Ways to Raise Money for Real Estate Syndication

For many of you, the idea of investing in real estate seems like something that could only happen in your wildest dreams. It's Real estate which is a costly investment that makes many people hesitate to take up the challenge. Let's face the fact that many people are living paycheck to paycheck, so saving hundreds of thousands of dollars may not be within the realm of possibility, but there are ways to finance a real estate investment. Although joint ventures and syndications are very similar, they are governed by very different laws.

It is primarily a contractual joint venture with a small number of business partners, all of whom are actively involved in the overall success of the project and contribute their unique skills, with or without investment in the business. For example, unique skills may include construction management, property management, due diligence, underwriting, financing, accounting, legal handling, etc.

In syndication, one or more people are the sponsor or part of the management team. They are responsible for the overall success of the project, and each brings their unique skills to the table. A person who contributes money but is not actively involved in the business is considered a passive investor. Syndication is a type of security. All business partners are involved in joint ventures, so the company's success is not dependent on third parties. In a syndicate, the passive investor relies on sponsors or management to generate ROI. In joint ventures, all members play an active role in generating profits. In a syndicate, passive investors rely on promoters to generate profits. If the passive investor expects to make a profit, sell the investment contract.

An investment contract must also be signed. An investment treaty is a legal agreement between an investor and a company that protects the investor's investment in the company. These contracts also guide how companies can provide investors with a return on investment. An investment contract is a security. The Securities Act of 1933 created a definition of what constitutes a security. Generally, under federal securities laws, securities must be registered in the United States. The U.S. Securities and Exchange Commission ("SEC") also raises money from investors in rounds with friends and family.

There are several forms of SEC registration statements available to public or private companies, the most common being Form S-1 for domestic issuers and Form F-1 for foreign private issuers. Applying for SEC registration can be time- consuming and cumbersome, so many companies rely on their SEC exemption to raise seed capital. This is called Regulation D Rule 506(b). Except for states, each state has its brokerage firm. Most people follow federal regulations. This is to get ahead of all these state laws.

To be "competent," an investor must "have, alone or with a buying agent, the financial and business knowledge and experience to make decisions," according to Rule 506(b)(2)(ii). The issuer must have a reasonable belief (based on fact-finding) that investors in its Rule 506(b) proposal fall within this explanation. If they are interested in participating in a deal that is open to them, whether or not it suits them, that conversation should be documented before talking about the deal.