All Forum Posts by: Jillian Sidoti

Unless Rule 504 becomes a federally covered security, this does no good. I used to do Rule 504 offerings and clients would consistently break state rules no matter how many warnings I gave them. Many states do not even recognize Rule 504 and thus, do not even allow the exemption in their state. (For example, and off the top of my head, New Hampshire, Michigan, Arkansas.)

Hi, a Rule 506(b) syndication is under the Securities Act of 1933. Under that is Regulation D. Under that is Rule 506(b).

Rule 506(b) allows you to raise as much money as you want so long as:

1. You have a substantive pre-existing relationship with investors (meaning you understand the ability of your investor to invest.)

2. You provide proper disclosure to your investors (a PPM)

3. You file the proper form Ds.

4. You have only up to 35 sophisticated investors and as many accredited investors.

Let me know if you have any questions?

Hi! Thanks, Jeff. Please let me know what you need, @Johnny Quilenderino

@Kevin Dureiko - I am a securities attorney if you have a question.

Hey @Andrey Y. - reading a PPM is a daunting task. I write several PPMs a week and when it comes to my own personal investing, I admit, even I don't like reading them.

So here are some tips to look out for:

1. Who is the principal? IS there more than one? What is their experience?

2. What are the voting rights of the investors? Be sure you are ok with none (I am as I am investing for truly passive purposes).

3. What are the distributions? This will be in the PPM and the OA. Make sure they match. Do the returns marry well with the proformas or potential cash flow of the property?

4. Are there any special risks?

5. Do the Use of Proceeds match up with what your expectations are on how your money is to be spent?

6. Do the fees to the management make sense? Are they inline with the interests of the investors?

Hope this helps!

we do crowdconverge every year. (Thanks, Jeff!) It is a chance to meet all the people you need to get your deals done. Investors, platforms, marketing companies, fund managers, software, cpas. Just google search! Thanks!

I agree and disagree with @Jessica Zolotorofe (I am always doing that to you! Sorry!!! :) )

The only reason I disagree, is basically something Jessica addressed: need. If you are going to finance the property, then the bank/lender will normally require an in state LLC to hold the property.

@Ivan Barratt - I am not sure who you are using for securities work, but you might want to shop around for syndication prices if you are paying between $30k and $50k for legal work. That's a bit high even for a 200+ unit deal. Or at least ask your attorney to lower the price a bit. Our firm is super experienced in syndication law (it's all we do) and we don't charge nearly that amount.

I AM NOT SAYING TO LEAVE YOUR ATTORNEY FOR US. (I don't want this to look for self-promotion nor do I want to poach another attorney's client - that's rude.) I just want to give you something for a point of negotiation when you do your next syndication.

@Joe Rinderknecht - is your attorney a securities attorney? Please, I cannot emphasize enough, if you are meeting the 4 prongs of the test @Sherman Ragland discussed above, you are selling a security and securities laws apply. It does not matter that you are using money from family and friends. There is no "family and friends" exemption.

In particular, Utah is very strict about how they proceed with offerings that do not file the proper Form D or offer the proper disclosure.

I completely understand that a securities attorney is sometimes an unaffordable option when you are raising a small amount of capital, but this should not stop you from making proper disclosure and properly filing. Therefore, please feel free to PM me and we can discuss alternative solutions to hiring an attorney.

Hey Dee - We should chat. I am always looking for a good tax attorney to whom I can refer business. I am a securities attorney and only a securities attorney.

My short answer: always use an entity! Never do anything individual and never lend to individuals. B to B only.