All Forum Posts by: Douglas Dowell

I also recommend Intent to Prosper by R Kymn Harp that is an epic read about due diligence.

The ULI books are the gold standard to me as well.

Hello Sean,

I would look into Advanced Real Estate Finance: A Case-Based Analysis of Deal Structure and Risk Allocation | Urban Land Institute
http://ow.ly/grZlz. I plan on taking it in this year as well.

Wishing a happy and prosperous new years for all!

Welcome to BP David!

It warms my heart to see a college grad taking action and getting an early start.

Check out this post: http://www.biggerpockets.com/renewsblog/2008/05/22/my-advice-buy-a-4-plex/

I am an active commercial broker and I will tell you that non-recourse for investors isn't even a possibility until you get above $2million even then you have to have a wicked strong resume and ton of networth.

As to the asset protection issues I would even go further in my book. I would hold the assets in a separate LLC altough I don't think each property needs to be in one separately unless you intend to flip it.

To get a max protection scheme I would master lease your rental property to your own C-corp management company.

However, without regard which entity strategy you use It is VITAL that you keep separate banking accounts and religiously adhere to corporate formalities. Ex. Don't pay personal expense out of your entities bank account...corporate minutes and records etc. This is the key way a crafty platiff's lawyer will undue all the effort in the event of a slip and fall or dog bite case. Keep those insurance premiums paid and sleep well knowing you have protected your self.

The first question to answer is will the project entity be a security? The test for a security is

1. an investment of money due to
2. an expectation of profits arising from
3. a common enterprise
4. which depends solely on the efforts of a promoter or third party

Therefore, Joint ventures with active management don't ring the bell and as a consequnce don't trigger the public protection framework. Neither does a debt obligaton.

The second question if it is a security what do I need to do next? Like most legal frameworks there are rules and then exceptions. Syndication as it operates in the real estate context is a prime example where most often the sponsorsobjective is to meet an exemption to the general rule. Why?

Generally, a security that is going to be mass marketed requires expensive disclosure and accounting expenses. However, most real estate sponsors prospective projects will not be financially viable under those circustances.

Good news....enter the private placement exemption. The real estate sponsors best friend. If you comply with limiting your offering in specific ways. This requires for the most part targeting your offering to “accredited investors” or essentially sophesticated investors deemed to have big enough britches to look out for themselves.