Development Capital Raise

[Patrick D.]

I am working with a real estate developer who is looking to raise capital on 21 x 2 family house purchase, gut/rehab and flip. I am in the process of raising funds for him, basically $260k money raise per property. The developer has an option on all of the properties and plans on building in stages (ie; 5 at a time).

I have a few investors who have expressed interest. What is the typical commission on a money raise of this type? I was considering 2% on the front end (2% of $260,000) and 1% on the back end (after the developer sells the property, which he thinks he will get about $400k for each).

Assuming I raise money for one contract ($260,000) and the house sells for $400k, I'd come out with $5,200 on the front end and $4,000 on the back end.

As you all can tell, I am a novice at this. What is the typical protocol on raising capital on projects of this sort? And what type of agreements should be in hand?

[Don Konipol]

As a third party marketer of a security or of a investment, you do not need to be an attorney. You do however need a series 6 securities license. An exemption from this Federal regulation may apply if you market these investments in one state only, however almost all if not all states have regulations requiring a marketer of investment/securities to have a series 6 license, or a state only license under NASD rules.

In the past many violations of these rules occurred as people claimed to be selling opportunities, not investments, claimed they were finders, not brokers or agents, claimed they ran "introduction" services, etc. as a way to be exempt. On the Federal level, none of these are an "out". On the state level there may be an exception. For instance, if you were to conduct this offering soley to residents of Texas (no other state's residents eligible), then this would be an exemption under Federal law and Texas Securities law would apply. Interestly, the Texas Securities Code does have an exemption for "finder" and even goes into depth defining such.

So actually it boils down to two choices. Pay for a couple hours expertise from an attorney experienced in both Federal and states securities law, and you will know exactly what is within the law, outside of the law, and maybe either. Or just go do your thing and disregard the bureacrats that stiffle productivity, growth, and achievement by attacking the free market with their rules and regs that always have unintended consequences negative to the original intent (this particular rant is put in only for the benefit of Financexaminer !).