offering investment opportunity general public?

Question

Hi

I know the SEC has made some changes regarding the offering of private investment opportunities. (i.e. hedge funds can advertise, etc.). I am wondering how that affects small investors? Specifically, I would like to offer the general (accredited) public an opportunity to lend me money to refinance my existing mortgages. It might be as simple as offering investors 6% for 30 years. Can we do this now? Or a better question, "can we do this without 3 years worth of paperwork?"

Kenneth LaVoie · Answer

Well it sounds like I can stop going down this road anyway. That's ok. My financing isn't too bad the way it is, I've got NO 15 or 30 year lockins (Not found bank yet that will give FNMA type for apartments owned by llc vs. direct) but I do have a 7 and 10 year lockin on one, most of my 3 years just reset at 4.25%, so I'm not too bad off. Most have 2% point caps per re set as well, so no danger of any loan going from 5% to 12% over night!

Jon Holdman · Answer

From what I've been told, $10K would be on the low side.  If you don't want to do this then forget about this approach.  The new JOBS act allows advertising, but still requires the rest of the process.  And if you do advertise, you're limited to ONLY accredited investors and you have to take steps (not well defined) to ensure they're accredited.

Kenneth LaVoie · Answer

Hmm..yes I see the point of low rates for 30 years, but hey I'd do it for 10 or 15 on a couple too, to "mix it up" and get a couple paid off earlier. I just have a LOT of ARMS (3,5,7 and 10 year reset periods) that I'd LOVE to "defray" a little. I'm certainly not going to spend 10K on registering though....

J Scott · Answer

It wasn't the rate that I thought was off, but the time period.  To commit to such a low rate for 30 years -- unless you have unlimited cash -- just seems like a poor long-term investment.  But, maybe someone with a lot more cash than I have would look at it differently...

Curt Smith · Answer

@J  Scott I've talked to only a few affluent lenders and they weren't that apposed to sub 9% loans on liens, but the message I heard clearly was that they are reluctant to risk their principal on some yellow letter they got in the mail.  :)

Meaning you can advertise but my experience is that you'll not get any takers at least until they have a relationship with you.   A low LTV lien doesn't seem to be enough to get a loan done in my experience, reg D filing or not.

But I've run across this org that is starting up a service of matching up lenders with borrowers:  blackhawk

I don't think they are related to the hedge fund, but the name similarity is odd..

I suspect and hope that more orgs start up who'll be a clearing house for higher yeilding loans like what real estate investors can afford to do.  So far my poking around the crowd funding sites only finds hard money interest rate lending.

Curt

Curt Smith · Answer

Hi Kenneth,  No 3 years of paperwork but around $10k worth to a good SEC lawyer to do a PPM / reg D 506 filing.  Then you are in for verifying accredited status and maybe audited books.

Saving you some reading: some states like NC, GA (??) have specific exemptions in their state SEC regs for putting lenders into liens secured by real estate, but NO advertising and no fees payed to a finder/broker.  Which means if you advertise you must do an SEC reg D 506 registration and have a PPM to be safe.  This is about $10k from Jilian Sidoti.  Other SEC lawyers charge much more.

There's quite a few threads on SEC registration here on BP.  here is one:

Jilian Sidoti

Yet more reading:

raising money podcast: 
	 http://www.biggerpockets.com/renewsblog/2013/01/31/raising-money-getting-started/
	 
	       Reg D: http://www.biggerpockets.com/forums/51/topics/82808-reg-d-and-ppm
	 
	     legality of borroing:  http://www.biggerpockets.com/forums/49/topics/73106-legality-of-private-money-and-sec
	 
	 
	 https://www.biggerpockets.com/forums/30/topics/83634-are-lonne-deals-dead---safe-act
	 
	       Jillian S:  https://www.biggerpockets.com/forums/49/topics/94458-what-the-jobs-act-could-mean-for-you
	 
	       Some states exempt mortgages from reg D:  https://www.biggerpockets.com/forums/49/topics/87220?page=1
	 
	 http://www.biggerpockets.com/forums/51/topics/97024-violation-of-sec-rule-for-private-investor

J Scott · Answer

I don't know the SEC rules, but I will say that if you're trying to find money at 6% for 30 years, you probably won't get that from accredited (i.e., most likely smart) investors.  With interest rates likely to rise over the next couple years, I don't imagine too many smart investors are going to tie up cash at 6% for more than a couple years, if that.

I know that wasn't the question you were asking (and sorry, I don't know the answer to your question), but thought I'd throw that out there...