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A common situation for members of this forum is the need to raise money from investors in order to get into bigger deals.
One of the things I don't know much about is how to do this in the right way, without running into problems with the SEC.
A common 'solution' --or better yet, just a 'play it safe' move-- is to only sell these 'securities' to accredited investors only. However, in my case, I have a decent number of potential investors approaching me about these deals. These are not accredited so I am looking for making these investments 'safe' (from the SEC's perspective) for all the parties involved.
I've been researching the SEC regulation about "Legal Ways To Offer and Sell Securities Without Registering With the SEC" in order to get money from investors for the next apt bldg deal. Still not clear if rules 505 and 506 allow me to get money from non Accredited Investors, so I'm still working on that.
Does anybody here have knowledge that you want to share? (please maintain the assumptions to a minimum, read the links posted above for reference)
I am in the first stages of my researches, so I want to have a good understanding of this topic before going to talk to an expert (I want to have some decent knowledge before talking to a lawyer, so I can ask the right questions). By the way, what type of professional is the one I should be talking to about this?
Thanks,
andviv
**********************
Steve:
From what I read on that, it looks like you can have up to 35 non-Accredited Investors under either Exemption. The major difference is the amount you can raise. Under 505, you're limited to $5 million. Under 506, it's no limit.
But, if you are going to use the 506 Exemption (since you need over $5 million), you need your non-Accredited Investors to be "sophisticated - that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment".
Where I'm confused is what they count as the amount raised. If you're looking at a $20 million property, and you're doing 80% financing, are you "raising" $20 million or $4 million? I'm assuming $4 million, since it refers to an "investment", not a "loan".
Is this what you are thinking?
One of the things I don't know much about is how to do this in the right way, without running into problems with the SEC.
A common 'solution' --or better yet, just a 'play it safe' move-- is to only sell these 'securities' to accredited investors only. However, in my case, I have a decent number of potential investors approaching me about these deals. These are not accredited so I am looking for making these investments 'safe' (from the SEC's perspective) for all the parties involved.
I've been researching the SEC regulation about "Legal Ways To Offer and Sell Securities Without Registering With the SEC" in order to get money from investors for the next apt bldg deal. Still not clear if rules 505 and 506 allow me to get money from non Accredited Investors, so I'm still working on that.
Does anybody here have knowledge that you want to share? (please maintain the assumptions to a minimum, read the links posted above for reference)
I am in the first stages of my researches, so I want to have a good understanding of this topic before going to talk to an expert (I want to have some decent knowledge before talking to a lawyer, so I can ask the right questions). By the way, what type of professional is the one I should be talking to about this?
Thanks,
andviv
**********************
Steve:
From what I read on that, it looks like you can have up to 35 non-Accredited Investors under either Exemption. The major difference is the amount you can raise. Under 505, you're limited to $5 million. Under 506, it's no limit.
But, if you are going to use the 506 Exemption (since you need over $5 million), you need your non-Accredited Investors to be "sophisticated - that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment".
Where I'm confused is what they count as the amount raised. If you're looking at a $20 million property, and you're doing 80% financing, are you "raising" $20 million or $4 million? I'm assuming $4 million, since it refers to an "investment", not a "loan".
Is this what you are thinking?
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