Capital Raised now what?

Question

I have, probably a newbie question. I have done my work and raised the capital needed for a purchase from a private investor and found a deal. My question is how do I proceed with the PPM? I assume I need that before I receive any capital and do banks typically want to see proof of funds before finalizing the deal?

The other option on the table is a partnership which involves him with his financials to the bank and probably having ties as a guarantor on the mortgage which honestly he probably doesn't mind. In this scenario its the exit strategy which I suppose could be disclosed with proper paperwork. Is the ppm the best bet here or is it 50/50 if we structure it properly?

Donnie Mendell · Answer

@Gino Barbaro Thanks for the feedback. This will be a simple partnership so I think a properly structured LLC and Operating agreement will suffice. Future acquisitions will require a syndication attorney as I bring others into future deals. I will keep Kim in mind for this in the future. Thanks again for the feedback.

Kyle Bryant · Answer

If you just have one partner, you probably don't need a PPM. Or even an expensive securities attorney. If you know this person, and they're giving input into your deal/operations, a simple LLC and an operating agreement should be enough. You can figure out an equity split between the two of you, but you don't need to get fancy with only one investor. My two cents.

Gino Barbaro · Answer

@Donnie Mendell

Hi Donnie

I would speak to a syndication attorney. You may be creating a security, and need professional help. I would look up @kim taylor.

A partnership is a bit different. You still would have to create an operation agreement if you are going to form an LLC. Now's the time to find the right attorney and CPA. Start off on the right foot.

Gino

Donnie Mendell · Answer

Thanks, guys. I just wanted to make sure I wasn't going overboard as it is a simple deal. That is what I was thinking initially, but somehow I started second guessing and over thinking.  It's my first deal so I want to make sure it goes smoothly for both of us.

Juan Vargas · Answer

I agree with @Kyle Bryant. What you  are referring to is a partnership which would not require a PPM. Just create a LLC and structure it according to your negotiations with him.

Conor Freeman · Answer

To answer one of your questions : Banks will typically underwrite the real estate (using the rent roll and historical operating statements) and the borrower (using tax returns) and issue a term sheet subject to a number of items - including proof of funds/liquidity, appraisal of the property etc. The requirement to provide bank statements will come  in the time between a signed term sheet and funding.

Capital Raised now what?

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