1 00:00:00,000 --> 00:00:03,060 If you finally want to do it, you know a lot about real 2 00:00:03,060 --> 00:00:07,200 estate, and you think it's time to start a Real Estate Fund? How 3 00:00:07,200 --> 00:00:10,440 do you go about it? And what's the process? Let's talk about 4 00:00:10,440 --> 00:00:10,500 it. 5 00:00:21,720 --> 00:00:25,470 So just how do you go about starting a Real Estate Fund, you 6 00:00:25,470 --> 00:00:28,290 know a lot about real estate, and maybe you've invested quite 7 00:00:28,290 --> 00:00:32,040 a bit yourself, but everything's owned by you already. And you 8 00:00:32,040 --> 00:00:35,250 want to grow, you want to make more money, you want to own more 9 00:00:35,250 --> 00:00:38,850 properties, or be a piece of that. How do you start a Real 10 00:00:38,850 --> 00:00:44,490 Estate Fund? Well, it always starts with two things that you 11 00:00:44,490 --> 00:00:49,140 are always always doing as a syndicator, you are always 12 00:00:49,140 --> 00:00:55,830 looking for investors, and you're always looking for deals, 13 00:00:56,280 --> 00:00:58,860 those two things are never gonna go away, those are the most 14 00:00:58,860 --> 00:01:02,250 important. Those are the fuel for the fire, right? without 15 00:01:02,280 --> 00:01:05,820 either of those, there is no deal, there is no real estate 16 00:01:05,820 --> 00:01:10,920 fund, no real estate, no fun. No investors, no fun, it just as 17 00:01:10,920 --> 00:01:17,730 simple as that. So you've are always looking for investors and 18 00:01:17,760 --> 00:01:21,510 deals, I like to think of it as a funnel, because you're working 19 00:01:21,510 --> 00:01:25,260 on these things all the time. And you're sifting out to see 20 00:01:25,260 --> 00:01:29,730 what exactly you're going to be working on. As deals come in, 21 00:01:29,760 --> 00:01:33,690 you need to be start identifying and start choosing while these, 22 00:01:33,720 --> 00:01:37,050 this is a possibility, this is a possibility. This is a 23 00:01:37,050 --> 00:01:41,760 possibility. And at the same time, you get investors who are 24 00:01:41,760 --> 00:01:43,350 thinking, hmm. 25 00:01:49,110 --> 00:01:52,950 I'd invest in that. Right. So investors are starting to think 26 00:01:52,950 --> 00:01:55,980 that I'll invest in that and you get an idea of who those people 27 00:01:55,980 --> 00:01:59,760 are. Those are your prime candidates for being in future 28 00:01:59,760 --> 00:02:03,990 investors with you. As soon as you think you have those best 29 00:02:03,990 --> 00:02:11,400 properties, you now go into this phase called underwriting. This 30 00:02:11,400 --> 00:02:15,060 is the financial analysis model. But more than that, because 31 00:02:15,060 --> 00:02:18,510 underwriting is financial analysis, but also with the 32 00:02:18,510 --> 00:02:23,790 component of Do you personally want to take this project on? 33 00:02:24,000 --> 00:02:28,050 Does that meet your criteria of what would be worthwhile? And 34 00:02:28,050 --> 00:02:32,370 are you willing to put your name on it? So underwriting becomes 35 00:02:32,370 --> 00:02:39,240 the key thing. At some point, a deal is found. And you've 36 00:02:39,240 --> 00:02:45,510 identified that one deal that you want to work on, you put the 37 00:02:45,510 --> 00:02:52,560 deal under contract. And you're done. Right? Wish it was so 38 00:02:52,950 --> 00:02:55,740 well, you've got two things going on. Now at the same time, 39 00:02:55,770 --> 00:02:59,280 right, you've got this deal that just went under contract. But 40 00:02:59,280 --> 00:03:09,120 you've also got the security to worry about this, so you've got 41 00:03:09,120 --> 00:03:12,030 to do a contract, you need to close and you've got a security 42 00:03:12,030 --> 00:03:16,590 that you need to fund. So you've got two things happening. You're 43 00:03:16,590 --> 00:03:21,150 always going to be have the same process. And in order to get the 44 00:03:21,150 --> 00:03:24,930 deal done. As it relates to the contract, right? You've got your 45 00:03:24,930 --> 00:03:29,310 due diligence, you might have some additional financing like a 46 00:03:29,310 --> 00:03:39,570 loan. And then ultimately, you have a closing. But your 47 00:03:39,570 --> 00:03:43,050 question for being here as probably more on the security 48 00:03:43,050 --> 00:03:46,170 side, what exactly do you need to do in order to do this 49 00:03:46,170 --> 00:03:49,770 security? You've got people who are raising their hands, right? 50 00:03:56,340 --> 00:03:58,500 Have those people who are raising their hands saying 51 00:03:58,500 --> 00:04:02,640 they're interested, but how do you get them from here, all the 52 00:04:02,640 --> 00:04:07,410 way down to here? Well, it starts with you need the proper 53 00:04:07,410 --> 00:04:10,680 documentation now that you've already identified those people 54 00:04:10,680 --> 00:04:18,780 and you've got those soft commitments. Soft commitments. 55 00:04:19,860 --> 00:04:28,410 Now you need the paperwork that lets you do this legally. You 56 00:04:28,410 --> 00:04:35,910 need a PPM the ppm is what does what you give to your investors. 57 00:04:35,910 --> 00:04:39,210 It describes the entire investment it describes the 58 00:04:39,210 --> 00:04:43,830 terms that that are going to be taking place. It lets your 59 00:04:43,830 --> 00:04:47,100 investors know what the risks are, what the conflicts of 60 00:04:47,100 --> 00:04:51,450 interest that naturally exist in your DLR. It gives them a firm 61 00:04:51,450 --> 00:04:54,960 basis so that they understand what they're going into. And 62 00:04:54,960 --> 00:04:58,890 lets them know also wow if they have additional questions, how 63 00:04:58,890 --> 00:05:03,900 they can get a hold of you and ask those questions. You also 64 00:05:03,900 --> 00:05:10,770 need the operating agreement. The operating agreement is the 65 00:05:10,770 --> 00:05:15,690 rules for the road, it's what tells the LLC that probably is 66 00:05:15,690 --> 00:05:21,390 the basis of your syndication or fun. Exactly what what it can 67 00:05:21,390 --> 00:05:25,650 do. And what it can't do. It is the manual, it is the law. It is 68 00:05:25,650 --> 00:05:30,990 what it is what takes place, the PPM explains the operating 69 00:05:30,990 --> 00:05:33,540 agreement, but the operating agreement itself is what 70 00:05:33,540 --> 00:05:39,180 actually rules the day. But your investors don't sign the 71 00:05:39,180 --> 00:05:44,670 operating agreement, almost all never. So they sign another 72 00:05:44,670 --> 00:05:52,440 agreement called a subscription agreement. So they sign a 73 00:05:52,440 --> 00:05:55,830 subscription agreement. And what that does, it binds them to the 74 00:05:55,830 --> 00:05:59,490 operating agreement. It says in exchange for this money that I'm 75 00:05:59,490 --> 00:06:04,200 about to give you, I am entering into this operating agreement as 76 00:06:04,200 --> 00:06:09,990 a member of this LLC. And that's what that does. So now you've 77 00:06:09,990 --> 00:06:13,290 got your all of your legal documents together, but you're 78 00:06:13,290 --> 00:06:25,860 still not at the closing window yet. Because this down here, you 79 00:06:25,860 --> 00:06:31,470 still don't have any money, you don't have their money. Yeah. So 80 00:06:31,470 --> 00:06:34,620 you've got the documents in place, this really now becomes a 81 00:06:34,620 --> 00:06:38,460 process of I call latching. So you've got the people that have 82 00:06:38,460 --> 00:06:41,400 raised their hands, you've got the documents, you need them to 83 00:06:41,400 --> 00:06:45,930 latch on to your investment and commit in order to do it. And 84 00:06:45,930 --> 00:06:49,740 that's a lot of the work that takes place in this whole phase 85 00:06:49,920 --> 00:06:53,790 here. Your syndication attorney is going to take care of the 86 00:06:53,790 --> 00:06:56,820 documents and make sure that those are all to getting done. 87 00:06:57,240 --> 00:07:01,410 But this latching period is what really kind of takes takes place 88 00:07:01,410 --> 00:07:05,130 to make sure that we latch properly, get your investors 89 00:07:05,130 --> 00:07:08,940 lined up, get that money in, get those signs, subscription 90 00:07:08,940 --> 00:07:13,290 agreements, if you're doing a 506 C offering, get the 91 00:07:13,290 --> 00:07:18,690 verification that they're an accredited investor, and then 92 00:07:18,690 --> 00:07:25,650 get their dollars so that at the end of the day, you can go to 93 00:07:25,650 --> 00:07:29,640 the closing table as well with that money that you have that 94 00:07:29,640 --> 00:07:34,320 you need. This is the broad picture on exactly how you start 95 00:07:34,320 --> 00:07:39,750 a real estate syndication. Now under a Real Estate Fund, what 96 00:07:39,750 --> 00:07:44,730 you're necessarily doing is you're just not doing this part 97 00:07:44,820 --> 00:07:52,950 quite yet. Right. So here your underwrite, you're still 98 00:07:52,950 --> 00:07:57,240 underwriting deals. And you're coming up with your founder 99 00:07:57,300 --> 00:08:04,170 investment theory. But you're not necessarily doing that. But 100 00:08:04,170 --> 00:08:07,710 you still need to do those other things, you need to get these 101 00:08:07,740 --> 00:08:12,600 the the documents in place to latch those investors. The end 102 00:08:12,600 --> 00:08:16,380 of the day, now you have this big pool of money. And I 103 00:08:16,380 --> 00:08:19,860 apologize that I don't know how to draw a pool. But this big 104 00:08:19,860 --> 00:08:24,810 pool of money as you're closing. When that happens, as soon as 105 00:08:24,810 --> 00:08:32,190 you start making sales, you're filing your form D with the SEC, 106 00:08:32,430 --> 00:08:34,530 and you're notifying the states 107 00:08:41,190 --> 00:08:45,630 of where your investors are coming from. And that's how you 108 00:08:45,630 --> 00:08:49,080 start a Real Estate Fund. As you've got this pool of money to 109 00:08:49,080 --> 00:08:55,680 now you're putting it into deals. Right, you're buying 110 00:08:56,400 --> 00:09:00,630 different different assets for them. And then you're just using 111 00:09:00,630 --> 00:09:04,050 the money as as you need to, you're using that money in order 112 00:09:04,050 --> 00:09:07,200 to make those investments. And the returns are going to your 113 00:09:07,200 --> 00:09:11,940 investors in the way that you promised them. Right. So they're 114 00:09:11,940 --> 00:09:16,260 getting that money back. And they then you it's just a matter 115 00:09:16,260 --> 00:09:18,900 of keeping constant communication, making sure 116 00:09:18,900 --> 00:09:22,170 they're happy and know what their money is doing for them so 117 00:09:22,170 --> 00:09:25,980 that they keep investing with you in the future. And this is 118 00:09:25,980 --> 00:09:29,340 how you start a real estate fund. I thought it was helpful 119 00:09:29,340 --> 00:09:32,490 to draw this out. And I thought it was helpful to also draw it 120 00:09:32,490 --> 00:09:36,420 out as a syndication versus have fun, because the only difference 121 00:09:36,420 --> 00:09:39,870 really is you may not have a transaction going at that time. 122 00:09:40,620 --> 00:09:43,920 My name is Tilden Moschetti. I am a syndication attorney with 123 00:09:43,920 --> 00:09:47,580 the Moschetti syndication Law Group. If we can help you put 124 00:09:47,580 --> 00:09:51,540 together a syndication or a fund, be happy to talk to you 125 00:09:51,540 --> 00:09:57,120 about it. We specialize only in Regulation D and in rules 506 B 126 00:09:57,120 --> 00:10:01,020 and 506 C. We'd be happy to work with Few we've worked with 127 00:10:01,020 --> 00:10:03,870 people of all levels, people who are just starting out who've 128 00:10:03,870 --> 00:10:07,170 never put a deal together before but know that they want to and 129 00:10:07,170 --> 00:10:11,370 are committed to the process, as well as large private equity 130 00:10:11,370 --> 00:10:14,730 funds with over a billion dollars under management. So we 131 00:10:14,730 --> 00:10:19,020 service everybody in between. We can help you please don't 132 00:10:19,020 --> 00:10:20,310 hesitate to give us a call.