RG 019 Syndication Basics Part 3 – How To Raise Capital Legally With Mark Roderick
Show Notes:
In case you missed it, here are some of the highlights from Ep 19: Syndication Basics Part 3– How to raise money legally with Mark Roderick
About Mark:
- Over 30 years experience practicing law;
- One of the leading crowd funding lawyers here in the U.S.;
- He assists entrepreneurs and start ups with all facets of raising private capital;
Something Unrelated to Real Estate Investing:
- Mark loves to ski!;
- His favorite mountain is Jackson Hole, Wyoming;
Nuts and Bolts:
Syndication Basics Part 3– How to Raise Money Legally with Reg D
- Any time you are selling securities you either need to register with the SEC (Security Exchange commission), which is hugely expensive, or you meet exceptions stated in Regulation D (Reg D);
- In Reg D there are exceptions you can adhere to which means your offering doesn’t need to register with the SEC;
- Every state has its own set of laws when it comes to raising private capital (ie: a mini SEC in each state);
- Rule 506 (most popular): You can raise an unlimited amount of money as long as you are selling to accredited investors, but up to 35 non accredited investors;
- Under Rule 506 you can ignore all the state regulations, but not if you raise money under Rule 504 or 505;
- Accredited Investors: Either earn over $200k/year or have a net worth of more than a $1mill excluding your personal residence;
- Rule 504: Very simple, used when you are raising less than $1mill.;
- Rule 505: The least popular rule;
- Historically you can’t advertise your offering to the public under Reg D, however with the new JOBS act (506c) you can advertise!;
- Title III: Effective May 2016 – Allows everyone to participate (both accredited and non accredited);
- Crowd-funding = Syndication, it is one in the same except crowd-funding just uses the internet; it connects buyers and sellers directly;
- You need to prove that you are accredited in the new 506(c) rule:
- Show tax returns;
- Show your W2;
- Have your lawyer or CPA send a letter stating you are accredited;
- Non-Accredited investors don’t need to provide any documentation but they are limited to investing max. 10% of your net income, or net worth (Title III or Title IV), whichever is higher;
- PPM – Private Placement Memorandum (Disclosure document);
- New Rule 506(b) – the issuer is required to give a PPM;
- What do investors need to look out for? Invest only with people with good reputation; invest along with other people you respect;
- Biggest Mistake when raising capital? Not understanding how crowd-funding works, you need to be thinking mostly about marketing – Syndication, see a lot of sloppy deals (documents, financial projections very sloppy);
Top Investing Tips:
- Most successful habit? Have a plan and stick with it;
- Most influential tool in you RE business? His P.C. & One Note!
- What’s the most exciting project right now? So many projects! New crowd-funding portals
- Most influential person in your career? Rick Flaster – Founder of Flaster Greenberg Attorney’s
Where can people reach to continue the conversation?
Blog: markroderick.net or CrowdfundAttny.com
Ready, Aim, Fire!
Happy Investing!
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