Posted by RL Williams on November 10, 2009 at 21:27:48:
Thanks Edwin. But what if it’s through advertising via classifieds etc. looking for private investors?
Thanks,
RL
Borrowing private investor money - Posted by RL Williams
Posted by RL Williams on November 10, 2009 at 04:25:53:
When using private investor money to procure real estate and you want to pay them a percentage return on their money rather than offer a percentage ownership or other means of compensation, do you need a special license like for securities and such? And is that state specific?
No lic required - Posted by John Merchant
Posted by John Merchant on November 10, 2009 at 18:39:51:
I’ve been involved in lots of these single REI deals where we have written agreement whereby we agree on all terms, upfront and before the property is acquired.
A RE loan and its security (deed of trust or mtg) are normally exempted from Securities Laws as such; and secondly, unless the guy selling the deal has solicited a number of people he doesn’t know, just talking and proposing a business deal like this, one on one, isn’t legally forbidden if it’s just a one investor deal.
However if the solicitor/promoter is trying to sell the deal in fragmentsd shares then those might be deemed to be “regulation required securities” as defined by Fed & State law that would require a Sec. registration.
Your state’s statutes will spell what is a “securities offering” in your state so I’d find and read those until you’re clear on it.
Also, a short call to, or office visit with (which is my preference) your state’s Securities Division or commission would get you some free advice from the regulators themselves as to what THEIR definition is re illegal sec. offerings.
I couldn’t begin to tell you how many times I’ve either called or stopped by my state’s Sec. Commission and had a chat with one or another of their staff.
Those guys/gals have enough trouble makers and they are delighted to try to help you and me stay out of their gunsights.
Recently here in WA our Sec. Comm. shut down a couple of old hands at money raising and partnership formation guys who’d been doing this for years.
“Bill and George” had put together umpteen little 4-10 man REI Ltd P’ships and bought, developed, then rented and eventually sold commercial corners. And to my certain knowledge made their investors a lot of money.
They were holding free little investor prospect meetings to help “educate” those prospects as to what was/is going on with REI these days, without going into specifics of their deals.
Basically they were just taking names of likely prosects on their future deals.
I even went to a couple of their meetings to see just what and how they were presenting their ideas and I thought they were legal and fairly presented and I saw no legal problems with their strategy.
But State Sec. guys and our Atty General did NOT see it my way and they sent my two friends “Cease and Desist” letter shutting them down.
So the pre-presentation preparation clearly requires that we first clear our plans with our Sec. Commission so we aren’t going to get knocked down when we start in.
Re: Borrowing private investor money - Posted by Edwin
Posted by Edwin on November 10, 2009 at 10:28:56:
the simple answer is “no.” A lot depends on how you found the investor. If it’s a personal friend or through a casual referral, you’re fine. No license needed.
Re: No lic required - Posted by RL Williams
Posted by RL Williams on November 10, 2009 at 21:24:33:
Thanks a million John! Great info and advice. I’m understanding that I can repay the investors in any way legally allowable and acceptable to the investors, ie. by paying out a percentage plus principle investment over x amount of time, without any need of special license etc. but to be absolutely sure of the legality to check with the state securities commission. I really appreciate your input.
Thanks again,
RL