Private money ads on Craigslist Financial Svcs

[Brian Sorensen]

I noticed there are lots of ads on CL Financial Svcs like this;

Motel in Idaho
looking for $250,000
secured by 1st deed of trust
Value of property $500k to $650k

add in 6-12 months interest reserve to the $250k, if you wish
motel is operating and doing well
approximate gross income of $100k for 2012

Prefer asset based, private money lender

Questions welcome
• Location: NW
•it's NOT ok to contact this poster with services or other commercial interests

My understanding is that this type of ad is in direct violation of SEC soliciting guidelines since they are directed at anyone who happens by.

Can we do this too?

[Jon Holdman]

People drive over the speed limit all the time. Doesn't make it legal.

[Ann Bellamy]

I think the SEC considers looking for a lender to be different from looking for an investor or partner

[Chris Martin]

Here are SEC press releases. There are a few about real estate, but the one of interest is this one: http://www.sec.gov/news/press/2012/2012-170.htm, which reads

[i]Washington, D.C., Aug. 29, 2012 – The Securities and Exchange Commission today proposed rules to eliminate the prohibition against general solicitation and general advertising in certain securities offerings.

Under the proposed rules, which are mandated by the Jumpstart Our Business Startups Act, companies would be permitted to use general solicitation and general advertising to offer securities under Rule 506 of Regulation D of the Securities Act and Rule 144A of the Securities Act.[/i]

So, don't worry... be happy.

[Karen Margrave]

I ran across this article the other day too:

http://blog.nreionline.com/nrei-writes/2012/09/14/jobs-act-bonanza-for-real-estate-syndicators-and-condo-sponsors/

[Brian Sorensen]

What about the little guy who wants to borrow funds to flip a house?

[Tim Delp]

as mentioned above I think there is a difference between looking for a loan and looking for someone to go in to partnership with.

[Corey Dutton]

I don't think the SEC will do anything. They are looking for people who are raising money from other investors, pooling it, and then using it to make investments. Their biggest concern is mom and pop's money who are no accredited investors and can't stand to lose. These are the types of crooks the SEC is after. They aren't trolling Craigslist looking for violators like you. Now if you posted an ad that said, "Looking for Investors to Pool Money Into Our Real Estate Fund," this may raise some red flags but as Jon Holdman said, people speed all the time and don't get caught. I doubt the SEC is trolling Craigslist, but who knows....

[Jon Holdman]

So, I don't really know where the line is regarding private loans. If you look at the definition of a security here:

www.sec.gov/about/laws/sa33.pdf

you find:

(1) The term ‘‘security’’ means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a ‘‘security’’, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

I've highlighted some of the terms that could refer to a loan.

Now, like Corey Dutton I don't really think the SEC trolls craigslist looking for these ads. But if you do a deal and it goes bad, it may well be your lender than tries to come after for an SEC violation.

[Corey Dutton]

Thanks for sharing that Jon. Good info.

[Chris Martin]

Loans secured with real estate are by definition a security. The question is what can you do (or can't do) with these securities? Or maybe put another way, what is exempt from the securities law(s)?.

At some point this becomes a state vs. federal issue. I would check your state laws. In NC at least, this is an exempt transaction: "Any transaction in a bond or other evidence of indebtedness secured by a lien or security interest in real or personal property, or by an agreement for the sale of real estate or chattels, if the entire security interest or agreement, together with all the bonds or other evidences of indebtedness secured thereby, is offered and sold as a unit." This is per NC Securities Act.

But can one advertise?

Again, NC state law says this under exempt transactions: "Any offer or sale to an entity which has a net worth in excess of one million dollars ($1,000,000) as determined by generally accepted accounting principles..." So advertising to accredited investors is exempt wrt NC security transaction regulations...

So I would check your state laws to see what they say. Or check with a lawyer, since (disclaimer) I am not licensed in legal matters....