So doesn't that make the contract fraudulent? 

Some day, the phone will ring and someone will say, "hey, you told me this..." then you can repeat exactly what you did say, usually in most cases, they will then recognize what you are saying, not only is it the same thing they heard, you can use the tone of your voice as might be appropriate, but you can continue, showing them what they got was the same thing all others hear from you.This is very handy with an attorney, they will recognize that what you say is uniform, consistent and difficult to combat in court!

That was the first time that had happened to me.To combat that I'm returning to my own letters.

I'm not saying you can't offer 60% or finance it, but how you justify that can be fluffing, puffing, misleading, unethical and even fraudulent.

If a guarantor transfers assets out of the guarantor's name in order to avoid liability under a personal guarantee, this is fraud, and a good attorney may be able to claw back those fraudulent transfers.It would be best to talk to your attorney about how to mitigate your risk in these situations.

To combat against this in some sense a fund might place a "high water mark" on the investor's account.

If market rents lag you will deal with serious cap rate compression.There are ways to combat this.  

Beware though, scam transactions designed to fraudulently take your "transactional funds" are out there, and probably becoming more common.

However, there is risk and $800k may not cover all the unknowns that will  pop up as the renovations continue.To combat that I am thinking a solution would be to just rip off the top floor of the building and put the roof over the second floor.

As long as your advertisement is factual, not fraudulent, and adheres to the rest of the securities regime you're operating under you should be fine.