1 00:00:10,980 --> 00:00:15,330 All right. Thanks for joining us today. It is one o'clock in 2 00:00:15,600 --> 00:00:19,650 Raleigh where I am right now. And thanks for joining us. I've 3 00:00:19,650 --> 00:00:22,620 got a bunch of people in which is terrific. So we're going to 4 00:00:22,620 --> 00:00:26,340 go through some questions that that you have, we're going to 5 00:00:26,370 --> 00:00:31,530 feel free to use the q&a portion that you'll see in zoom, and we 6 00:00:31,530 --> 00:00:37,950 will answer what is coming in as we go. And just let me know, 7 00:00:38,010 --> 00:00:41,130 I've scheduled about 45 minutes for this call. So hopefully, 8 00:00:41,130 --> 00:00:44,010 we'll, we'll hit that we may run slightly over 9 00:00:45,390 --> 00:00:47,940 there. We'll go from there. Sue. 10 00:00:49,890 --> 00:00:54,330 First question that we have, is there any support? Such as legal 11 00:00:54,330 --> 00:00:59,250 review of the acquired property, legal entity maintenance after 12 00:00:59,250 --> 00:01:02,370 finished drafting of the document? That's good question. 13 00:01:03,060 --> 00:01:07,440 The answer is no. So what we do at Moschetti Law Group is we're 14 00:01:07,440 --> 00:01:11,400 primarily concerned with your security itself. So we're 15 00:01:11,400 --> 00:01:14,760 concerned with how you deal with investors, how you present 16 00:01:14,760 --> 00:01:19,800 yourself, making sure you're protected by the SEC. My license 17 00:01:19,800 --> 00:01:24,150 covers national things such as securities licenses, like 18 00:01:24,150 --> 00:01:28,620 securities, but it doesn't necessarily go to different 19 00:01:28,620 --> 00:01:32,280 states. So I'm licensed in California, I'm licensed in 20 00:01:32,280 --> 00:01:36,240 Washington, DC, if you are outside of there, I can't offer 21 00:01:36,240 --> 00:01:39,750 you specific legal advice as it relates to whatever state it is, 22 00:01:40,170 --> 00:01:44,640 if there was a legal issue about that acquired property, for 23 00:01:44,820 --> 00:01:47,850 example, title, I'm not going to be able to give you the legal 24 00:01:47,850 --> 00:01:51,780 advice to it many times for my clients, I can give them kind of 25 00:01:51,780 --> 00:01:55,560 my opinion as a, as a real estate professional or as a 26 00:01:55,560 --> 00:01:59,190 syndicator. But it's not legal advice, and I will probably 27 00:01:59,190 --> 00:02:03,600 still refer you to an attorney. If you have a specific legal 28 00:02:03,900 --> 00:02:07,890 issue. I hope that answers that question there. 29 00:02:10,139 --> 00:02:14,609 Another question, what LLCs? Do I need to start my syndication? 30 00:02:15,299 --> 00:02:19,169 It's probably one of the top three most common questions I 31 00:02:19,169 --> 00:02:23,789 get so happy to answer that for you. Let's go to I have a 32 00:02:23,789 --> 00:02:28,109 whiteboard here that makes that a little bit easier to explain. 33 00:02:29,700 --> 00:02:34,560 So there's two different LLC typically that we form, it's a 34 00:02:34,560 --> 00:02:38,460 service that we also offer, when you sign up for a package, we, 35 00:02:38,670 --> 00:02:42,690 we generally do the formations it's fine if you already have 36 00:02:42,690 --> 00:02:45,390 them set up, but we'll also do them for you if you don't. 37 00:02:46,770 --> 00:02:48,990 So there's two entities here. 38 00:02:51,270 --> 00:02:52,380 This is 39 00:02:53,550 --> 00:02:56,130 building so I'd say it's a property 40 00:03:00,870 --> 00:03:05,250 So, generally, there are is two entities we form 41 00:03:09,390 --> 00:03:11,820 oops, I made that totally ugly. 42 00:03:15,480 --> 00:03:19,650 Those are little like seals on a thing. So this is what I call 43 00:03:19,650 --> 00:03:21,810 the sponsor entity. 44 00:03:26,970 --> 00:03:29,970 And this is what I call the 45 00:03:34,080 --> 00:03:37,170 boss My sheep this is what I call the investment entity 46 00:03:44,550 --> 00:03:50,760 and so, the title is owned by that investment entity, it is 47 00:03:50,790 --> 00:03:54,930 this investment entity is managed 48 00:03:56,550 --> 00:04:00,180 by the by the sponsor entity. 49 00:04:01,830 --> 00:04:03,900 And then your investors. 50 00:04:06,390 --> 00:04:09,990 They all invest into that investment entity. So there's 51 00:04:09,990 --> 00:04:11,010 typically two 52 00:04:12,090 --> 00:04:18,870 two different entities. Now in cases where there is a several 53 00:04:18,870 --> 00:04:20,130 different properties 54 00:04:21,390 --> 00:04:26,400 will normally set up SPVs or special purpose entities 55 00:04:27,990 --> 00:04:32,910 for each of those, which is then managed by the investment 56 00:04:32,910 --> 00:04:36,300 entity. So that answers that question. 57 00:04:38,370 --> 00:04:43,740 Another question is how do I handle timing differences for 58 00:04:43,740 --> 00:04:46,740 different investors in a given fund when calculating returns? 59 00:04:46,920 --> 00:04:51,180 Great question. Also same issue with timing different projects. 60 00:04:51,780 --> 00:04:55,440 Investments in the same fund. Okay, George, good question. So, 61 00:04:55,770 --> 00:04:59,940 this is God talking about two different 62 00:05:00,000 --> 00:05:04,110 I think so there's two different kinds of funds in the world or 63 00:05:04,110 --> 00:05:07,230 two different kinds of syndications. There's open ended 64 00:05:07,230 --> 00:05:13,050 funds, and there's closed ended funds. So about maybe 60 70% of 65 00:05:13,050 --> 00:05:16,200 our clients do closed ended funds. And that's you've got a 66 00:05:16,200 --> 00:05:22,020 single asset, or a single group of assets, you have investors 67 00:05:22,020 --> 00:05:26,250 come over a limited time period. So you're raising money for 68 00:05:26,280 --> 00:05:30,180 three months, six months, whatever it is, they all go in 69 00:05:30,180 --> 00:05:33,300 together, and they all come out together, that's called a closed 70 00:05:33,300 --> 00:05:37,740 ended fund. The difference is an open ended funding George, you 71 00:05:37,740 --> 00:05:40,140 probably know this, but I'm giving background just for the 72 00:05:40,140 --> 00:05:41,130 other people as well. 73 00:05:42,270 --> 00:05:48,630 So in a closed ended fund, that what that does is it is open in 74 00:05:48,630 --> 00:05:52,650 time. So you may have investors coming in in month one, you may 75 00:05:52,650 --> 00:05:55,620 have them coming in, in month nine, you may even have them 76 00:05:55,620 --> 00:06:00,420 coming in like the year later. So what Giorgio is asking about 77 00:06:00,450 --> 00:06:03,990 is this challenge here, where you've got 78 00:06:05,850 --> 00:06:07,170 erase everything. 79 00:06:09,930 --> 00:06:12,180 Where if we look at it on a timeline 80 00:06:16,170 --> 00:06:18,360 and this, let's say q1, 81 00:06:20,640 --> 00:06:21,390 q2, 82 00:06:23,190 --> 00:06:25,800 q3, q4, 83 00:06:26,820 --> 00:06:31,530 et cetera, where you have an investor coming in here, and 84 00:06:31,530 --> 00:06:37,650 you've got for, say, 100k. And you've got an investor coming in 85 00:06:37,650 --> 00:06:44,730 here, for 100k. So the challenge comes up, because this 100k Here 86 00:06:45,000 --> 00:06:50,940 is more valuable to you, at this point, than it is at this point, 87 00:06:50,970 --> 00:06:53,250 right? It's time value of money, they're coming in at different 88 00:06:53,250 --> 00:06:56,010 points. And if you're saying at the end, we're going to be 89 00:06:56,010 --> 00:07:01,740 paying you a return of 40%, or 30%, or whatever it is, this guy 90 00:07:01,740 --> 00:07:06,120 here, this, this guy who came in before the end of a for q1 91 00:07:06,120 --> 00:07:10,650 happen, he's getting disadvantaged, so he is being 92 00:07:10,980 --> 00:07:13,800 he's not getting the full benefit, because he would much 93 00:07:13,800 --> 00:07:18,930 rather wait till q4 In order to put his money in. So there's 94 00:07:19,320 --> 00:07:23,490 really one main way to deal with it. And then there's a couple 95 00:07:23,640 --> 00:07:27,930 kind of variations to deal with it. The main way is by 96 00:07:27,930 --> 00:07:31,680 calculating the net asset value at these different points in 97 00:07:31,680 --> 00:07:36,420 time. So you count the net asset value here, you calculate the 98 00:07:36,420 --> 00:07:38,070 net asset value here. 99 00:07:39,330 --> 00:07:43,110 And you go, and what that essentially does is you'd say, 100 00:07:43,110 --> 00:07:48,120 okay, the whole value of the entire portfolio, let's say is 5 101 00:07:48,120 --> 00:07:55,500 million here. And then in q2, now, maybe it's five whoops, 5.2 102 00:07:55,500 --> 00:08:00,990 million. And now maybe in q3, maybe something slightly 103 00:08:00,990 --> 00:08:05,610 happened, where it's now 5.1. But then it jumps up to 5.5 104 00:08:05,610 --> 00:08:06,090 million. 105 00:08:07,140 --> 00:08:11,490 And then you divide out this amount by the total amount of 106 00:08:11,490 --> 00:08:15,240 membership units that there are. And so basically, what you're 107 00:08:15,240 --> 00:08:18,480 coming up is the cost per membership unit. So you're 108 00:08:18,480 --> 00:08:24,480 selling those membership units to this investor, for 100k, for 109 00:08:24,480 --> 00:08:29,100 100k. And then each quarter, you're doing a reassessment of 110 00:08:29,100 --> 00:08:34,140 what that net asset value is. Now in the example of 111 00:08:36,390 --> 00:08:42,030 what what you don't want to have happen is basically to be saying 112 00:08:44,130 --> 00:08:48,810 that this person is getting diluted at the same time. And 113 00:08:48,810 --> 00:08:52,230 that's how, why we do it this way. Because we also don't want 114 00:08:52,230 --> 00:08:58,110 to be just adding shares, or membership units here in here in 115 00:08:58,110 --> 00:09:01,800 order to make up the difference, because that just dilutes that, 116 00:09:02,280 --> 00:09:05,820 that person. So that's kind of the main way we deal with it. 117 00:09:05,820 --> 00:09:10,080 The second way to deal with it, is by doing an accounting. 118 00:09:11,580 --> 00:09:17,880 So what we can do, where we get basically can get rid of the 119 00:09:17,880 --> 00:09:20,370 idea of net asset value. 120 00:09:23,040 --> 00:09:29,010 And come up with accounts for each one of your investors and 121 00:09:29,040 --> 00:09:33,240 build a ledger for each one of them. So let's say I have 122 00:09:33,270 --> 00:09:39,210 investor one who comes in here. And let's say this is investor 123 00:09:39,210 --> 00:09:43,980 17. Just for sake of argument, I'm doing deals and this is 124 00:09:43,980 --> 00:09:48,420 really for a portfolio not for a single, single asset. 125 00:09:49,980 --> 00:09:55,230 So I know that here I've got these properties here. And I 126 00:09:55,350 --> 00:09:59,970 allocate as evenly as I can at the time of the person 127 00:10:00,000 --> 00:10:04,410 Investing, or at the time of acquisition, I'm allocating 128 00:10:04,620 --> 00:10:09,120 percentage of ownership of each one of those. 129 00:10:11,519 --> 00:10:15,059 Each one of those assets, almost like its own little mini fund, 130 00:10:15,059 --> 00:10:19,559 it's a little account that you're keeping track of. And 131 00:10:19,559 --> 00:10:24,929 then as those get disposed of, it gets the roll off. This is 132 00:10:24,929 --> 00:10:30,299 probably the harder way to keep track of it in a lot of senses, 133 00:10:30,299 --> 00:10:33,899 especially if there's a lot of transactions coming in, or if 134 00:10:33,899 --> 00:10:37,889 there's, but it's probably the only way to do it if you've got 135 00:10:38,189 --> 00:10:42,659 large gaps of time of when between acquisitions and 136 00:10:42,659 --> 00:10:47,339 dispositions and when your investors are trickling in. So 137 00:10:47,369 --> 00:10:52,199 kind of a complicated question. That's how it's dealt with, most 138 00:10:52,259 --> 00:10:56,759 almost always is one of those two ways. But you know, like I 139 00:10:56,759 --> 00:11:01,319 said, we can go through and come up with some other ideas about 140 00:11:01,589 --> 00:11:03,719 whatever meets your particular need as well. 141 00:11:08,070 --> 00:11:12,780 Sure, Tom, we can talk about, we can talk about fees, my fees and 142 00:11:12,780 --> 00:11:17,700 finance, we charge flat fees, we're very competitive about 143 00:11:18,060 --> 00:11:22,800 what we charge. So we charge for a closed ended fund, we charged 144 00:11:22,800 --> 00:11:25,170 $15,000 as a flat fee. 145 00:11:26,190 --> 00:11:31,350 And for a open ended fund, we charge $25,000 as a flat feet. 146 00:11:31,350 --> 00:11:35,130 Now, that's only for the first deal. Once you become one of my 147 00:11:35,130 --> 00:11:39,090 clients, we give a guarantee that for the next three years, 148 00:11:39,090 --> 00:11:43,980 it's going to be discounted by 50%. So that if you're doing 149 00:11:43,980 --> 00:11:48,390 closed ended funds, which most people are, those get discounted 150 00:11:48,390 --> 00:11:53,250 to $7,500. That's just the fees. So everybody's paying those 151 00:11:53,250 --> 00:11:58,830 fees. The I do not finance or do monthly payment plans. It's it's 152 00:11:58,830 --> 00:12:01,830 a one time upfront charge. Because our time to produce 153 00:12:01,830 --> 00:12:04,590 these is really, you know, is really quick, I devote a lot of 154 00:12:04,590 --> 00:12:09,690 time to it. And then we get we get you the paperwork out. So 155 00:12:09,840 --> 00:12:14,580 you're generally getting getting the paperwork in two weeks. So 156 00:12:14,760 --> 00:12:17,220 financing, it just generally doesn't work. 157 00:12:18,600 --> 00:12:21,720 Is there software that I use to keep track of individual 158 00:12:21,720 --> 00:12:24,210 accounts or Ledger's? Yes. 159 00:12:25,560 --> 00:12:31,350 I personally use that folio. App folio is a good is a good 160 00:12:31,350 --> 00:12:36,780 solution. I recommend it, I get a I have a discount code with 161 00:12:36,780 --> 00:12:40,050 them. When they pay that affiliate fee. I pass that 162 00:12:40,050 --> 00:12:44,070 directly on to my whoever, whoever got it. So I don't keep 163 00:12:44,070 --> 00:12:47,550 any of that affiliate money myself. And they winds up being 164 00:12:47,550 --> 00:12:53,820 about 10% of the cost. I think the costs and I know I do not 165 00:12:53,820 --> 00:12:57,660 keep track of what their costs are. I think it winds up being 166 00:12:57,660 --> 00:13:01,110 about $600 a month though, because it is a very kind of 167 00:13:01,110 --> 00:13:05,430 industrial grade solution. There are other projects out there. I 168 00:13:05,430 --> 00:13:09,720 know that some people are using a product called groundbreaker. 169 00:13:09,750 --> 00:13:15,300 I haven't used them myself, and but you could check them out. 170 00:13:15,330 --> 00:13:18,030 And so maybe they're they're very good. I have no idea. 171 00:13:19,980 --> 00:13:20,400 Right? 172 00:13:21,780 --> 00:13:26,010 All right, can I get my friends to invest in my reg D if I am 173 00:13:26,010 --> 00:13:32,490 advertising? Let's start kind of at the from a bigger picture, it 174 00:13:32,490 --> 00:13:34,680 might make a little more sense. 175 00:13:36,960 --> 00:13:38,490 Just you to do 176 00:13:40,260 --> 00:13:40,710 oops, 177 00:13:42,270 --> 00:13:44,880 what to delete? There we go. 178 00:13:47,040 --> 00:13:49,560 And go back to the whiteboard. All right. 179 00:13:52,080 --> 00:13:59,640 So can I read the question? Okay. So two types of syndicate 180 00:14:00,420 --> 00:14:06,780 syndication generally under 506 under reg D 506, B and 506 seed, 181 00:14:07,350 --> 00:14:12,420 there is also 504 But it is it is hardly ever used now it's 182 00:14:12,450 --> 00:14:17,010 overly complicated, and so nearly no one is using it. So 183 00:14:17,010 --> 00:14:19,260 506 B is 184 00:14:22,440 --> 00:14:22,830 C 185 00:14:25,260 --> 00:14:27,870 and we'll go through we'll answer the question minute but I 186 00:14:27,870 --> 00:14:31,560 just want to outline what those those differences are. 187 00:14:32,820 --> 00:14:39,810 There so 506 B is yes, you can have non accredited investors 188 00:14:46,260 --> 00:14:51,690 there's up to 35 per 90 days 189 00:14:53,460 --> 00:14:59,220 506 C, you can have you can advertise 190 00:15:00,210 --> 00:15:03,300 you can make a general solicitation. 191 00:15:04,529 --> 00:15:11,249 And so with 506 B though no advertising 192 00:15:15,299 --> 00:15:21,689 and with 506 C no non accredited investors. So to answer your 193 00:15:21,689 --> 00:15:26,999 question, what were the problem is, is if you're doing a 506 B, 194 00:15:27,869 --> 00:15:31,079 you're not allowed to advertise it really at all. And you said 195 00:15:31,079 --> 00:15:36,749 that you needed to advertise? So the short answer is probably not 196 00:15:36,749 --> 00:15:39,119 as long as those friends and family are non accredited 197 00:15:39,119 --> 00:15:45,869 investors, if they, so how do you do a 506 B, and, 198 00:15:46,980 --> 00:15:51,720 and basically be able to get people into your fund and find 199 00:15:51,720 --> 00:15:57,180 investors, there's a few ways what the SEC is main concern is 200 00:15:57,510 --> 00:16:02,250 between 506 B and 506. C, and why they have this rule setup is 201 00:16:02,250 --> 00:16:05,370 they don't want people just going out and making general 202 00:16:05,370 --> 00:16:08,550 solicitations to the entire world of hey, come into this 203 00:16:08,550 --> 00:16:12,870 fund, and basically taking is of people taking advantage of it. 204 00:16:13,200 --> 00:16:18,480 So people coming up with some very large mechanisms to, you 205 00:16:18,480 --> 00:16:21,270 know, make, you're gonna make a billion dollars, if you invest 206 00:16:21,270 --> 00:16:24,930 $5 into this fun, and we're gonna make all this money and 207 00:16:24,930 --> 00:16:27,750 basically, the syndicator walking away with it, none of 208 00:16:27,750 --> 00:16:30,870 you are obviously going to be doing that. But that's what the 209 00:16:30,870 --> 00:16:36,060 SEC is concern is. And so they use this toggle point between 210 00:16:36,060 --> 00:16:40,680 accredited investors versus advertising as their mechanism 211 00:16:40,680 --> 00:16:44,820 to regulate that. So non accredited investors are not 212 00:16:44,820 --> 00:16:48,540 necessarily less sophisticated, but they have less means to be 213 00:16:48,540 --> 00:16:53,280 able to adapt a very bad thing happening where somebody walks 214 00:16:53,280 --> 00:16:54,840 away with all the invested money. 215 00:16:56,100 --> 00:16:56,910 So 216 00:16:58,110 --> 00:17:02,370 the turning point, really, and it's just read it, this is my 217 00:17:02,370 --> 00:17:05,490 interpretation, reading between the lines of what the code says 218 00:17:05,850 --> 00:17:08,070 is that it comes down to trust. 219 00:17:10,680 --> 00:17:16,410 They want the investor to be able to have some relationship, 220 00:17:16,410 --> 00:17:21,480 some sort of, like trust that's based in something real with the 221 00:17:21,480 --> 00:17:28,440 syndicator. And so what what needs to happen is dialogue and 222 00:17:28,440 --> 00:17:34,350 communication that is outside of what the investment is needs to 223 00:17:34,350 --> 00:17:38,190 take place first. So what used to happen in the very early 224 00:17:38,190 --> 00:17:42,180 days, as syndicators would put together a seminar, they'd get 225 00:17:42,180 --> 00:17:45,660 everybody packed into a room, they talk about the investment, 226 00:17:45,900 --> 00:17:49,140 and they get a list of things and they'd start talking about 227 00:17:49,140 --> 00:17:52,230 what their investment was immediately and saying, Okay, 228 00:17:52,230 --> 00:17:55,020 come invest, come invest, come invest in this. It's great, it's 229 00:17:55,020 --> 00:17:58,560 great, it's great. And there was a lot of the the there was 230 00:17:58,560 --> 00:18:01,860 concerned that there was a lot of pressure that was being put 231 00:18:01,860 --> 00:18:06,840 on to investors by syndicators in order to invest. 232 00:18:07,890 --> 00:18:12,360 And so what they have done by doing this is they've actually 233 00:18:12,360 --> 00:18:16,590 specifically said in the code, you can't do that. What you can 234 00:18:16,590 --> 00:18:21,450 do, and what this code does, does not prohibit is putting 235 00:18:21,450 --> 00:18:25,380 together the same seminar, he put together a seminar of how to 236 00:18:25,380 --> 00:18:29,160 invest in real estate, you never talk about your investment at 237 00:18:29,160 --> 00:18:32,970 all. And then you basically invite people to say, hey, if 238 00:18:32,970 --> 00:18:35,400 you'd like to talk some more about real estate and talk with 239 00:18:35,400 --> 00:18:39,810 me one on one, love to do it, let's set up a coffee or, or 240 00:18:39,810 --> 00:18:43,410 whatever to do that. So that's really kind of the main 241 00:18:43,410 --> 00:18:48,450 mechanism that people are doing in order to build their investor 242 00:18:48,450 --> 00:18:52,380 base is by still setting up seminars or webinars or things 243 00:18:52,380 --> 00:18:56,190 like that, inviting people into those communications in those 244 00:18:56,190 --> 00:19:00,630 dialogues, and then going from there to build that trust and 245 00:19:00,630 --> 00:19:02,370 then doing a 506 B. 246 00:19:06,330 --> 00:19:08,040 I hope that answers that question. 247 00:19:09,540 --> 00:19:14,730 Next question. What services do I provide in setting up a closed 248 00:19:14,730 --> 00:19:19,530 end fund? Good question. So we are basically your back office, 249 00:19:19,530 --> 00:19:24,060 your your support team to get that fund set up. So what we do 250 00:19:24,060 --> 00:19:27,330 is we put together the PPM the operating agreement, 251 00:19:27,330 --> 00:19:32,550 subscription agreement, investor questionnaires, and then put a 252 00:19:32,550 --> 00:19:36,570 package those all together so that it meets what investors 253 00:19:36,570 --> 00:19:41,070 would be expecting to see from them. We can do reviews of your 254 00:19:41,070 --> 00:19:43,530 marketing material. We don't do the marketing material 255 00:19:43,530 --> 00:19:48,330 ourselves, but we do do reviews. And then you can put it out 256 00:19:48,330 --> 00:19:52,410 there into the marketplace. Once you've put that all together. We 257 00:19:52,410 --> 00:19:56,790 look at what the offering is. And then we put together the 258 00:19:56,880 --> 00:19:59,970 form d which is what gets filed with the SEC 259 00:20:00,329 --> 00:20:06,629 And then we get put together with the blue sky filings. Now, 260 00:20:06,719 --> 00:20:10,649 a lot of my competitors do exactly that same thing in terms 261 00:20:10,649 --> 00:20:14,249 of the actual, like, we put this documents together, what I think 262 00:20:14,249 --> 00:20:18,329 sets us apart and my firm is I'm an active syndicator. Myself, 263 00:20:18,359 --> 00:20:22,709 I'm putting together my own deals. And so what, what we try 264 00:20:22,709 --> 00:20:26,219 and do to the the difference that we make is, I take that 265 00:20:26,219 --> 00:20:30,119 expertise, and I'm available to you in order to make sure that 266 00:20:30,419 --> 00:20:33,779 ultimately you're successful. I mean, the reason that we cut our 267 00:20:33,779 --> 00:20:38,279 rate once you're a client of ours is because our whole goal 268 00:20:38,279 --> 00:20:42,329 here is to have you be successful. So you keep hiring 269 00:20:42,329 --> 00:20:47,249 me over and over and over. That's my goal. So generally, 270 00:20:47,249 --> 00:20:50,579 once you're one of my clients, I'm available to you, we set up 271 00:20:50,579 --> 00:20:54,449 meetings, I see some of my clients are on this call. And so 272 00:20:54,449 --> 00:20:58,229 they can probably attest to it as well, that I really do try to 273 00:20:58,229 --> 00:21:01,979 make myself as available as possible. Probably the easiest 274 00:21:01,979 --> 00:21:07,139 way is to set up a meeting with me, I try and make it so that I 275 00:21:07,139 --> 00:21:11,489 can meet with people as quickly as possible. And then we can we 276 00:21:11,489 --> 00:21:14,999 can discuss whatever it is, if it's about your syndication 277 00:21:14,999 --> 00:21:18,629 specifically, we can talk about that. Or if it's a question 278 00:21:18,629 --> 00:21:22,139 about, you know, an issue that you're having, I'm happy to have 279 00:21:22,139 --> 00:21:23,519 those conversations as well. 280 00:21:25,380 --> 00:21:30,150 So that that's what we provide, in order to set up a closed end. 281 00:21:32,340 --> 00:21:37,260 Another question, is that okay to have both a 506 b and a 506. 282 00:21:37,260 --> 00:21:41,760 C for the LLC. Great question. I do get that a lot, too. The 283 00:21:41,760 --> 00:21:46,890 answer is no. So you choose one and then the and then sometimes 284 00:21:46,890 --> 00:21:51,030 you can go to the other. So generally, you could if you need 285 00:21:51,030 --> 00:21:54,930 to do raise, do a raise from friends and family. And to 286 00:21:54,930 --> 00:22:00,240 advertise, what you can do is you can put together a 506 b 287 00:22:00,240 --> 00:22:04,800 offering, offer that to friends and family. And then once that's 288 00:22:04,800 --> 00:22:08,910 closed, then you can put together a 506 C, and then 289 00:22:08,910 --> 00:22:12,090 advertise that specifically, they need to be two separate 290 00:22:12,090 --> 00:22:14,040 different offerings, though. 291 00:22:15,360 --> 00:22:19,170 So we have we have a fair number of people that do that, probably 292 00:22:19,170 --> 00:22:22,710 not nowhere near a majority, but some people definitely do that. 293 00:22:23,100 --> 00:22:28,260 And, and it works, it works fine, what you cannot do is do a 294 00:22:28,260 --> 00:22:32,610 506 C offering, where you're advertising it to the world and 295 00:22:32,610 --> 00:22:37,170 then do a 506 b offering just to pull in those people because at 296 00:22:37,170 --> 00:22:42,750 that point, they've pretty much seen the offer that's there. And 297 00:22:42,840 --> 00:22:45,450 that may be out there in the marketplace that you've 298 00:22:45,450 --> 00:22:48,930 advertised. So what we don't want to ever have happen would 299 00:22:48,930 --> 00:22:54,390 be a complaint gets filed. The SEC is called in to investigate, 300 00:22:54,420 --> 00:22:58,830 the investor says, Well, I had no idea who these people were, I 301 00:22:58,860 --> 00:23:02,760 saw an ad on TV, I gave them money, and I'm definitely not an 302 00:23:02,760 --> 00:23:06,630 accredited investor. That's what we're trying to prevent. By 303 00:23:06,630 --> 00:23:10,950 making sure that it doesn't go C then B. But if it goes B then C, 304 00:23:11,220 --> 00:23:13,530 you know, that's fine. You've brought in all the friends and 305 00:23:13,530 --> 00:23:17,610 family that you know, and then close that off and then do the 306 00:23:17,910 --> 00:23:19,530 do a 506 C offer. 307 00:23:20,610 --> 00:23:21,210 Right? 308 00:23:23,220 --> 00:23:27,210 So how do I let friends and family know if I'm doing a 506? 309 00:23:27,210 --> 00:23:33,450 B and can't advertise? Great question. The the you can't 310 00:23:33,480 --> 00:23:39,060 advertise in terms of a general solicitation under 506 B. But 311 00:23:39,060 --> 00:23:42,480 you can't let certainly let friends and family know I think 312 00:23:42,480 --> 00:23:46,140 you probably could even post on Facebook or on whatever your 313 00:23:46,140 --> 00:23:47,490 social media is, 314 00:23:49,050 --> 00:23:54,180 hey, here's what I'm working on. And you could bring people in 315 00:23:54,180 --> 00:23:57,990 that way. But you'd have if you decide to do that, you just 316 00:23:57,990 --> 00:24:01,080 wouldn't be very diligent that the only people that you're 317 00:24:01,080 --> 00:24:05,250 letting into that investment are people you actually know. So I 318 00:24:05,250 --> 00:24:09,810 wouldn't go like trying to test the gray area when you're 319 00:24:10,020 --> 00:24:13,350 putting together seminars and getting to know them for a week 320 00:24:13,350 --> 00:24:16,620 and then talking to them about the investment and do that 321 00:24:16,620 --> 00:24:21,690 mechanism. But otherwise, you could certainly say put it out 322 00:24:21,690 --> 00:24:25,140 there to the world, hey, I'm doing this. You know, if you're 323 00:24:25,140 --> 00:24:29,220 one of my buddies, give me a call. And that should be okay 324 00:24:29,220 --> 00:24:33,720 because it's not then a general solicitation where anybody can 325 00:24:33,720 --> 00:24:34,200 come in. 326 00:24:36,690 --> 00:24:41,460 Who is an accredited investor, an accredited investor as 327 00:24:41,460 --> 00:24:46,320 defined in rule 501. What it basically says is there's two 328 00:24:46,320 --> 00:24:51,450 tests, there's an income test or there is a a net 329 00:24:52,560 --> 00:24:56,820 net wealth test. You do not need to pass both of them in order to 330 00:24:56,820 --> 00:24:59,940 be considered an accredited investor you only need to be 331 00:25:00,000 --> 00:25:04,680 I passed one of them. For the net income test it needs to be 332 00:25:04,830 --> 00:25:07,650 if it's a person applying on their own. So without their 333 00:25:07,650 --> 00:25:12,930 spouse that they need to have $200,000 a year in income for 334 00:25:12,930 --> 00:25:15,660 the past two years and expectation of get that for the 335 00:25:15,660 --> 00:25:19,890 third year. And for the net wealth test, it needs to be net 336 00:25:19,890 --> 00:25:24,240 wealth of, Oh, I'm sorry. And for the income test, if it's 337 00:25:24,450 --> 00:25:27,150 with a spouse, it's $300,000. 338 00:25:28,710 --> 00:25:29,430 Or, 339 00:25:30,870 --> 00:25:36,870 plus $300,000. A year for the last two years with the 340 00:25:36,870 --> 00:25:40,980 expectation of the current year being $300,000 a year, the 341 00:25:40,980 --> 00:25:45,840 wealth test is for a net wealth of $1 million. And that's not 342 00:25:45,840 --> 00:25:50,880 counting any positive equity for fant primary residence. So if a 343 00:25:50,880 --> 00:25:54,690 house is underwater, that does bring down that personal net 344 00:25:54,690 --> 00:26:00,360 worth. But if your house is worth worth a million, and you 345 00:26:00,360 --> 00:26:04,710 owe, you know, $5 on it, you don't get to count that 346 00:26:04,710 --> 00:26:09,540 additional income as that primary that that big spread 347 00:26:09,540 --> 00:26:14,430 that $995,000. So you don't need to get to count that as your as 348 00:26:14,430 --> 00:26:16,740 your wealth that needs to be separate from that primary. 349 00:26:19,110 --> 00:26:19,800 Key. 350 00:26:22,410 --> 00:26:29,400 Can we do a 1031? Exchange? Common question the answers? 351 00:26:30,540 --> 00:26:32,400 The simple answer is no. 352 00:26:33,600 --> 00:26:38,940 The we'll have a backup this simple. If you mean to, can we 353 00:26:38,940 --> 00:26:44,280 do a can people 1031 Exchange into a property into your 354 00:26:44,280 --> 00:26:47,520 property and give you the the money from there? The answer is 355 00:26:47,520 --> 00:26:51,420 probably no, that money itself would be counted as boot and 356 00:26:51,420 --> 00:26:54,690 they're going to be paying their taxes on it. Outside of that 357 00:26:54,690 --> 00:26:58,950 1031 Exchange. If they want to pay taxes on it, then absolutely 358 00:26:58,950 --> 00:27:02,970 they can. But it is counted as boot. And he can't come in. 359 00:27:04,170 --> 00:27:10,050 The only exception to that. And I'm hesitant to say it is in the 360 00:27:10,050 --> 00:27:14,550 case of a Delaware statutory Trust, which is a very 361 00:27:14,550 --> 00:27:16,650 competent, complicated mechanism. 362 00:27:17,700 --> 00:27:22,290 And it's so technically they you can set up a fund in order to 363 00:27:22,290 --> 00:27:27,810 raise money with 1031 money. But it can only be in the in the 364 00:27:27,870 --> 00:27:32,220 specific shell of a Delaware statutory Trust, which are very, 365 00:27:32,220 --> 00:27:36,240 very complicated, expensive and very challenging to put 366 00:27:36,240 --> 00:27:36,660 together. 367 00:27:37,830 --> 00:27:42,780 In You 1031 out probably now here it gets kind of state 368 00:27:42,780 --> 00:27:48,210 specific, because a lot of times what happens is the IRS under 369 00:27:48,210 --> 00:27:52,440 the IRS rules. It's 98% Not a problem. 370 00:27:53,700 --> 00:27:58,650 Under local state rules, it depends. So in California, for 371 00:27:58,650 --> 00:28:02,910 example, if you were to try and do a 1031 exchange out of a 372 00:28:02,910 --> 00:28:07,590 property that's being syndicated, and one of your 373 00:28:07,590 --> 00:28:11,430 investors doesn't want to go along, but everybody else does. 374 00:28:12,030 --> 00:28:15,570 The Franchise Tax Board and California will come after you 375 00:28:15,570 --> 00:28:19,050 and disallow it and they don't have any problems filing a 376 00:28:19,050 --> 00:28:23,610 lawsuit against you, no matter what, despite whatever the IRS 377 00:28:23,610 --> 00:28:28,320 rulings are, they want their money immediately. So they will 378 00:28:28,320 --> 00:28:32,850 disallow it. I've heard New York is also equally challenging. I'm 379 00:28:32,850 --> 00:28:35,820 not keeping track of which states like it and which don't. 380 00:28:36,270 --> 00:28:41,400 Now, if everybody wants to 1031 Exchange, that's not going to be 381 00:28:41,400 --> 00:28:46,380 a problem. So you certainly can turn 31 out, as long as every 382 00:28:46,380 --> 00:28:50,250 investor doesn't have a problem with it. Or if your fund is just 383 00:28:50,250 --> 00:28:54,690 set up automatically to do that, then it will be okay. But 384 00:28:54,690 --> 00:28:57,840 everybody has to come along, you can't spread out split out 385 00:28:57,840 --> 00:29:02,820 fractional shares in some states. So I'd be very careful 386 00:29:02,820 --> 00:29:03,660 about that. 387 00:29:05,700 --> 00:29:09,600 We have some clients who are doing it very successfully. But 388 00:29:09,600 --> 00:29:12,360 they're also not letting in people from New York or 389 00:29:12,360 --> 00:29:15,300 California in order to be able to do it without a problem. 390 00:29:17,940 --> 00:29:22,290 Which is easier an open ended fund or a closed ended fund. 391 00:29:23,490 --> 00:29:25,080 So and 392 00:29:26,550 --> 00:29:31,710 well, it depends what you mean by easier, so easier in terms of 393 00:29:31,710 --> 00:29:36,360 raising capital. I think most of the time, it is much easier to 394 00:29:36,360 --> 00:29:40,740 raise money for a closed ended fund. In my experience, most 395 00:29:40,740 --> 00:29:46,770 investors like to have concrete start dates. An expectation of 396 00:29:47,460 --> 00:29:50,370 this money is going to be held and doing whatever it's doing 397 00:29:50,370 --> 00:29:53,610 for five years, seven years, three years, whatever that time 398 00:29:53,610 --> 00:29:56,610 period is and they kind of know what that is going in. 399 00:29:58,350 --> 00:29:59,670 So raising money 400 00:30:00,000 --> 00:30:04,650 My experience is closed ended as much easier open ended is more 401 00:30:04,650 --> 00:30:07,830 vague. And the more vague it is, the more challenging it is. 402 00:30:09,750 --> 00:30:14,820 The what's easier about open ended funds is open ended funds 403 00:30:14,850 --> 00:30:19,380 are easier in terms of strategic decisions. If you've got a pool 404 00:30:19,380 --> 00:30:23,190 of money and you're able to place it an open ended fund, 405 00:30:23,190 --> 00:30:25,770 you're able to do that. You just need to make sure you're 406 00:30:25,770 --> 00:30:29,700 complying with whatever rules are in your operating agreement 407 00:30:30,120 --> 00:30:35,940 that are set up. So the specific plan of an open ended fund can 408 00:30:35,940 --> 00:30:40,980 be easier. But a closed ended fund is much easier to get 409 00:30:40,980 --> 00:30:45,780 investors for and much easier to maintain. Because we're not 410 00:30:45,780 --> 00:30:49,500 dealing with like what we answered before about funds 411 00:30:49,500 --> 00:30:52,980 where we're have to having to keep track of either separate 412 00:30:52,980 --> 00:30:55,590 Ledger's or keep track of 413 00:30:57,060 --> 00:31:01,170 of net asset value along the way that gets gets overly 414 00:31:01,170 --> 00:31:01,890 complicated. 415 00:31:05,310 --> 00:31:07,740 How, what's up above? 416 00:31:11,730 --> 00:31:16,200 does? Does documentation for five accepting investments from 417 00:31:16,200 --> 00:31:17,310 self directed IRAs? 418 00:31:18,720 --> 00:31:23,940 Yeah, basically, almost every syndicator does allow accepting 419 00:31:23,970 --> 00:31:27,960 funds from self directed IRAs, to backup just so everybody 420 00:31:27,960 --> 00:31:33,330 knows a self directed IRA is basically it's an IRA, where the 421 00:31:33,330 --> 00:31:39,720 administrator of that IRA allows the LAOs the person with that 422 00:31:39,720 --> 00:31:44,430 account the account holder to basically dictate where their 423 00:31:44,430 --> 00:31:48,630 funds are going to go. And that can be into a syndication. So 424 00:31:48,630 --> 00:31:53,280 there's quite a few companies that are self directed IRA 425 00:31:53,280 --> 00:31:58,170 companies, probably the biggest is and trust en TR ust, but 426 00:31:58,350 --> 00:32:01,890 they're by far not the only ones, I've dealt with probably 427 00:32:01,890 --> 00:32:03,300 about six different ones. 428 00:32:05,190 --> 00:32:10,650 And they're generally pretty easy. So it I haven't had a 429 00:32:10,650 --> 00:32:15,720 situation where I've had a, an administrator of a self directed 430 00:32:15,720 --> 00:32:21,390 IRA, ask for any changes to a, to a ppm or to an operating 431 00:32:21,390 --> 00:32:25,440 agreement, their main concern in order because they want to stay 432 00:32:25,440 --> 00:32:31,290 compliant for the benefit of the IRA holder, is that the IRA 433 00:32:31,290 --> 00:32:34,950 holder doesn't have access to touch the money themselves. So 434 00:32:34,950 --> 00:32:39,690 it's, it's nearly impossible to set up a self directed IRA, 435 00:32:39,690 --> 00:32:44,010 where the syndicator themselves gets to go into the investment. 436 00:32:44,250 --> 00:32:48,690 But it's almost always the case that, that you can generally 437 00:32:48,690 --> 00:32:52,320 have investors who have self directed IRAs. And you should 438 00:32:52,320 --> 00:32:57,630 and that's a great talking point to, to finding investors to 439 00:32:57,630 --> 00:33:01,080 having those conversations, because now they can put their 440 00:33:01,230 --> 00:33:05,490 IRA money as to use in your syndications as well, it's a 441 00:33:05,490 --> 00:33:11,010 good thing to talk about. And the only administrative thing 442 00:33:11,010 --> 00:33:16,050 that that burden that it adds to you is two things is first, you 443 00:33:16,050 --> 00:33:19,410 have to submit it to the administrator for their review 444 00:33:19,410 --> 00:33:23,310 before you can get the money. And the second thing is every 445 00:33:23,310 --> 00:33:27,930 year, the administrator is going to ask what really they're going 446 00:33:27,930 --> 00:33:33,690 to ask the IRA holder, who then will ask you is they want to get 447 00:33:33,720 --> 00:33:40,170 a general assessment of what the current value of that IRA is, or 448 00:33:40,170 --> 00:33:44,520 what that acid is in their IRA, for reporting purposes, they 449 00:33:44,520 --> 00:33:48,660 need it. So they will ask for it. But it's really it's not 450 00:33:48,690 --> 00:33:52,410 that big of a deal. You know, I basically have a template for 451 00:33:52,410 --> 00:33:52,590 it. 452 00:33:53,610 --> 00:33:56,490 If ever you're working on one and you're a client of mine, you 453 00:33:56,490 --> 00:34:00,570 just tell me that, you know, how does this work? And I'll send 454 00:34:00,570 --> 00:34:04,200 you over what my template is, and you can fill it out and it's 455 00:34:04,230 --> 00:34:05,250 it's pretty simple. 456 00:34:07,560 --> 00:34:08,700 Let's get a quick drink. 457 00:34:12,090 --> 00:34:12,450 All right. 458 00:34:14,070 --> 00:34:17,310 Another question. We have some situations where after signing 459 00:34:17,310 --> 00:34:20,400 the ppm or wanting to provide a discount on our fee and 460 00:34:20,400 --> 00:34:21,000 commissions, 461 00:34:22,200 --> 00:34:25,470 what tax formality or documentation do we need to 462 00:34:25,470 --> 00:34:29,370 have? Okay, yeah, you you absolutely can do that. 463 00:34:30,720 --> 00:34:34,440 This is where most of the time we'll talk about side letters. 464 00:34:34,440 --> 00:34:38,130 So, and we'll talk we talked about side letters and our PPM 465 00:34:38,130 --> 00:34:41,490 and I think we talked about a little bit in the operating 466 00:34:41,490 --> 00:34:45,810 agreement, just that these things exist. What a side letter 467 00:34:45,810 --> 00:34:49,800 basically is, is it's an agreement outside of what your 468 00:34:49,800 --> 00:34:56,610 normal investors get. So it's, let's do a diagram. Easier. 469 00:34:59,670 --> 00:34:59,970 Oops. 470 00:35:00,000 --> 00:35:01,020 Same thing. 471 00:35:07,440 --> 00:35:10,380 So you've got your agreement 472 00:35:11,910 --> 00:35:18,720 with your investors, right? So investor, investor. And then 473 00:35:18,720 --> 00:35:20,820 you've got this guy here, 474 00:35:22,140 --> 00:35:27,780 who's also an investor. And you want to give him a little bit 475 00:35:27,780 --> 00:35:34,200 better deal, say, you've got it on that, that this investment is 476 00:35:34,200 --> 00:35:38,040 paying, and I'm making stuff up here, it's paying an 8% 477 00:35:38,040 --> 00:35:41,760 preferred return, and then a 7030 split. 478 00:35:45,030 --> 00:35:50,550 So 70%, to the investor and a 30%, to the manager, this guy is 479 00:35:50,550 --> 00:35:52,980 coming in with a lot of money, this guy here. 480 00:35:55,320 --> 00:35:59,670 And you really want him as an investor, and you want to incent 481 00:35:59,670 --> 00:36:03,960 him in order to finish off your investment and bring him in. 482 00:36:05,040 --> 00:36:10,410 So what you want to offer him is an 8%. Breath 483 00:36:12,090 --> 00:36:13,980 and an 8020 split. 484 00:36:16,560 --> 00:36:21,660 So that is no problem at all. What you'd basically do is have 485 00:36:21,660 --> 00:36:25,680 him sign the fee agreement, and then do this separate side 486 00:36:25,680 --> 00:36:26,280 letter 487 00:36:27,690 --> 00:36:32,850 just for him, that says, okay, and for you, we're going to do 488 00:36:32,880 --> 00:36:33,840 an ad 20. 489 00:36:36,210 --> 00:36:37,650 So that's one way to do it. 490 00:36:38,670 --> 00:36:43,230 What the caution is that, that we're looking at whenever we're 491 00:36:43,230 --> 00:36:48,240 doing side letters, is I don't want there to be a situation 492 00:36:48,240 --> 00:36:48,750 where, 493 00:36:50,070 --> 00:36:52,860 where instead of this 8% pref, 494 00:36:54,600 --> 00:36:58,650 you are suddenly doing a 12% prep, and you've told your 495 00:36:58,650 --> 00:37:03,210 investors that word that this is an 8% Prep. Now why is that the 496 00:37:03,210 --> 00:37:07,950 case, because all these are getting the 8%, 497 00:37:09,120 --> 00:37:10,380 the 8%. 498 00:37:11,790 --> 00:37:16,200 And then after that are getting that 7030 split. So after all 499 00:37:16,200 --> 00:37:19,740 that money's paid out, then they're getting a 7030 split 500 00:37:19,740 --> 00:37:21,150 well, that 8% 501 00:37:25,050 --> 00:37:29,130 is driving down the amount of available 502 00:37:32,340 --> 00:37:35,040 cash for distribution. 503 00:37:37,620 --> 00:37:41,010 Right, because they're getting that right off the top. So now 504 00:37:41,010 --> 00:37:46,110 if I'm giving somebody this 12% right off the top, that striping 505 00:37:46,140 --> 00:37:50,370 them more than the investors are expecting, and so you're 506 00:37:50,370 --> 00:37:54,570 diluting them without telling them and so that's that's a big 507 00:37:54,570 --> 00:37:54,990 nono. 508 00:37:56,550 --> 00:38:00,300 So I don't want whenever we're talking about, 509 00:38:01,440 --> 00:38:05,130 about those, that's what I'm on the lookout for is dilutions 510 00:38:05,130 --> 00:38:11,580 that are unintended. In terms of fees, what you can do is, 511 00:38:11,910 --> 00:38:13,620 because I think that was your question 512 00:38:16,560 --> 00:38:24,180 is Can you can you give them some fees? The answer is, yeah, 513 00:38:24,180 --> 00:38:27,240 you can give them some fees. And sometimes we'll do those, 514 00:38:27,270 --> 00:38:31,470 especially in the case of like a kicker for a guarantor on a 515 00:38:31,470 --> 00:38:34,860 loan. Like if somebody is investing a large amount on 516 00:38:34,860 --> 00:38:39,960 there, you'll give them maybe 1% of the of the amount financed 517 00:38:39,990 --> 00:38:44,460 just for the act of signing on the loan. That's okay to do. 518 00:38:46,320 --> 00:38:52,560 In terms of, of what there is now, in terms of tax formality, 519 00:38:53,340 --> 00:38:57,240 but so though, the documentation is simple, it's a side letter, 520 00:38:57,330 --> 00:39:00,660 it's the agreement between the fund and the investor. That's 521 00:39:00,660 --> 00:39:06,300 the documentation you need. For a as it relates to taxes, what 522 00:39:06,300 --> 00:39:09,960 will happen is you'll need to just basically explain what it 523 00:39:09,960 --> 00:39:14,430 is what the situation is to your tax preparer, your CPA, when 524 00:39:14,430 --> 00:39:16,920 they're preparing the K ones to make sure that they get 525 00:39:16,920 --> 00:39:21,120 notified. Now, if they're getting paid a portion of fees. 526 00:39:25,350 --> 00:39:30,510 That's basically BS coming from the manager is how you would 527 00:39:30,510 --> 00:39:34,470 want to structure it, not from the fund itself. So it's the 528 00:39:34,470 --> 00:39:40,110 manager paying the fees. So a fee gets paid to the investor to 529 00:39:40,110 --> 00:39:43,710 the manager, and the manager then kicks that back to the fee. 530 00:39:44,430 --> 00:39:45,330 So let's just 531 00:39:46,710 --> 00:39:50,490 just make sure it's real clear because could be a problem 532 00:39:50,520 --> 00:39:51,300 otherwise. 533 00:39:52,590 --> 00:39:53,130 So 534 00:39:59,070 --> 00:40:00,000 here's your inbox. 535 00:40:00,000 --> 00:40:07,080 stir. So it's paying regular distributions. And this is the 536 00:40:07,080 --> 00:40:07,800 investment. 537 00:40:11,130 --> 00:40:13,710 Hopefully you all can see my handwriting, I think it makes it 538 00:40:13,710 --> 00:40:15,240 helpful to see it this way though. 539 00:40:24,240 --> 00:40:28,620 So you have the sponsor LLC, getting paid fees, 540 00:40:29,730 --> 00:40:36,210 and then the sponsor LLC paying some subset of fees. 541 00:40:40,680 --> 00:40:44,250 So it's going to reduce the amount of taxes that the sponsor 542 00:40:44,250 --> 00:40:50,730 LLC pays. And then the what this investor is going to basically 543 00:40:50,730 --> 00:40:52,020 get a k one. 544 00:40:55,260 --> 00:40:58,260 They'll get a k one on that distribution, and they'll get a 545 00:40:58,260 --> 00:41:01,110 1099 on the subset of B's. 546 00:41:02,340 --> 00:41:06,090 So from a tax perspective, that's the that's what would 547 00:41:06,090 --> 00:41:06,420 happen. 548 00:41:08,340 --> 00:41:11,910 In a real estate fund, could an investor invest funds into a 549 00:41:11,910 --> 00:41:16,950 property's equity through a no between the fund LLC and the 550 00:41:16,950 --> 00:41:17,910 sponsor? 551 00:41:25,470 --> 00:41:29,130 Sorry, let me switch. Could an investor invest funds into this 552 00:41:29,130 --> 00:41:30,600 property's equity? 553 00:41:31,920 --> 00:41:36,480 Through a no? Yes, you could. 554 00:41:37,980 --> 00:41:43,380 Yeah, you could do that. You just would want to, again, make 555 00:41:43,380 --> 00:41:47,790 sure that the investors are still getting what, what they're 556 00:41:47,790 --> 00:41:53,580 expecting, who are not a party to that specific investor? And 557 00:41:53,580 --> 00:41:56,730 then document that that investment through the note. So 558 00:41:56,730 --> 00:41:58,050 you would document the No, 559 00:41:59,760 --> 00:42:01,740 don't? Yes, is the short answer. 560 00:42:03,540 --> 00:42:07,470 There is no difference in the document preparation, if the 561 00:42:07,470 --> 00:42:10,350 syndication invest in residential or commercial 562 00:42:10,350 --> 00:42:10,980 property. 563 00:42:13,140 --> 00:42:17,460 Not a substantial difference in me know, in your private 564 00:42:17,460 --> 00:42:21,240 placement memorandum, there's there's documentation about 565 00:42:21,240 --> 00:42:24,120 different risk levels, there's documentation about what your 566 00:42:24,120 --> 00:42:26,880 overall strategy is. So those things are going to be 567 00:42:26,880 --> 00:42:31,650 different. In what those docket what all of those syndication 568 00:42:31,650 --> 00:42:36,900 documents look like, but the state of those documents or you 569 00:42:36,900 --> 00:42:39,720 know, there's, there's not anything that's 570 00:42:41,700 --> 00:42:45,090 substantially different, like, oh, well, if it's residential 571 00:42:45,090 --> 00:42:50,070 property, you need to put all of this stuff, except for risks or 572 00:42:50,070 --> 00:42:52,740 whatever is going on with that particular investment. 573 00:42:54,840 --> 00:42:57,690 Is there any minimum or maximum amount of money that can be 574 00:42:57,690 --> 00:43:01,620 raised? No. So under Regulation D, you could raise $1, you could 575 00:43:01,620 --> 00:43:02,970 raise $20 trillion? 576 00:43:04,170 --> 00:43:07,950 You'll, you know, if you can, if you can raise $20 trillion, I've 577 00:43:07,950 --> 00:43:08,820 got a job for you. 578 00:43:10,680 --> 00:43:11,370 If you 579 00:43:13,260 --> 00:43:18,660 but there is there are no maximums, under Regulation D and 580 00:43:18,660 --> 00:43:23,220 no minimums, either. It's probably not economically viable 581 00:43:23,250 --> 00:43:31,020 to to do a minimum raise to do a raise, typically. I mean, when I 582 00:43:31,020 --> 00:43:34,440 was coaching people, when people would ask what the minimum would 583 00:43:34,440 --> 00:43:38,760 be, that I would look at, I probably would say a minimum of 584 00:43:38,760 --> 00:43:42,300 a million dollars of equity raised, it's 585 00:43:43,380 --> 00:43:47,490 the amount of money that you're making at less than a million 586 00:43:47,490 --> 00:43:53,070 dollars is probably lower than would make it make sense for the 587 00:43:53,070 --> 00:43:55,260 amount of work that you do as a syndicator. 588 00:43:57,480 --> 00:44:02,130 Alright, so we got just one question left, how does form D 589 00:44:02,130 --> 00:44:02,760 work? 590 00:44:04,380 --> 00:44:08,340 Form D is basically the notification to the SEC. So 591 00:44:08,610 --> 00:44:16,290 Regulation D has, is basically an exception to the general 592 00:44:16,290 --> 00:44:20,580 security rule that all securities must be registered. 593 00:44:20,820 --> 00:44:24,360 That's the key word is registered with the SEC. As an 594 00:44:24,360 --> 00:44:28,380 exception to it, it doesn't need to be registered, but it does 595 00:44:28,380 --> 00:44:32,340 need to be some documentation needs to be filed. And that's 596 00:44:32,340 --> 00:44:33,480 through the form d. 597 00:44:34,650 --> 00:44:41,070 What the rule is, is generally the the SEC once the once that 598 00:44:41,070 --> 00:44:46,140 form D filed within 15 days of the first sale of of the 599 00:44:46,140 --> 00:44:51,420 security, but it further defines that the sale the first day of 600 00:44:51,420 --> 00:44:55,500 the sale of the security is the date, basically at which point 601 00:44:55,500 --> 00:44:57,720 the investor isn't going to get their money back. 602 00:44:58,770 --> 00:44:59,970 So if you get it up 603 00:45:00,000 --> 00:45:03,270 You know, you've raised all this money, you get it to the finish 604 00:45:03,270 --> 00:45:05,970 line, it's just not going to happen, that property is not 605 00:45:05,970 --> 00:45:09,420 going to transact, you give them their money back, no form deeds 606 00:45:09,420 --> 00:45:14,880 owed. It's just not a relevant piece of paper anymore to being 607 00:45:14,880 --> 00:45:19,500 filed. You still could file it if you want. But you know, they 608 00:45:19,500 --> 00:45:22,410 you've already given the money back. So you don't have a filing 609 00:45:22,410 --> 00:45:27,000 date, really until, until there's no time to get it back. 610 00:45:27,300 --> 00:45:31,170 Now, if you miss that time period, it's very far from the 611 00:45:31,170 --> 00:45:37,140 end of the world. The SEC does not have a penalty. There's no 612 00:45:37,140 --> 00:45:40,590 fee and filing the form d, there's no penalty associated 613 00:45:40,800 --> 00:45:45,600 with the SEC on late files. Occasionally, some of the blue 614 00:45:45,600 --> 00:45:50,460 sky states have a late fee filing. But they also don't have 615 00:45:51,330 --> 00:45:55,620 I don't know of any state that has a a, you know, a prohibition 616 00:45:55,620 --> 00:45:59,190 of, you know, you won't get this protection under form D because 617 00:45:59,400 --> 00:46:02,130 are under reg D because that would be outside of their 618 00:46:02,130 --> 00:46:03,210 jurisdiction anyway. 619 00:46:04,350 --> 00:46:09,540 Because as a matter, the federal rule wins. Regulation D says, 620 00:46:09,570 --> 00:46:14,280 Well, yeah, you need to file it within 15 days. Probably you 621 00:46:14,280 --> 00:46:17,820 need to have it filed to be protected by Regulation D in 622 00:46:17,820 --> 00:46:22,080 case of a lawsuit. But there's never been an opinion. There's 623 00:46:22,080 --> 00:46:25,740 been one opinion letter that opined that it was possible. 624 00:46:26,760 --> 00:46:29,550 But in that one particular opinion letter, it said in this 625 00:46:29,550 --> 00:46:33,270 case, it doesn't. It doesn't change the standing that 626 00:46:33,570 --> 00:46:36,750 Regulation D still applies, even though the form d wasn't filed. 627 00:46:38,580 --> 00:46:42,360 So that is the answer to that question. Okay. So we hit the 628 00:46:42,360 --> 00:46:46,050 amount of time that we've got allocated for this. So I hope 629 00:46:46,050 --> 00:46:50,010 that was helpful. Again, if you're ready to move forward on 630 00:46:50,010 --> 00:46:53,520 putting a syndication together, if you've identified properties, 631 00:46:53,520 --> 00:46:57,930 or you're ready to get started right away, give us a call and 632 00:46:57,930 --> 00:47:01,680 we will get you going we'll get set up a time to talk. But 633 00:47:01,680 --> 00:47:04,260 otherwise, feel free to you know, we'll be putting these 634 00:47:04,530 --> 00:47:08,610 webinars together fairly regularly or I'm sure you're 635 00:47:08,610 --> 00:47:12,150 getting our email blasts, and I hope you find those useful. Feel 636 00:47:12,150 --> 00:47:15,960 free to check in as if you're not a client. I will try to make 637 00:47:15,960 --> 00:47:19,110 time to answer answer the questions. If you are a client. 638 00:47:19,110 --> 00:47:23,220 I will definitely find time to answer any questions. So I hope 639 00:47:23,220 --> 00:47:26,910 you found that helpful. Thanks and have a great day.