Revolutionize Your Portfolio: Real Estate Syndication Strategies with Kim Lisa Taylor

[00:00:00] If you want an education on how to raise private capital about how to do syndications,

[00:00:05] about how to buy multifamily assets, larger multifamily assets and even other asset classes

[00:00:13] leveraging other people's money in addition to bank financing, but to put together deals and

[00:00:18] build a business that's going to be extremely profitable, she's got the roadmap for it. Stay tuned.

[00:00:24] Welcome to The Brick and Mortar Money Show. The podcast dedicated to helping business owners

[00:00:32] and professionals achieve wealth, autonomy and control through commercial property ownership.

[00:00:38] Join us as we unlock the power of real estate to transform your business and investment strategies.

[00:00:45] Whether you're seeking to expand, invest or gain more freedom in your entrepreneurial journey,

[00:00:50] this is your destination for insightful stories, expert advice and actionable strategies.

[00:00:58] Welcome.

[00:01:02] Hey, welcome listeners today. I have the distinct honor and privilege of having Kim Lisa Taylor

[00:01:07] on our show. She is a nationally recognized corporate securities attorney, speaker in the

[00:01:13] author of the number one Amazon bestselling book, How to Legally Raise Private Money.

[00:01:18] She's the founder of syndication attorneys and multiple other companies around that

[00:01:22] and their purpose is collectively to provide quality legal advice, plain English offering

[00:01:26] documents, professionally designed marketing materials and education for clients who are

[00:01:30] raising money in real estate. Startups are growing companies. She's been the responsible

[00:01:35] attorney for hundreds of security offerings and is listed in the 2020 top 100 attorneys

[00:01:40] and top 100 in finance magazines. And Kim is out of Florida, but she represents clients

[00:01:45] nationwide. Kim, welcome to the show today. Well, thanks Paul for having me. I'm really glad to be here.

[00:01:52] Yeah, absolutely. Absolutely. Just to start off at the basic level as we were discussing before I hit

[00:01:57] record. A lot of our listeners and clients are entrepreneurs, business owners. They have

[00:02:02] growing businesses. They're creating a lot of cash. A lot of them are buying commercial real

[00:02:06] estate in terms of where they operate their business from. And in addition to that, a single

[00:02:11] family, multi-family and many of them are looking to grow in both their business expansion and also

[00:02:18] the real estate track and that portfolio because they understand the advantages of that and part

[00:02:23] of their wealth plan. And you bring something to the table that I get asked about a lot in terms

[00:02:28] of, hey Paul, can you help me deploy some own money? Can you help us put together a group or

[00:02:32] whatnot? And so your expertise is deep there. And so if you could spend some time today

[00:02:38] and I've got questions, but just this concept of how does someone go from there to the syndication?

[00:02:43] What is it? How do you raise capital for it? And that sort of thing. Paul, thanks a lot for having

[00:02:48] me on. Where we get involved mostly with real estate investors that are just starting out is

[00:02:55] a lot of people will start out in a single family space because that's what we're all

[00:02:58] comfortable with. We can understand buying the house next door and running it out.

[00:03:04] And so a lot of times you can finance those properties with private lenders and people that

[00:03:09] you know might loan you money or hard money lenders. If you go to your local real estate

[00:03:13] investment associations, you can meet a lot of hard money lenders that's happy to loan you money.

[00:03:18] And usually you'll have to put in a little bit of your own money because they might not

[00:03:21] sometimes they'll loan 100% of what you need but sometimes they'll only loan a portion of it

[00:03:26] and so you've got to put in the rest. But then you quickly realize that if you might not

[00:03:30] be making enough income to support the lifestyle that you envision and or to achieve whatever your

[00:03:36] real estate goal is. So you figure out that you've got to scale up, do more properties

[00:03:43] which you don't have the money for on your own or you start having friends and family

[00:03:48] seeing your success and they want to participate and you want to be able to help that.

[00:03:52] In both of those cases what you end up doing is exploring how can I bring investors into my

[00:03:57] deal. And that's where we come in. We work with a lot of first-time people who have never

[00:04:03] pulled money from private investors before and we've made it our mission to not only just provide

[00:04:09] the legal documents that you need and the legal compliance part but we also want to educate you

[00:04:15] on why it's important what you need to learn putting all the pieces together so that you

[00:04:20] gain a comfort level and confidence to be able to go out and do it. Because the first

[00:04:24] thing you're going to learn when you're trying to deal together with investors is that

[00:04:30] there's securities laws that apply to what you're doing and that sounds daunting and scary.

[00:04:35] It's not, I liken it to learning to drive a car. You've got to learn how to operate the vehicle,

[00:04:40] you've got to learn the road signs and you've got to learn how to navigate to get from here to

[00:04:44] the air. So once you've learned the parts of syndication you can put it all together

[00:04:49] very easily and it becomes as comfortable as what you do right now when you first

[00:04:53] went to the driver's training it sounded scary. Once you learned all those pieces now you just

[00:04:57] grab your keys and go get in the car, you don't give it a second thought you just do it. You

[00:05:00] know what to do. There's basically three parts to syndicating. There's one is the securities

[00:05:09] compliance. What does that mean? How do we figure it out? The other is how do you structure

[00:05:13] your deals with investors and how do you fairly split money with them? What's fair for you

[00:05:19] to earn? What's what's fair to offer them and how do you figure out who contributes what?

[00:05:25] So that was a big mystery for me when I first started in this industry also. And then the third

[00:05:30] thing is how to go out and meet and develop relationships with investors that will actually

[00:05:34] invest with you. And we always presume that our clients are coming to us with knowledge of

[00:05:40] the real estate that they want to buy so they either got other coaches or they've had

[00:05:45] the experience to understand this is what we're buying and this is how we can make it profitable.

[00:05:50] The only missing piece for them is how do we incorporate our investor pool into that. And

[00:05:55] so that's what we do. Got it. So what you're saying basically just recap a little bit. Number

[00:06:01] one, if this is a space that you're interested in getting into you have to understand that there

[00:06:06] are security laws and regulations you have to follow. You can't just go out and run an ad.

[00:06:11] We used to say run an ad in the paper right but I guess you would do it online or

[00:06:14] I don't know how you do it today but there are laws and there's a roadmap you have to follow.

[00:06:19] But there's no reason to be intimidated by that. It's just a process that when properly guided

[00:06:26] by someone like yourself who understands it once you learn it then it's not that big of a deal.

[00:06:31] And then the other two pieces are how do we structure the deals which to me makes total

[00:06:35] sense because it has to be profitable for not only you or any investors because why would

[00:06:40] someone risk their capital right in the deal and then the last is meeting investors. And what

[00:06:46] you're saying is that you're under the presumption that when someone comes to you they understand

[00:06:52] the property piece and the bigger picture on how they what their end game, how they're going

[00:06:56] to make profit on it but they don't have the money to execute the transaction.

[00:07:00] That's exactly right. Yeah most of our clients have come after they've attended

[00:07:05] some training program or they've had a mentor that's taught them how to buy the real estate and

[00:07:10] what real estate they should buy, what real estate to avoid and they've usually picked an asset class

[00:07:16] that they're going to go into. We have clients that are doing multi-family or self-storage

[00:07:20] or mobile home parks or RV parks, land flipping, ground up development. It just pretty much any

[00:07:29] way that you can think of that you might make money on some type of income producing property

[00:07:35] that's those are the clients that are coming to us and we're able to help them. And even

[00:07:39] those that want to continue on to build their single family portfolio we can help them too.

[00:07:44] If that's what you've been doing and you're comfortable with that, we've got people that

[00:07:47] do short-term rental funds or mid-term rental funds or long-term rental funds or fix and flip

[00:07:54] funds. I see okay so there you can use it for a multitude of different asset classes

[00:08:01] and if someone is already comfortable in that space they know it, they don't necessarily have to

[00:08:04] go get another mentor or whatnot in a new space. Maybe that potentially could be a place for them

[00:08:10] to start because now they're familiar with it they can start raising their own capital and

[00:08:13] they can accelerate that or they could take that next step up to something larger. What are you

[00:08:18] seeing from your part since you see so many deals in 2020 now we're in 2024 right? So

[00:08:24] the world's changed a lot but the money world's changed, the real estate world's changed.

[00:08:28] What do you see as some of the most popular or most successful asset classes today and what do you

[00:08:35] see as a typical deal size? Are we talking tens of millions of dollars? Are we talking one to ten?

[00:08:42] Are we talking under one? What kind of things are you seeing that that are maybe trending today?

[00:08:47] So there's certainly a lot of multifamily investors and by far that seems to be the

[00:08:53] most popular thing that people graduate into because we all relate to it right? We lived in

[00:08:59] apartments or we know somebody that's lived in apartments, we understand that model and

[00:09:03] apparently just by having done it and so that's a very comfortable place. The problem with

[00:09:08] multifamily right now is there's a lot of people out there training people out of

[00:09:12] buying multifamily. There's a lot of competition for the deals. There's you know the interest

[00:09:17] rates have risen within the last year and the sellers adjusting their prices to meet the

[00:09:25] interest rates there's always a lag time, six nine months where they're still trying to get the high

[00:09:30] price they were six or nine months ago until they finally realize hey I really need to get rid

[00:09:35] of this property then I'm going to have to reduce the price because the cost of capital is

[00:09:39] higher right? If somebody now wants to get into it they're going to have a larger monthly payment

[00:09:44] so they have to pay less for the property so that it still makes financial sense and leaves

[00:09:49] enough money on their table for them to be able to split the profits with their investors.

[00:09:56] This is a great time to learn some different asset classes and so we've got a lot of people

[00:10:03] that are doing self-storage. That seems to be a natural progression from oh I can multifamily

[00:10:08] isn't working for me right now maybe I'll try self-storage there's a little bit of competition

[00:10:12] there also. Getting creative I'm actually working on a book talking about different asset classes

[00:10:18] that people can invest in just based on the things that our clients are doing. Mobile home parks maybe

[00:10:23] there's not quite as much competition there are v-parks but in each model that you want to look at

[00:10:29] it really behooves you to go out and find somebody who's done that before either to bring

[00:10:35] them onto your team for your first few deals to help enhance your credibility and teach you

[00:10:41] the ropes and also to make it more attractive to a lender because you're always going to want to get

[00:10:46] lenders on commercial properties always because the bank believe it or not even though the interest

[00:10:52] rates are high they still want less than private investors want. It rarely works on commercial

[00:10:58] properties for you to finance the whole entire thing unless you're just going to do land

[00:11:04] development you want to you want to just pay cash for the land and the entitlement

[00:11:09] process that's okay and then when you get to the point where you've got to put in some more money

[00:11:13] to get a construction loan then you can syndicate at that point but in all other cases it really

[00:11:20] makes a lot of sense when loans are available to get a loan even if it's a bridge loan although

[00:11:25] be careful on bridge loans right now because bridge loans with short maturity dates and adjustable

[00:11:30] rates that start to happen within two or three years are very dangerous all in the last

[00:11:35] recession the people that really lost out and had significant financial issues with their properties

[00:11:42] were the ones that short maturity dates on their loans so the loan the loans came due you had to pay

[00:11:48] off the balloon payment at a time when real estate prices were depressed and you had no ability to

[00:11:54] extend that loan or get another one because perhaps the you couldn't get a loan for the same

[00:11:59] amount you had before so you either got to bring money to the table in order to get a new

[00:12:03] loan or you end up losing the properties but also it's a time to don't over leverage your properties

[00:12:09] keep your leverage low on the property so we see a lot of lenders just naturally doing that right

[00:12:14] now there was a time when people would be able to get 80 85 loan to value institutional loans on

[00:12:21] commercial properties but now we're seeing a lot of 65 70 percent so that means you've got to bring

[00:12:27] in more money from private investors to make up that difference and that's okay but that'll also

[00:12:34] help you write out any any dips in the market real estate is very cyclical historically there's

[00:12:41] been like an eight year cycle up eight year cycle down eight year cycle up so if you position

[00:12:47] yourself with lower loan to value ratios longer maturity dates maybe five to ten years before

[00:12:53] you have to pay off that loan balance and you've got a fixed return in between then you're going to be

[00:12:58] in a much better position to write out those waves and and eventually the prices do go back up they

[00:13:04] go back to up to what they were before and they even surpass it but you've got to write out that

[00:13:09] wave you got to be able to hang on and not have that loan come due at that lower value

[00:13:14] pointer or that's where you're going in trouble we've got people that are looking at all these

[00:13:18] other asset classes that that you can do when we have a podcast also called raise capital easily

[00:13:24] raid raise capital legally and i've been interviewing a lot of our clients that have done some of these

[00:13:31] other asset classes just to introduce our audience to these other concepts and things you might not

[00:13:37] have thought of before oh that's fantastic i'm gonna plug in myself and recommend that i think

[00:13:42] i think you're right at the multifamily space we do a lot of that and it is a very popular asset

[00:13:48] class but there are so many that are just ignored and people aren't aware of them because they

[00:13:53] they're not talked about writ large multifamily single family and i like your approach to

[00:13:58] your thoughts on on being conservative and not over leveraging because real estate is a long

[00:14:04] play right it's not people talk about and sometimes in the same sentence of get rich quick

[00:14:09] and retiring and all that and yeah sure you can get rich and you can retire and you can build

[00:14:14] build a profitable business but any business is a long-term enterprise right in real estate

[00:14:19] investing is one as well and none of us are we don't have a crystal ball nobody knows what's

[00:14:26] going to happen tomorrow nobody predicted covid was going to come when the treasury markets

[00:14:30] we're going to do they're going to do and whatnot and this year we have an election who

[00:14:34] knows what's going to happen this year right there's always surprise and it always has some kind of

[00:14:38] impact and collateral impact that we don't know but if you take a long perspective

[00:14:44] this would be 30 years right like you said eight years eight years eight years on a cycle

[00:14:48] but if you tread intelligently in um then you're positioned to to weather those storms but also

[00:14:55] to really build something that that's legitimate that you can look back on 10 15 years from now

[00:14:59] and say wow we've really done something pretty cool several of our clients that started out

[00:15:04] just never having done this before one that built his portfolio of 26 multifamily properties over

[00:15:11] eight years and then went on to start syndicating assisted living facility developments and also

[00:15:18] now investing in hotels and he's done very well for himself he's a 200 million dollar portfolio

[00:15:22] now we have some other clients that started out buying multifamily three to five million

[00:15:29] dollar properties and now they're buying 30 to 50 million dollar products and that took a six seven

[00:15:35] year process so it's not a get rich quick it's a get rich slow but you get rich slow at the same

[00:15:42] time that you're bringing your investors along with you because the ones that those two clients

[00:15:47] as examples one of them has a database of 550 investors that invest with him again and again

[00:15:53] he can raise five or 10 million dollars in a couple of days the others have 300 accredited

[00:15:59] investors and they started out with non-accredited investors and now they can raise I've seen them

[00:16:04] raise 10 million dollars in a week but you asked earlier what is the typical deal size so a good

[00:16:10] comfortable raise for people who have not brought investors into a deal before is one to two

[00:16:16] million dollars most of our clients that are just starting out are able to pull that off

[00:16:20] from their own group of family and friends but that's but predicated by the fact that you've been

[00:16:26] out telling people for a long time what you're doing and bringing them along on your journey

[00:16:32] explaining to them how the process works and all the things that you're learning from your

[00:16:36] mentors from your coaches from the training programs that you're investing in and helping

[00:16:42] them understand how it can be beneficial for them to come along and then when you do find

[00:16:47] something saying okay you've pre vetted them you've had conversations with them about their

[00:16:52] financial situation whether or not they're even eligible to invest in these deals and now you

[00:16:57] can start bringing them into the deals as they arise and that's really the best thing is you've

[00:17:03] got to realize you it's a too faceted business one you're looking for properties all the time

[00:17:10] and you're submitting letters of intent and trying to get those to stick and then the other

[00:17:16] is that you're also cultivating relationships with investors who understand what you're doing who've

[00:17:22] been like I said pre vetted and then now they're ready and they're primed to be able to invest

[00:17:27] with you as soon as you have something and that that could take a six month process before you

[00:17:31] actually find something so there's a time investment that goes along with it and your

[00:17:36] education investment that is key to learning how to do it and to set that foundation

[00:17:43] and you probably only really need a coach for the first two or three deals

[00:17:47] some people keep them longer because your coach will keep you on track and they'll keep you from

[00:17:51] veering off and going off in the wrong direction it's very easy to do that it's very easy to say

[00:17:56] I can't find any multifamily that works but hey here's a ski resort that looks really interesting

[00:18:01] when unless you know something about ski resorts and you can bring someone on your team that

[00:18:05] has that kind of experience that it's unlikely that you're going to be successful with that

[00:18:09] investment either getting it funded at all or actually operating in a way that's going to be

[00:18:14] profitable okay so it's a journey you're saying the typical kind of first place to start is at one

[00:18:21] to two million probably going to raise that from friends and family but you're doing that because

[00:18:26] you're while you're being educated and you're in the process of learning and looking for property

[00:18:30] you're educating them what you're doing and you're so in the seeds of the field hey we're

[00:18:34] we're going to find this property is what's going to do and get your team on board

[00:18:38] that you mentioned this word and I know what it is but let's just address it accredited versus

[00:18:44] non-accredited and what that means specifically I know there's Reg D and a lot of things out there

[00:18:49] but just again first level step entry into this syndication space what do people need to know

[00:18:56] we're understanding there so let's just back up and do a little very quickie securities primers

[00:19:01] first we have to decide you start out with maybe promissory notes those are securities but they're

[00:19:07] usually governed at your state level and there's maybe some level at which you can do those without

[00:19:12] triggering having to comply with disclosure requirements and filings and things like that

[00:19:17] that's usually dictated by your state then you might go graduate into joint ventures joint

[00:19:22] ventures are where everyone is actively involved in generating their own profits so it's a good

[00:19:30] way to start if you have one or two investors that want to come in with you on a deal but it

[00:19:35] doesn't work for more than five people in fact the fewer the better because it's just very hard

[00:19:40] you have to get everybody to agree on everything and when you start to get too many people you

[00:19:45] can't get people to show up you can't get people to engage you can't get them to participate

[00:19:49] and you can't take control of their money because if you do now you're falling into the realm

[00:19:54] of securities law and how that happens is that the securities act of 1933 contains a definition

[00:20:01] of what are securities and it's about a half page long and there's a lot of words and phrases in

[00:20:06] that definition you can look it up online and see that the ones that pertain to you specifically

[00:20:11] are the very first thing in list are notes so those promissory notes where you're borrowing

[00:20:15] money from investors those do qualify as securities but the later one that most of our clients

[00:20:21] are using is something called an investment contract an investment contract is the technical

[00:20:26] definition is an investment of money in a common enterprise with an expectation of profits

[00:20:34] based solely on the efforts of the promoter and so translate that into plain English you're doing

[00:20:40] all the work other people are relying on you to generate the profit they're passively

[00:20:44] investing and they're not participating actively in managerial decisions you're making all the

[00:20:50] day to day decisions you're deciding what to buy what how to get it financed how much money you need

[00:20:55] to raise from investors how that money is going to be spent and then you're periodically evaluating

[00:21:01] the cash that you've generated and you're splitting it between your investors and your

[00:21:06] management team and so that's that's what we call syndication so syndication is really just

[00:21:12] pooling resources from a group in order to achieve a common goal so the resources on

[00:21:19] your part could be your education the time you've invested in your education learning how to do it

[00:21:24] cultivating this list of investors and all the deals that you've looked at to try to find one

[00:21:29] that seems viable and then trying to put all that together into a group that actually gets it to

[00:21:34] the closing table and then continues to own and operate that property that's your typical

[00:21:39] syndication model the graduate up from that is a blind pool fund where you would try to

[00:21:46] raise the money in advance of having deals under contract and you're raising your money based on your

[00:21:51] business plan it is a harder way to raise money but for single family fix and flippers you really

[00:21:58] probably need to use that model but you have to do it based on your track record so if you don't

[00:22:03] have a good enough track record you've got to bring people into your management team that have

[00:22:07] a significant track record doing the same kind of thing that you're offering to investors

[00:22:11] in a fund so that's your what is your model what what type of model are you using to bring investors

[00:22:18] into your deal we just covered the promissory notes joint ventures syndicates and then maybe a fund

[00:22:24] and each of those is a graduating step you don't necessarily start directly as a fund but you

[00:22:30] could graduate up to that after you've built that track record the the next thing we've got

[00:22:34] to figure out is what are the securities laws that you have to comply with so now that we

[00:22:39] know if you're selling investment contracts where people are passively investing so this would

[00:22:44] this would apply anytime you're selling interest in a company where there's a management team and

[00:22:49] people erroneously call it the gplp model like a general partner a limited partnership where you

[00:22:56] have a general partner that does all the work they're responsible for all acts of the partnership

[00:23:00] and then you have limited partners who are the ones that put up the money but don't

[00:23:03] participate in management that was the original syndication model but we've now graduated into

[00:23:10] limited liability companies because they give better liability protection for the management team

[00:23:15] that's primarily the reason and lenders are more amenable to that you would really only use

[00:23:21] limited partnership if you were bringing people in from outside the country for a variety of

[00:23:25] reasons but but the LLC structure is the same we have a management team they're called the

[00:23:31] manager asset manager is technically what they're doing they're managing the company on behalf of

[00:23:37] investors they're not the property manager they're the asset manager that's managing this investment

[00:23:42] company they've created on behalf of the investors and then we have the members and the

[00:23:47] members can have different classes so we've usually got a class a which is all the cash

[00:23:53] paying investors so that would include members of the management team that are contributing cash

[00:23:57] to the deal they would buy class a interest right alongside the other investors and then we have

[00:24:02] class b which is the section that we reserve for the management team for all of their non-capital

[00:24:08] contributions so their sweat equity this is where you're putting in the effort and the time to

[00:24:14] asset manage the steal and to put it all together the way that syndicators or fund

[00:24:19] managers are in money is in the form of fees and also in the form of a share of profits

[00:24:24] between those class a class b members so it can be pretty lucrative the fees are really just to keep

[00:24:32] you going the fees are always going to be taxed at ordinary income rates so we're going to minimize

[00:24:37] the amount of fees that you get we want to maximize the amount of profit share that you get because

[00:24:42] we can structure that in a way that's taxed more favorably both for the investors and for you

[00:24:48] and so that's typically why we structure them the way we do but that's a very typical

[00:24:53] structure where you have a manager managed LLC with a management entity being a separate LLC

[00:25:00] just comprising those members of management team and then we have class a members and we have class

[00:25:04] b members and class b is usually the same people that are in the management entity

[00:25:11] putting their sweat equity in yeah so so that's so now we're talking corporate structure so

[00:25:15] we've talked about the securities law so securities laws now that we know we're selling

[00:25:20] securities now we've talked a little bit about how you're going to structure this deal

[00:25:24] so what are the securities laws you'd have to follow when you're raising money from private

[00:25:28] investors you and when you're selling these investment contracts you either have to register

[00:25:33] the offering in advance of even talking about it to anybody or you have to qualify for an

[00:25:39] exemption from registration and so there are some exemptions for what are called private

[00:25:44] offerings the registration process is actually taking your company public so that's

[00:25:50] Google did Facebook did Tesla did it's a very long and arduous process it's very expensive

[00:25:56] it's going to take maybe a year or more to get approved and it's going to cost a lot of money

[00:26:02] well you don't have time to do that if you have a commercial property under contract

[00:26:07] that you need to raise the money within 90 days and get it closed the alternative is to

[00:26:12] qualify for one of these exemptions there are exemptions that allow you to raise money from

[00:26:16] private investors without going through the registration process but you have to document

[00:26:22] how you followed the rules so you have to there's a specific set of rules we're going to pick

[00:26:26] which exemption fits your model and then we're going to have you document how you follow those

[00:26:33] rules so that if you ever are questioned by a regulator or maybe an investor's counsel if

[00:26:38] somebody wants to get out of a deal or they don't like what you're doing they want to sue you

[00:26:42] then we have to document how all of that occurred to create a defensible position for you and think

[00:26:50] of this like a tax deduction right so when you're filing your income taxes you're you know say

[00:26:57] hey I qualify for this tax deduction but if you were ever questioned by the IRS who wanted to

[00:27:03] do an audit then you would have to produce the documentation to prove why you were entitled

[00:27:08] to that deduction and if you can't produce that then they're going to take away the deduction

[00:27:13] they're going to say hey you owe that tax you should have paid it we're going to find you for not taking

[00:27:17] it and we're going to charge you interest for all the time that you should have had the money so

[00:27:22] a similar scenario with these securities exemptions they're self executing you're obligated to

[00:27:29] prove how you followed the exemption and to be able to produce that paperwork demonstrating

[00:27:34] that you did comply if you were ever questioned about it and as long as you do it correctly

[00:27:39] and you know what you're doing because you've taken the time to learn it then you're going to be okay

[00:27:44] you're going to have that documentation and uh you're going to be able to produce it and

[00:27:48] and uh and it protects you the documentation actually protects you because one of the things

[00:27:54] when you're selling in securities you have an obligation to give the investors all of

[00:28:00] the information they need to make informed consent and that's information about the property

[00:28:05] information about the real estate market in general information about you and your management team

[00:28:11] whether it's good bad or ugly for instance somebody has declared bankruptcy within the

[00:28:15] recent past then that could affect your ability to get a loan but it also might affect

[00:28:21] affecting an investor's decision to invest they don't maybe they don't want to invest with

[00:28:25] somebody who declared bankruptcy a lot of times you could have just explained hey I had a divorce

[00:28:30] and this happened and it was unrelated to my business and then they understand maybe they've

[00:28:35] seen that situation before or been in it but they need to know you need anything that about you

[00:28:42] or the deal that could have altered their decision to invest uh you want to make sure that

[00:28:48] you told them that upfront and the way we do that is that there's a very specific set of

[00:28:53] documents called an offering package securities offering package and so one of those documents

[00:28:59] is a private placement memorandum private placement memorandum is the disclosure document

[00:29:05] that explains to the investors all the different risks of investing in the deal

[00:29:10] all the things that could go wrong if it's a construction project and you're going to talk

[00:29:15] about construction risk of somebody could get hurt somebody could flake get contractor could

[00:29:19] flake out the cost of goods could rise or your supplies could rise or your labor costs could

[00:29:25] increase all the different things that we just experienced after covid right we were

[00:29:29] going to talk about those things we're going to talk about things there could be a pandemic in the

[00:29:32] whole world to get shut down we didn't know that before but now we talk about it

[00:29:39] we talk about the fact there could be a financial meltdown in the the markets and

[00:29:42] in effect it happens then we get caught in it so if we tell the investors all those things

[00:29:48] that could possibly go wrong and we try to imagine all the scenarios they then fill out a

[00:29:53] subscription agreement that explains that they meet the qualifications for that specific

[00:29:58] exemption that they're going to invest anyway they read all the risks in the ppm then they

[00:30:04] want to invest so then you asked earlier where do these definitions of credited and non-accredited

[00:30:10] investors come in so these exemptions that we're talking about have some financial

[00:30:16] qualifications that go along with them so a very popular exemption that everybody uses

[00:30:21] is regulation D rule 506 and there's a rule 506 B and a rule 506 C so rule 506 B is a rule that

[00:30:33] allows you to raise an unlimited amount of money from an unlimited number of accredited investors

[00:30:39] and up to 35 non-accredited but sophisticated investors but you cannot find them through any

[00:30:46] means of general advertising or solicitation and the way to prove that is to be able to

[00:30:52] demonstrate that you had a pre-existing substantive relationship with every investor before you

[00:30:58] invited them to invest with you or told them about the deal so you can talk to them in general

[00:31:03] about what your company does but when you get a deal you have to have that pre-existing

[00:31:08] substantive relationship already in place and that means you've pre-vetted those investors

[00:31:14] you've talked to them about their financial situation are they accredited are they sophisticated

[00:31:23] so accredited this is an evolving definition in fact there was a congress just recently met

[00:31:30] discuss it on March 5th trying to determine whether or not we should be making some changes to

[00:31:35] this definition but as it stands right now um an accredited person is someone who has over

[00:31:41] a million dollars net worth excluding any equity in their primary residence or they have $200,000

[00:31:47] a year income if they're single or 300,000 if they're a cohabitating couple so they don't have to

[00:31:54] be married but they have to share the same address so that's that's the definition for

[00:31:59] individuals there's nine other definitions one of them is a knowledgeable employee also the

[00:32:06] members of the management team of your syndicate are by definition considered accredited for the

[00:32:11] purposes of investing in your own deal this is the most common exemption that people use 506b

[00:32:20] it allows you again to bring in your family and friends who might not meet that definition of

[00:32:25] accredited so they but they are sophisticated so they have to have by reason of their education

[00:32:34] background investing background or experience they have gained enough knowledge to be able to

[00:32:40] understand the offering documents are going to provide them how the deal is structured how it

[00:32:46] can be beneficial for them and to be able to take on those risks um so when you're pre vetting

[00:32:53] investors to establish this relationship then you're going to talk to them about those things

[00:32:58] do you meet this definition give them the definition of accredited do you meet this if

[00:33:02] they say no okay here's the definition of sophisticated do you think you meet that

[00:33:06] they say yes then you're going to say can you tell me how you're going to take notes on that

[00:33:10] and then once you have all of that information you've talked to them about hey we do deals that

[00:33:15] last five to seven years does that work for you we try to find deals that a yield returns

[00:33:20] for our investors in the mid teens is that something that's of interest to you once

[00:33:25] you've had that conversation and you've documented that conversation now you have the correct

[00:33:31] pre-existing relationship substantive relationship so that you can start offering them any deal that

[00:33:37] you have after that point you have to do that before you have deals because it has to be pre

[00:33:44] exist and predate the offering if at the point that you have the offering anybody you might

[00:33:49] meet and in vet would have to go in a future deal so that's 506 b and that's the limitation

[00:33:55] 506 c allows you to include and you can freely advertise but you are restricted to verify the

[00:34:02] accredited investors only only those who can prove to a third party that they meet the definition

[00:34:10] of accredited and then that third party usually someone with a license attorney cpa

[00:34:16] investment advisor would vouch for them and say yes I know them to be accredited or I've

[00:34:22] reviewed their financials within the last 90 days and they are accredited then you they would be able

[00:34:27] to invest with you so that's 506 c there is another rule that I think is going to become more and

[00:34:34] more important shortly and it's called regulation crowdfunding so regulation crowd the tricky part

[00:34:40] here is finding a registered investment portal that will house your offering because you're not

[00:34:45] able to do it yourself if you want to use that regulation crowdfunding exemption what it

[00:34:50] allows you to do is to raise money from private investors and currently they can invest up to

[00:34:57] $2,000 without you having any knowledge of their financial condition so anybody can invest that

[00:35:04] if they want to invest more then you'd have to ask them some questions about what is your net worth

[00:35:09] or what is your net income and they would have to meet some additional qualifications for that

[00:35:14] but then they would be able to invest more but as I said before all these definitions are

[00:35:18] currently being re-evaluated and Congress just met on a bill a proposed bill to make some changes

[00:35:25] to some of these rules and we'll just have to see how it's going to play out so but you but one of

[00:35:32] the big things that you bring to the table you and your organization is that if someone says okay

[00:35:37] I'm really interested in doing this and raising funds you can provide this roadmap right on how

[00:35:43] to do it the documentation the process basically to do it right up front to CYA so you're protected

[00:35:50] on the back end and that you're not you might be walking through a minefield but you've got a map

[00:35:55] and you lead them through and then it's no big deal right when you're on the other side but it

[00:35:58] seems to me this is not something you want to try to tackle on your own or DIY because

[00:36:03] there's just so many landmines. No, you don't want to do it yourself and we see people that

[00:36:08] you know try to get a hold of somebody else's offering package and think oh I can just go in

[00:36:12] and change it for my own yeah you know we've helped a lot of those people or tried to help a lot of

[00:36:18] those people correct their deals after they improperly structured them or use the completely

[00:36:25] inappropriate document or didn't even understand they were selling securities so didn't provide

[00:36:29] a disclosure document and sometimes that means you have to liquidate the asset and you have

[00:36:34] to start over but in all cases it means you have to confess to your investors that

[00:36:38] you did it wrong. The problem with securities laws is there's no statute of limitations

[00:36:43] until the violation is discovered so once they've determined that there's a violation which could be

[00:36:50] five or six years into a deal that they have a year to complain about it so the best thing you

[00:36:56] can do at that point is say hey I realized that when we did this in the beginning we didn't

[00:37:00] do it correctly and if any of you want out then you need to let us know and then

[00:37:05] maybe you have to liquidate the asset to do that or you have to you know re-sindicate it correctly

[00:37:10] and bring in investors that would want to stay in some of your people won't care they're going to

[00:37:15] want to stay in some of the people will you may bring in new people to cash out those that don't

[00:37:20] want to be in anymore. It becomes a little bit of an ordeal to do that but once you've

[00:37:25] you admitted hey we screwed up on these technical issues if the deal's going well

[00:37:30] nobody wants out if the deal's not going well everybody wants out and

[00:37:36] and they could even force you to re-send the offering meaning you got to pay everybody back

[00:37:41] within 30 days and that can be very hard if you invested in commercial property.

[00:37:46] And generally speaking if the deal's not going well and then they force you to liquidate

[00:37:50] that's even worse right so the advice here is to do it right from the beginning if this

[00:37:55] is the road you want to travel right because it's just yeah you're not asleep at night

[00:37:59] you don't want to wake up in a panic in the middle of night because you realize you did something

[00:38:03] wrong or it could come back and bite you that's you know you really want to take the time to

[00:38:08] learn these rules and document your compliance and make sure that everyone on your team understands

[00:38:15] the rules. And beyond that beyond just sleeping at night because you follow the the legal

[00:38:21] guidelines just from an ethical moral standpoint if you're going to be investing other people's

[00:38:27] money we don't need another Bernie Madoff out there right we need people that you have fiduciary

[00:38:32] responsibility to people some of them they are okay yes there's some protections being accredited

[00:38:38] or sophisticated but still this is someone's hard-earned money that you're going to invest

[00:38:43] and with the and they're only investing it because they believe in you and the investment

[00:38:48] and they expect a profit in return and for you to do it sort of halfway is not a very

[00:38:54] responsible approach to that might be how you handle your own finances but not someone else's right

[00:39:00] and so to me if you're going to do it you need to do it right in that way again you're sleeping at night

[00:39:05] and everyone understands what they're getting into and investing into things we all understand

[00:39:10] that things happen that we can't control but to your point of disclosing up front this is these

[00:39:16] are the potentialities that we are aware of today we don't know about the boulder striking the

[00:39:21] planet in two years or whatever we have no control over that it's important to do it and

[00:39:26] and people will appreciate that because people want to deal with people with such a fake world today

[00:39:31] people want to deal with people that are real and they're honest and they are authentic and

[00:39:35] they're trustworthy and and just being up front with people I think will serve you one one last

[00:39:40] question before we wrap up and get into specifically how people can get get in touch with you

[00:39:46] Kim and what you guys offer you've mentioned mentors and coaches a couple times on getting in

[00:39:51] the space and learning the space and everybody's a prophet right to put a website up and stand

[00:39:55] up and beat your chest do you where would someone go if they're looking for a legitimate coach

[00:40:01] or legitimate mentor that they're going to get value and they're going to be treated right

[00:40:06] and I don't know if you could name drop or some loat some sources that maybe people

[00:40:10] could go to yeah I do a lot of teaching for a few of the bigger coaches so the ones that seem to be

[00:40:18] most successful at teaching people how to syndicate and then become clients of our firm which means

[00:40:24] they are successfully syndicating and especially if they come back again and do it again and again

[00:40:28] the Ari mentor or so it's like real estate mentor Ari mentor.com they have a multiple

[00:40:34] so these most of these coaches are multifamily coaches but Ari mentor has live events they

[00:40:40] have one that's called multifamily family millions and they hold it all around the country multiple

[00:40:46] times per month I recommend that because that's where you start to learn what's what is a viable

[00:40:52] property what what do we should we avoid what can we buy what kind of metrics does it have

[00:40:58] to have before it's going to make sense for us to do it with investors and you're going to

[00:41:03] it's going to help focus your efforts on the right track so multifamily millions and

[00:41:08] then they have another one that's called a private money event and that's the one I coach teach so

[00:41:14] that's a three-day event that I coach teach with another uh season syndicator who's raised lots and

[00:41:19] lots of money and he's invested before in commercial properties multifamily and now our

[00:41:26] v parks Ari mentor is a good group they have an excellent coaching program also Jake and Gino

[00:41:33] Jake and Gino are a really good group and they too have an excellent coaching program and they've

[00:41:38] got their suite of one of these guys will have kind of a more intense they'll have a big event once a

[00:41:43] year that's just a networking event and they'll do some teaching there but then they'll have these

[00:41:48] kind of smaller groups like a finance right boot boot camp on a buy right boot camp and where

[00:41:53] they're teaching you different aspects the idea is you want to walk away with where you feel

[00:41:57] like you've got an associate's degree in this particular type of investment and then also

[00:42:04] Joe Fairless they have a really good program they've got an event coming up and then another

[00:42:10] one of our clients the one that syndicated 26 properties Vinnie Chopra Vinnie Chopra has

[00:42:16] a coaching program and he and I are actually teaching an event on April 27th it's on event

[00:42:23] right so if you go to invent right and you type in learn to syndicate you'll find our event it's

[00:42:28] just one day he's going to be teaching the practical aspects of finding the properties and I'm going

[00:42:34] to be teaching the deal structures securities compliance and mistakes people make and how

[00:42:40] to avoid them so that that would be a good around to learn what you can in a day that

[00:42:45] that's a good choice but there's some other real estate trainers out there I don't know all of

[00:42:49] them also Stacy and Jen conky k on k e y they have an event called wow con but they also have some other

[00:42:57] events what I think they're really good at that maybe some of the others aren't as good at is helping

[00:43:02] people get started with some smaller multifamily now and that's an also all often an overlooked

[00:43:09] asset because and it can be somewhat lucrative even more lucrative than jumping into 100

[00:43:15] unit apartment complex conky k o c o n k e y look them up they have an excellent little training

[00:43:23] program that I think works well and so with this regulation crowdfunding I just met a guy just recently

[00:43:30] called ridge crowdfunding rich crowdfunding and they are going to be allowing people to put their

[00:43:37] offerings on to their crowdfunding portal and the portal itself has to be licensed by FINRA

[00:43:44] or the SEC FINRA is a quasi regulatory agency for securities so they're legit and they have to house

[00:43:54] your offering there but you also still need us to help you set up the corporate structure and to give

[00:43:59] you the the form cf which is form c which is your your disclosure document and to set up the

[00:44:05] operating agreements for your companies the management and the syndicate itself and then

[00:44:10] also your subscription agreement and then there's filings that have to be done with the SEC and with

[00:44:15] the state securities agencies that's the part we help with and then they house the offering and

[00:44:20] they may at some point even be able to help push that out to their group of potential investors

[00:44:26] but you can certainly drive your own investors to that portal so it's going to be I think

[00:44:32] becoming more important there's some again some proposed changes in those rules that would make

[00:44:37] it even more advantageous with each of them there's limitations so you just have to learn the

[00:44:43] rules and once we learn the rules and understand what those rules mean then they can do that.

[00:44:49] We actually have a weekly mastermind that we hold for our clients and that is conducted by a

[00:44:55] securities attorney and our goal is not to teach you how to by the real estate but to teach

[00:44:59] you how to develop those defensible relationships with investors how to get that

[00:45:04] database of pre vetted investors how to make sure that they know you well enough that they will invest

[00:45:09] with you at the time you're ready to go and how to keep them informed. Wow that's excellent in

[00:45:15] addition to that so how does someone just winding now this has been so much really awesome Kim I've

[00:45:21] learned a ton I've been taking notes here the whole time I'm looking forward to listening back

[00:45:26] to this what about how do we contact you if you have an investor a budding investor

[00:45:30] someone wants to move into syndication or maybe someone who's been in syndication and they realize

[00:45:34] maybe they haven't done it the right way and it's time to fix that so they have a long-term career

[00:45:38] in it not just a short flash in the pan kind of situation. Go to our website syndicationattorneys.com

[00:45:44] and there you will have plenty of opportunities to look around the site there's over 80 different

[00:45:50] articles there they're all one to two pages on different aspects of syndication there's a

[00:45:54] bunch of frequently asked questions there's also all of our podcasts are housed there as well as well

[00:46:01] as other podcasts like this I've been on where we've talked about all different topics and they

[00:46:05] can if you want to schedule an appointment with one of our team there then we can talk to you

[00:46:09] about where you're at in the program we can we have a very low entry low cost entry program

[00:46:14] and call a pre syndication agreement and that's the one that gets you access to the

[00:46:17] mastermind so we can start coaching you on having that ready willing enabled database

[00:46:22] and then also you can get a free book there this book if you've never done it before how to legally

[00:46:27] raise private money there is a free book tab at our website against syndicationattorneys.com

[00:46:33] this is a very easy read if you haven't raised money before you're going to get a question that

[00:46:37] says have you raised money before if you say no you're going to send you physically this book

[00:46:42] so you have to give us your address if you say yes and you have raised money before you're

[00:46:46] going to get this book this one's more like Euclidepedia so this is the second version of

[00:46:50] that book more like a desktop reference I like how you did that yeah it's okay the primer

[00:46:56] wet the appetite and then now it's time to go deeper because you've you've read the first one

[00:47:00] what? This one's good step by step pretty much all the things we've talked about here it'll help

[00:47:06] solidify just some of the topics that we've covered that's beautiful that's awesome i'm

[00:47:10] gonna head over there myself and grab a copy and Kim this has been awesome is is there anything

[00:47:16] else that you'd like to add that we haven't covered today we talked about a ton the other thing you

[00:47:21] can do is but you can tax the word syndicate syndi Cate to our phone number which is 844

[00:47:30] syndicate syndi I see eight also the other the actual number is 8447963428 if you do that you

[00:47:38] can order that book on your phone and we just love to what we do is periodically we do what

[00:47:44] we call a roundup and we'll take all the people that have gotten the books and then we'll offer you

[00:47:48] to come to a webinar or give you a call and say hey how can we help you where are you at right now

[00:47:54] what do we think would be beneficial for you to do next steps help you strategize

[00:47:59] how to get that process going because it is a process and it is a learning and you are getting

[00:48:04] an education and there's going to be some time span in between but one thing I don't recommend

[00:48:09] is don't just go get a deal and think the investors will come

[00:48:13] see people who've advocated that and I've seen people lose money on that scenario it's not

[00:48:18] it's just not a workable scenario you've got to develop those relationships tell people what

[00:48:23] you're doing get that all going and keep growing that list and then you're going to be successful

[00:48:29] as a syndicator long term well that makes total sense total sense and I love the way that

[00:48:34] you have a graduated approach for people to bring them on to the highway and to learn and get

[00:48:38] them up to speed because people need that it's as you said there's a lot to learn but it's infinitely

[00:48:43] learnable and infinitely doable if you just take the right approach and do it over time that's right

[00:48:48] that's awesome Kim thank you so much for being on the show this has been amazing thank you Paul yeah

[00:48:54] I really enjoyed it hey gang just winding down here today thanks for listening to the show and

[00:48:58] as always if you need capital to grow your business you're looking to purchase commercial

[00:49:05] real estate or build a building or invest in commercial real estate you're looking to acquire

[00:49:09] a business or a competitor or just need growth capital we'd love to talk to you we fund businesses

[00:49:14] all day long our mission is to help entrepreneurs win and to fund their businesses and fund their

[00:49:20] dreams so that they can make an impact in their community reach out to me today go to our website

[00:49:25] click the button to schedule a 20 minute conversation discovery call we'll have a quick

[00:49:29] conversation see if there's a need see if there's a fit and we can take it from there

[00:49:33] the website is vpc victor paul charlie dot capital that's vpc dot capital all right there's no dot

[00:49:44] com on that it's vpc dot capital as always keep crushing it and hope to see you soon around here take care