compliance should an investor sue you if you don’t comply with Reg D can be devastating.  In other posts I’ve written extensively about the legal and compliance aspects of syndication; suffice to say there is a ton of mis information about this out there with much of the information being hopelessly outdated.  Attorney specializing in SEC compliance mandatory.