There are many ways of Raising money for Real Estate Investment.
In 2017, artificially low interest rates will rise, the economy is already recovering, and real estate bargain prices are still available.
There has never been a better time to purchase real estate, and Equity Capital raised in a Private Placement of LLC Shares can qualify as a Real Estate Investment Trust, and meet down payment requirements for mortgage lenders.
With new ways to market those shares and raise the necessary equity capital enabled by social media and crowd funding, 2017 is the perfect time to plan an offering and create a project.
It is not hard to do a Reg D PPM
- Pick a real estate project
- Quantify what you have to bring to the table
- Create a document
- Obtain a contingent commitment from a lender
- Raise the Equity capital from family, friends, relatives, investors
- Secure the real estate
- You are on your way as managing partner!
PICKING A PROJECT
It can be an empty building that can be converted to retail, live and work environment, a business incubator, a farm, an apartment complex, anything with potential, even a whole Ghost Town
WHAT DO YOU HAVE TO INCLUDE
Your assets can be expertise such as management experience or a Real Estate or other professional licence, marketing connections or expertise, cash investment, a dormant, non-producing asset of some kind, or even a related business(s) that can enhance the potential profit.
CREATE A DOCUMENT
You can get templates from a number of places with updated PPM (private placement memorandum), subscription agreements, and associated disclosures and forms for your state. You can also hire somebody to assist you very inexpensively. Contrary to popular belief, Lawyers and Accountants are not needed to do this legally, it is the right of every American Citizen to do so with certain exemptions from registration under various federal and state laws:
- “The coffee table rule”
- Regulation D, rules 504, 505, 506
- Uniform Securities act of 1981
- “Limited Offering Exemption”
Lenders and investors of all kinds have a criteria. A contingent commitment to participate is obtained by contacting them, asking them what the cirteria is, reading it back to them, and asking them to commit to the criteria they just described, in written or letter form. These letters can then be added to the PPM, and help to secure investments. Funding the project then becomes simply a matter of informing all parties that, according to their letters, they have already bought!
EQUITY CAPITAL – SELLING SHARES
With all these other steps in place, it may surprize you how easily the LLC Private Shares can be sold, if and when the project is well planned, researched and prepared, and the upside potential is clearly defined. The downside potential for equity shares in an early stage offering is a complete loss of capital, so the upside needs to be large: at least a ten times return within 3-5 years. The assumptions and projections must be credible, and well documented.
SECURE THE REAL ESTATE
Once you have raised the paid in capital, and tied up the property by funding an escrow, with enough downpayment to qualify, the original contingent commitment lender can be given first right of refusal as promised, and other lenders can be shopped. I have found that often the original commitment is not at the lowest available rate once the project has come this far.
BECOME THE PROJECT MANAGER
If all these things are done well, you are now in complete control of a fully funded, very tax advantaged project.
Original article is here