All Forum Posts by: Kyle Bryant

If you just have one partner, you probably don't need a PPM. Or even an expensive securities attorney. If you know this person, and they're giving input into your deal/operations, a simple LLC and an operating agreement should be enough. You can figure out an equity split between the two of you, but you don't need to get fancy with only one investor. My two cents.

I'm almost certain that any securities attorney you talk to will have several forms (or completed PPMs) that they draw from to draft new ones. They're already familiar with them and know how to make the right changes in the rights places, rather than looking at a new document without "home field advantage." I can't imagine there's an SEC lawyer out there that starts from scratch, but I could be wrong.  

It kind of depends on the size of the deal and the level of involvement your private investors will have. But if this is just a proposal to familiarize them with the deal, you might consider structuring your proposal like a business plan. Consider including (at a minimum) the following:

1. Details of the property (size, location, makeup of units, etc.)

2. Your plan going into the property (is this a repositioning, value-add, appreciation play, etc.)

3. Your management plan for the property (self-managed, property manager, etc.)

4. Your pro forma P&L for the life cycle of the investment

5. Your exit strategy

6. What role the investors will play (passive, active management of the asset, etc.)

7. What your projected returns are to the investors over time.

I'm sure I'm leaving several things out, but that should give a broad idea. Depending on your deal structure (well, most likely regardless of structure), you'll want to speak with an attorney to make sure you draft the right documents and comply with all necessary regulations concerning these types of investments. 

The main idea is that you want all the relevant info in a concise, understandable manner. Organization and preparation will help garner trust that you can execute on your plan. Best of luck to you!!

Charlie, I know a guy here in Houston that does something similar, but he runs a company that raises money from missions-minded churches and members to fix up and manage 4-unit complexes for ministries and people who need stable housing. That way, the churches don't own the properties but get to participate in the mission of the business, and everyone gets to make a living and have a place to live. I say all that to say that it's possible, but be open to different scenarios.

Don't forget to talk to a securities attorney, too. It sounds like you'd be selling investment vehicles, and you wouldn't want to run afoul of SEC regulations. Interesting idea!

@Jennifer Walne yes, that's correct! 

It really depends on what you want done. I've done commercial PSAs where a client just wants another pair of eyes on the contract. If that's all you want, then $2,500 seems kind of high to me. But if the lawyer is drafting from scratch, that's a reasonable number I guess. I'm also not sure why you would have an attorney doing title and survey work for a multi-family deal—generally the title company would perform those tasks. Or, did you want an attorney specifically to do the title work? Again, it all depends, but $250 per hour is a reasonable rate for a solid lawyer. 

I'm interested in this as well. Have you done any condo conversions before? Did you underwrite the deal differently with that exit strategy in mind?

Hi Jennifer, I’m an attorney in Houston and we have done many operating agreements for small corporations and LLCs. PM me if you’d like to talk about options further.

Well there you go. That makes sense. Thanks for the info, Jillian.