Structure for Raising Capital without Broker-Dealer

[Larry Caper]

(Yes, I understand comments provided are simply educational, I will consult with an attorney before moving forward. Thanks in advance for your input!) 

Over the years, I have 1) invested heavily in education (underwriting, financing, market analysis, asset management, identifying macro/micro trends per market, etc), and 2) developed strong relationships with a network of accredited investors who are interested in diversifying and jumping into the multifamily space. The next phase of my maturation cycle is gaining "on the job experience" in the form of GP participation before attempting to take down a deal by myself. Full transparency, I have not passively invested in multifamily syndications and no experience as a GP. I am clear on our markets of interests, returns we would like to see and our risk appetite.  

However, I believe partnering with other syndicators (i.e., proven syndicators w/ track record) raise money for their deals is the next best move. However, I want to ensure I'm properly structuring deals, receiving legal and fair compensation. 

I understand there are multiple ways to legally raise money for others without tip-toeing the broker-dealer line: 

1) Consultant Fee. Become a consultant of the issuer where compensation is not tied to the amount raised.

2) Finder's Fee. Without solicitation introduce passive investors to the group (flat fee). 

3) Class B. Of class B (management) share, a percentage is given to the "capital raise" LLC. (I've seen a lot of groups choose this structure)

4) Become a part of the issuer (GP-side)

I do not want to give other syndicators access to my investor database, so Number 3 seems like the best move. I understand my role should include more than raising the initial equity investment and continue throughout the holding period and disposition.

Here are my questions:

• Is Number 3 (from above) a good idea to create anonymity for investors?
• How is the acquisition fee distributed if no compensation should be tied to the amount raised?
• Could my LLC provide bring additional credibility (i.e., loan requirements) which directly affects the amount of capital received from the bank?

Thank you in advance for thoughtful insight, pearls of wisdom and/or tips. Excuse me for any ignorant questions/assumptions, feel free to direct down the correct path to further my research.

[Greg Dickerson]

@Larry Caper if your goal is to do your own deals and you do not want to expose your investors to other operators then you need to create a fund of funds. That way you can legally negotiate all kinds of fee structures with other operators.

Second option would be to just go ahead and do your own deal. You can partner with an operator or hire a mentor to help you.

Either way sounds like you have a good problem as most people struggle with raising capital so your already ahead of the game.