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Updated almost 3 years ago, 01/13/2022
Syndication - Purchase PPM Template Online?
I am interested in syndicating my first MF this year. Is it recommended to purchase a PPM Template online to give to your SEC Attorney to review/edit to save time and money of having the attorney draft from scratch?
If so, what site would you recommend? Does anyone have a PPM copy they'd be willing to share? I definitely don't mind paying but just uncertain about the direction to take. Thank y'all!
I'm almost certain that any securities attorney you talk to will have several forms (or completed PPMs) that they draw from to draft new ones. They're already familiar with them and know how to make the right changes in the rights places, rather than looking at a new document without "home field advantage." I can't imagine there's an SEC lawyer out there that starts from scratch, but I could be wrong.
Garrett- I’m not expert in this as we are learning as we are embarking on our first official syndication this year as well, but I have heard of a group called Bootstrap Legal https://bootstraplegal.com that can prepare “boilerplate” PPM and streamline the process. I’ve not used them but you might investigate them. I look forward to hearing about your success.
@Garrett White if you're using an SEC attorney let them tell you what you need in the PPM. Main thing you'll want to walk through with them is the company agreement or operating agreement. This is where it will spell out the structure of your LLC, how distributions will be made, etc. FYI, not all SEC attys are equal. This is an area worth spending a few more bucks on. To give you an idea, we pay ours $15k an offering. This gets paid by the LLC at closing so you shouldn't have to come out of pocket for it.
Good luck!
I think in the end it might cost you more for your attorney to go through and vet that all the information in your template is correct. Any SEC attorney worth their salt would probably decline using it and if you insisted, probably would not work with you.
Just budget $10-20k for an SEC attorney and another $2-5k for transactional attorney as part of your closing costs. You only lose that money if you fail to close as otherwise it would be paid out of the funds raised in the syndication.
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#2 Multi-Family and Apartment Investing Contributor
- Rental Property Investor
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Start and finish with your securities attorney. They will have a "boilerplate template" already and will be familiar with it.
While we are on the topic; I have heard multiple opinions on this question by highly experienced folks as we have on this post. As a first M.F deal, is a syndication too much risk to take on? Love to hear your input..
Khalil,
Keep in mind that in a syndication of any deal the PPM and LP Agreement are the documents that govern the relationship between the investors and the sponsor. Just like you are completing your due diligence on the property you wish to syndicate don't overlook the due diligence on your real estate attorney. They can be the difference between success and massive failure/litigation.
So many of us who have found success in real estate can point to a great team around us who has provided guidance and wisdom and I count my attorney as part of that team. Not sure where you are looking to syndicate but if its in NY message me and I would be happy to be able to provide the referral to my attorney.
Also check out the following link
https://bootstraplegal.com/realestate/
I have never worked with them but the CEO is speaking The Best Ever Real Estate Conference next week in Denver, CO. Looks like a really innovative way to approach legal services.
Hope that helps.
Kris
Contact @Dominic Bouchard
He runs a neat startup that might be able to save you considerable money on legal costs. I haven't used them, but I intend to give them a chance on my next syndication.
If you are going to be raising funds from savvy investors, I'd come correct. Hire the attorney, especially since you'll need one anyway, and focus on the deal.
@Garrett White Great advice from the above posts. I just wanted to add that saving time/money isn't synonymous with syndications.
You are better off spending the resources on the front end to ensure that you and your investors are protected.
Hope this helps, Garrett. Goodluck on your first MF deal. Thanks! - Ola
@Garrett White depending on who use as your SEC Attorney, to prepare a PPM, operating and subscription agreement will cost about $10 to $20k.
My suggestion is don't DIY when it comes to the many legal aspects of raising money from investors.
Find a reputable SEC attorney and spend the money to ensure you are protected.
How much does the template cost? We have an SEC attorney that focused solely on doing PPM's, and work with a different attorney for entity creation, contract negotiations and closing help. Our PPM's have been running us under $7k per deal--not insignificant but doesn't break the bank either.
As has been stated already, you don't want to skimp on the legal side of things with either the SEC or your investors.
Good luck!
@Garrett White, this is an area to take very seriously, because there are real penalties for messing it up, including fines and being barred from doing syndications in the future by the SEC. If you are dealing with an attorney who is not already an SEC expert and doesn't already have their own in-house form that they have developed over time to account for the evolving legal landscape, stop dealing with them right away. This is an area in which it is critical that you hire someone with real experience, even if they are a bit more expensive.
Kris, thanks for the link. It was very helpful. I am not in the New York area but thanks for the offer.
Wow, I’m overwhelmed with the great responses. Thank you all for your input in making sure I take the right next steps.
How important is it to have an SEC Attorney from the state you’re from and considering purchasing real estate in? I’ve listened to multiple podcasts with reputable SEC Attorneys but they’re all out of state and wasn’t sure if that would make a whole lot of difference
Originally posted by @Garrett White:
Wow, I’m overwhelmed with the great responses. Thank you all for your input in making sure I take the right next steps.
How important is it to have an SEC Attorney from the state you’re from and considering purchasing real estate in? I’ve listened to multiple podcasts with reputable SEC Attorneys but they’re all out of state and wasn’t sure if that would make a whole lot of difference
Obviously I'm no lawyer but I don't think it is important. Most of the laws regulating this are federal laws. Obviously there will be some state specific items but any good lawyer will know that too. For what it's worth, my lawyer is based out of CA for my deals in TX.
Agree with @Kris Benson on lawyer due diligence.
Let's face it, if lawyers were free (or very cheap) almost nobody will ask the question should I hire one or not.
This is complex stuff, often case by case specific and time-consuming. Plus we're all trying to sleep well at night.
This is why it's a pretty good reflex to find a way around such as a boilerplate template. Some are available for free or for a low cost on the Internet. Here's the thing:
For simple contracts its a very usable solution. You just need to be sure those contracts are compliant with your states and are designed for the intended purpose (BP did an awesome job putting those together: http://get.biggerpockets.com/forms/index/)
But when a lot of money is in the balance or complex/specific things are required, it might not be the best solution.
Here's why:
1. Chances are you're going to need an attorney anyway to finalize the document. In that case, you'll need a lawyer that will accept to work with your template which is rare since they all use their own template. Why? Because they know its good quality and its state compliant so they don't have to waste time checking it all over.
(It's possible that you know a very good attorney that will not charge you for that (revision) but it's rare)
2. Time - getting in par with all the intricacies when filling a template yourself can cost you more time than hiring a lawyer (again, if it's fairly simple then it's a different story)
3. Peace of mind: Lawyer's work comes with an insurance - their signature. If something needs to be revised or goes wrong, they're responsible.
4. Last but not least, a good lawyer will also provide valuable info on how to conduct your affair in the future or what you should look out for. This, to me, is the most important part. You want professional advice and should come more intelligent after getting it.
In sum, for PPM copy, getting an online template is not best.
Hope that helps!
PS:
@Tyler Kastelberg Thanks for the mention!
Thank y'all for the advice! I have researched the local attorneys, and have reached out to my SEC attorney to begin reviewing my business plan and marketing material to ensure we stay compliant. Thanks again!
