How to fund your real estate deal THE RIGHT WAY | Attorney Adam Vincent

Today we're so excited. We're going to be sharing about how to raise funds and how to do it properly and legally for apartment syndications. We have attorney Adam Vincent who's going to be sharing. This is actually a recording. He recently came to our mastermind on a zoom call, one of our collab calls that we do and just spent time poured into everybody and shared. The goal here today is that you would feel confident and excited in raising money for massive deals. Our team has been able to raise millions of dollars in money, in private money to be able to take down some big deals. And so if you are someone who wants to make sure you're doing it right, you don't want any. You want to be able to sleep good at night and make sure you're in the right vehicle. Whether it's a 5,506B, 506C, non accredited versus accredited. You want to make sure you are advertising correctly on social media. That's a massive deal. And if you're somebody who wants to make sure that you're creating the highest possible returns for your investors, then you're going to really love this talk. So I'm going to share just about everything that these he shared with our group and except for the questions at the end, but if you enjoy this, let us know. We want to make sure that we're putting up stuff that people are getting value from. So if you're a real estate investor and you're ready to take down some big apartments, this is a must know. Do not want to skip this talk. Do not want to skip this conversation. So let's, let's check it out.

Yeah. Thanks, Jonathan, for having me. Thanks everybody for hopping on. I'm going to just run through this, presuming a lot of the stuff is new, even if you've done a raise, let alone if you haven't a lot of this stuff, we have people who bought, who bought, you know, been partnering on a bunch of apartment buildings and complexes and this is still somewhat unfamiliar to them or vague or mysterious. So don't feel bad. First of all, first disclaimer is like, if you, if this takes a while to kind of sink in, that's all right. That's a natural thing. Had we not gone to law school and then spent a couple of years talking about this, it took a, you know, it takes time for everybody. So I'll just talk about it kind of in that way. I don't know how many of you are, have gotten into deals or raising money, but I'll Just talk about it as though you haven't. And I think that's helpful for everybody either way. So yeah, my name's Adam. He mentioned my brother Paul. We're law partners here out of Cleveland, Ohio area. We're out of Westlake. I'm going to try to share my slides because there are at least some pictures to look at instead of just my face. So does that show up?

Yes.

Okay, cool. So there we are. I'm going to try to do the button for slideshow play concurrent slide. Cool. So we usually do a longer one. And for anybody who's interested, that's our law firm, Vincent Esquire. You can, we were on Facebook and stuff. We have pretty, a decent presence online. Tick Tock Lawyers is our Tick Tock handle. But if you want a more detailed version of this, we do, we do every month or so kind of a longer version of what we're talking about today. This, I'll try to just kind of keep it simpler today. But we're, but we go into some more detail. So if you want to, we throw that out there as just some free informational content for folks to kind of help you get involved here. And then if you, if you need somebody to help you out with this down the line, hopefully you find somebody good. Whether it's us or not, find a good lawyer. I mean that's basically the, the big thing here. It's good to have an understanding of the framework but a lot of the details behind this. You're going to rely on a lawyer and it's better you rely on a lawyer for that sort of thing because that'll, that'll keep you out of trouble and, and give you less headache and, and less time, you know, trying to go back to school over about all this stuff. So there we are. I'm Adam, brother Paul's my law partner. We, we focus on real estate. We have some entrepreneurial, small, medium sized business clients and do some estate planning too. So try to look at those three, which are the big three to think about if you, if you own a business, whether it's a real estate business or, or not. Obviously this is for educational stuff. We're not going to go into a lot as much detail tonight, but you know, call a lawyer up whether it's us or not. Whenever you start getting into this thing, into this real quickly. If you're not familiar with syndication, syndication is just the fancy word for pooling resources together. It's a group of individuals or legal entities. You know, you could do this work through Your llc. But either way it's a group combining resources for a common goal. And what we'll look at in a bit is, is that some of the individuals or entities that come in, come in as limited partners or investors and then there's going to be the active general partners. So those are the two main categories to know about. But the main thing is you're combining resources for a common goal when you syndicate. So just people getting together and pulling resources. So that gives you a little introductory definition of syndication, just a basic idea of how that works. But the main thing is you're pulling resources. Some resources are strictly cash, you know, investor money. And then the other resources are obviously on the general partner side is their expertise and then their day to day operations and that sort of thing. So. But that's a resource and a value obviously that you're contributing to the, to the project. So there's, that's syndication. Just to give you an idea, it's not that complicated. If you came from like single family, you're used to basically just doing things on your own or having a small, you know, one or two, two folks involved in that and then maybe one money person, you know, the next step is, is you just have more people involved on a bigger project, right? So there's just some more, you need maybe some more, some more teammates on those sort of things. And that's kind of what syndication arises from. Second thing real quickly I want to talk about is when you get to the point where you're raising money for a commercial deal or a bigger deal, you know, some people want to get around the paperwork we're going to talk about which is, which is what you should do as a syndicator. It's called a private placement memorandum. You should do notice fil. We'll talk about that. But some people want to get around it and they want to say, hey, what if I just, you know, I came from single family, I always gave my investor a note mortgage and flipped a house and we were all good. Can I just do that with 10 investors? And the answer is no. Because the thing about that, that investor had the only mortgage on the property usually, right? Or maybe they had a second behind a lender, if you had a lender. But what happens is if, if you don't, if you, if you go that route, at least in Ohio and most states, mortgages are, are, are the preference on a mortgage is based on when they get filed. And naturally if you file mortgages, 10 mortgages, number one gets paid first and number 10 gets paid last. That's how it works in Ohio, is that you get in line and you're a first mortgage, second mortgage, third mortgage, all the way down the line. And so that creates a conflict, right, between, between investors. Number 10 investor is being treated much worse than number one if things go sideways. So that's, that's part of the reason you need to do this. Treat them all equally, give them a disclosure document and not go that route. And that's what the SEC and regulators want you to do, is have this offering document rather than securing them through these conflicting mortgages. So just to give you an idea, we get the question all the time. I'll go through the kind of basic questions, what's a syndic, What's a security? And then some of the, some of the things you need to do. But we get the question all the time, what can I get, get around this being a security or can I get around doing the PPM and the notice filings? And the answer is, and this isn't, this is partly self interest, but the reality of it is is that no, you really can't and you really don't. You really want to protect yourself and your company by doing the thing, the things we'll talk about tonight rather than trying to do an end around and save some money and that sort of thing. And, and, and you know, do what you need to do because there's no, they've seen all the tricks before. There's a lot more like nuanced and, and creative ways people try to get around it. But ultimately they want to protect investors, passive investors. They want to protect them and they've set up a framework to, to do that and you should just follow it is, is the short version of it. So definition is though, is real broad and they make it broad so that they can catch anybody who's trying to trick the system. But it's an, with an expectation of profit. If you hear passive income, yeah, that's an expectation of profit through the efforts of a promoter and is a common enterprise, meaning there's, there's multiple players involved. All right, so that's the basic definition, one of the most common ones used when it comes to securities. We're going to skip my sample deal just because there's not as much time and I don't want to put you guys to sleep, but, you know, basically you're going to find a deal and then you'll structure the deal and I'll talk real quickly about the, the, the way that plays out. So just, I Mentioned the syndication, you have class A members, the GPs another way. In this case the GPs are Class A members and then you have the class B investing members, the limited partners. This is a org chart. If you've never seen one before, been involved in a commercial closing, these illustrate just the company structure. So I think it's helpful for you to take a look at this. In this example we have an Ohio LLC called the Smoking 101 LLC. It's going to buy 101 units in Ohio. In this case, class A members are going to own 60% of that company and then investing members are going to own 40. In this case we didn't lay out who the investors were. But eventually once you get the money and go through the whole process, you fill in that class B member list. But this example we have class A members, the general partners, the people putting a deal together. In this one I try to keep it simple. You have a Syndicator Sam llc, that's the managing member, that's the syndicator, who's, who's running the operation, probably found the deal, probably put together, got the team together and then you have ground. Boots LLC is owned by Berry Boots in Ohio. So this is a deal in Ohio, but say Sam Smith doesn't live nearby, maybe it's a deal in southern Ohio and Sam Smith is from Cleveland. So he gets Barry boots 10% and says hey Barry, I'm going to need you to be the boots on the ground visiting the property, handling some, some of the, the day to day operations. And then Syndicator Sam's doing real estate but he has not yet done 101 units. So he gets a sponsor Steve involved and sponsor Steve is Steve Jobs out of California. For anyone who's not familiar with sponsorship on these bigger deals, banks are interested in experience and liquidity or balance sheet. That's what where a sponsor comes in. If, if the other members of the LLC don't have them. So you got your syndicator, you got your boots on the ground. But if Sam and Barry don't haven't run 101 units before because they have, you know, some duplexes or they have a 30 unit and they have years of experience in that area, but they've never had a hundred unit complex, then the bank's going to say well we need somebody else involved on this deal who's got that experience. And that in this case is Steve Jobs out of California. He's going to sponsor the deal. He's owned a bunch of apartments. He also has the balance sheet that the bank is looking for. And they want liquidity based on what their requirements are. But if you hear about sponsorship, those are generally the two things that they're looking for in the deal is who's the person that's going to, usually is the guarantor who's going to sign on the deal and has the experience and the liquidity for this size deal. And that's not always the person who's doing the day to day, but it's one of the team members. And then through the operating agreement, that person has managerial authority and that sort of thing. So we got class A general partners and then we have the class B investing members. They're going to be the limited partners who are putting in an investment of strictly money. They're passive. All right. And then so the, the, you know, this illustration, you fill out this, they might invest through LLCs or whatever, that's not as important. But eventually you have to tell the bank, you know, who's, who's involved in each of those LLCs. So if anybody has questions, this is a good time to throw them out there. I don't really want to have to hear my own myself the entire time, but feel free to tap in or have me go back and clarify anything that comes up. So this is kind of an illustration of what a syndication looks like in terms of the, the organizational chart in an llc. And hopefully that kind of helps clarify some things. So, so that's how you kind of structure a syndication is, is through the general partners and then the limited partners. One thing I'll give you a heads up, a general idea about is how you split up the equity on a deal. The traditional syndication. And we use pies just because it's easy to think about if you have 100% pie, which is the LLC, which is the ownership of the company. This is just to illustrate that there's two general theories about how you put together a syndication. And one, in the traditional sense, the LPs usually get the limited partners. The investors get more equity in the deal. So in the traditional syndication model, they would get say 70% of ownership of the LLC that owns the property. I left this part out. But usually what happens on these, if you're unfamiliar with it, is that the bank wants you to start a new special purpose entity. It's just a new llc, usually in the state where the property is located, you start that new llc. And just to go back real quick, the new LLC in this case was smoking 101 LLC. But you start a new entity and then that entity is made up of the members that are involved. And so we're splitting up that new entity. In this case, the pies are analogy what size slice do each new members get? And I just to give you the heads up, the traditional way was investors get more and general partners, the active folks, take a lesser equity slice but maybe they're getting paid through fees. So on the left side we have investors get more equity, meaning they'll get more cash flow whenever there's a distribution. And then the GP's get smaller distributions but they usually have ongoing fees or something that make it worth their while pre cash flow for them to get paid in the deal. So that's kind of the traditional way. One, one other common way is the low to no fee GP pumpkin pie. So the GPS in other words have no or low fees but they're getting, they're getting equity. So this might be a value add deal where there's enough to make it interesting to the GPS to have day to day to operate this thing. And in a year or two the plan would be for example, value add. And in a year or two we'll refinance and that'll be a big capital event where having all that equity has made all this hard work worthwhile. So it just depends on how on the deal, you know, how they structure it and you know what, what your plans are for the, for the property. But on the GP, on the, on the no to low fee side GPs get more equity but they generally have fewer fees ongoing. That's because a lot of the cash flow is going to go to LPs for a prep payment. So on the left side usually less prep payment and on the right side usually there's like an 8 or 10% pref payment. And that's what makes investors say well I'm not getting as much equity, but I'm getting prep payment that's either getting paid out or accruing during an operation. So that's just, just to be aware of it. And there's no good answers. The other thing that like to point out here is people are like well which one's better? And it's always deal dependent. It depends if this is a stable property or depends if this is a heavy lift value add property. And then you know, there's the other question about how you split up those slices. I think it's more, more than we can get into ton. But just know that, you know, essentially the first question to answer is well, is this going to be a deal where GPs are going to get less equity and more fees, or is this a thing where GPS are going to get more equity and fewer fees? Is the way they set those usually up. Any questions at this point? I can't see the chat, but throw them out there, Jonathan, if there are.

Hey, Adam, great to see you.

Hey, Larry. How's it going? Good.

The pie on the right looked a lot more appetizing.

The pie on the right. It did, yeah. Yeah. I don't know where the left look.

A little overcooked or something.

Yeah.

But that's what I found.

Right, that.

I love that analogy, though. That's great because you can do either one. But what I found is like the better the deal is, the easier it is to do the one on the right.

Right.

Because you find yourself having to give more, more ownership to limited partners to make the returns make sense. But, but if you buy a nice, stable deal that, that doesn't need a lot of lift. Like you said, there might not be anything wrong with that. It's just a different structure.

Right. So. Yeah. Yep. So you got to kind of go through that underwriting and timeline and figure out how much cash flow there is up front and figure out what you can afford or, or what you can pitch to investors. The other thing is, it's just, it's as much as there's like legal advice and all this, a lot of the practical advice I'll give, it has nothing to do with the law directly as much as just having been involved in deals. And really the best advice is just to think about how you're going to pitch it because it's the investment, what's going to be a good story to tell to your investors and in a concise, easy to understand manner and just, you know, figure out the numbers that are going to be appealing to them. And that depends. I mean, some people have a circle that don't expect as much and you can kind of get away with giving investors less, you know, prep payment or whatever, or if you have a, you know, a strong enough reputation, sometimes they're, they feel better about the security of their investment and they'll take a little less money because they're, you're a person who has experience, they've had good, good, good experience or a good history with you. You know, sometimes that allows you a little flexibility. But you just kind of got to think about this also as just kind of how you're going to pitch the story to investors. And one other practical side is, no matter your experience, if you have a thousand Doors right now, you probably already know this, but even if you had a thousand doors, you got to find more investors, you got to have relationships with more people that might be interested in investing because we have seen it. Even people that are very experienced, let alone people who are on their first few deals, it just the, the circle of people willing and able to invest in the timeline. The timing just doesn't work. A lot of times where it's, it's a lot tougher to pitch. Even if you have a good deal and you have good numbers and everything. Sometimes it's just, it's harder, I think, for people. So we just see a lot of people who have a lot who, who unfortunately find out it's a lot harder to raise than they, than they, they thought it would be. So the takeaway from that is just, you know, start making connections as soon as you can. If this is something you want to do into the future, make all, make as many connections as you can, you know, be, be, be more than ready when the time comes. You know, you usually need two or three times as many people as you'd expect just because, like I said, the timing of it and, or somebody just doesn't like the model you went with, not because of anything with you. They're just more comfortable with the pie on the left, you know, or whatever. So that's just a little practical advice. Doesn't have as much to do with, with securities and all that sort of stuff. And you guys mentioned you talked a little about 506B and C. Right? Already. But I'll, I'll try to touch on it. That's right. It's super, it's super mysterious. I'm sure for everybody. It was for me for a long time. But the basic idea is that the, the regulators want to protect passive investors. Right. And the basic idea behind all those regulations is to, to make sure that investors are, are not being swindled or snake oil salesmen aren't getting people into bad investments by, by, you know, defrauding them. And if they do, then they're in big trouble and for a lot of reasons. But they give you some guidelines about what to do so that you can raise money from investors properly. And so, you know, the stock market and all those regulations are a big deal. The public offerings we hear about are a huge lift. No small company or real estate professional could do that. The public offering and all the heavy lift for that. So what they allow for are private offerings. And it's called private offering. It's a little bit Confusing now because you're allowed to now make your private offerings public. We'll talk about that in a minute. With a 506C but, but it's helpful to understand that previously with a 506B when that was the only option, it was a private offering. And 506B requires relationships, right pre existing relationships with the investors. So you can't raise money from somebody who doesn't have a relationship with the company or its members. And so that's if you understand like oh, you go back, that's what, that's what it was until about 10 years ago was the only, the only option you had for raising money on a private offering was with people you had a pre existing relations with. And the goal there is just regulators said, well that at least requires that people pitching an investment have a pre existing relationship. And investors are going to at least have that as sort of a, a basis for their, for their assessment of the investment. You know, they know this person already. It's not some stranger, you know, selling them a bill of goods. So that was kind of what they, what they started requiring was private offering only goes to pre existing relationships. And we'll talk a little more about that. But that's kind of the basic. And nowadays they allow you on a 560 talk about it publicly and it's still considered a private offering. And we'll go through that. But, but if you understand that basic idea, that's kind of why they want, why all this came up and why the regulators require you do these things in order to have a private offering between 506B and C. Let me just real quick before I go to there, go to this one. So for 5 or 6B, that's the one where you have pre existing relationships. You can sell, you can always offer, make an offering to accredited investors. Whether you're doing A, B or C. The difference is B, you're allowed to take from non accredited investors. If you've never heard of accredited investors, those are folks that have more wealth. So there's a definition. It is making $200,000 a year, 300 for a couple or $1 million in assets outside of your personal residence. So that's someone that, that can usually has more expertise, somebody that has the means to make an investment without relying on that money as much as a non accredited investor. So for B, you're allowed to take from non accredited investors but again they have to have, be have a preexisting relationship with you. They also have some level of sophistication so it shouldn't be your cousin's mother in law who's never invested in anything else but you know, your cousin sold her on the deal. It should be for two reasons. You probably don't know your cousin's mother in law, that's a problem. And secondly, your cousin's mother in law probably isn't sophisticated to be able to assess the investment. And that's ultimately what regulars want. Right? They want people pitching investments to tell the investors all about what their plans are, to not defraud them. And they also want investors to be able to, to, to assess that investment and willingly and knowingly enter into it, you know, clear eyed. So that's kind of the idea there with the 506B of those pre existing relationships. That helps. Then you also have somebody who assess the investment. You aren't allowed to advertise. Again, preexisting relationship. You can't go out on Facebook and talk about your pitch to, to strangers. So that's an important distinction. 506C you can do any kind of advertising or getting that, getting that message out. So those are two big distinctions. And so I just want to go back then the big two biggest questions, when people are talking about B and C when, when you get to this point you have two big questions to ask. When you, once you get to you got your deal, you start thinking about how you're going to structure it. You start thinking about what you're going to offer to investors. And again I, we can, if you go to our longer one we talk a little more detail about what that is. But when you get to, you get to there, you're starting to think about what your pitch is and then you're, you're electing your exemption. So in other words you're at the fork of the road. Do I do go with a B or a C? These are the two big questions that, that determine that B versus C. One is do I want to market to and raise from strangers? So do you want to be able to talk to the public about this deal? If you do you corner yourself into one or the other. The other question you ask is do I want to raise from non accredited investors? And that again is corners you into one versus the other. So do you want to be able to talk about this publicly to strangers? Do you want to raise from less wealthy non accredited investors? Those are two big distinguishing factors and ultimately these are the two that you end up when end up with. If it's an absolute yes for number one, you have to go with A B. If it's an absolute yes to number two, you have to go with C. And if you go with C, of course raising from strangers, you've, you've eliminated raising from non accredited investors. You can only raise from accredited investors with a 506C. So yeah, so I'll, I'll shake it up a little bit here. I'm sure everybody's falling asleep but one other way to remember it is we came up with 506B is for buds and blood. That's for people you have a pre existing relationship with your, your buddies and your blood relatives and people who know you. Or if you want to go with C, you can market to the crowd and you have to, you've cornered yourself into 506C if you want to be able to market to the crowd. So hopefully that helps you with the basic questions of 506B and C. And.

I want to ask too, that's extremely helpful with 506B. Another thing about that question of do you want to raise from 506B is the type of person, I think a lot of times if you were to go and take someone's last $5,000 or whatever to put into a deal, they're going to be a lot more, you know, on top. Every day maybe, you know, or every week they're going to be reaching out what's going on, you know and. Right. And you gotta assess your time capabilities and you know, being able to work with that type of.

No, that's exactly it. Yeah. So we, Paul and I have been in on deals. We did when we were involved in some. We, we went with the C partly, partly for that reason. We had enough, we, we knew enough marketing was somewhat important. But I'll say one other thing, Jonathan, one that was one factor was yeah, we kind of would prefer raising from people who aren't going, who aren't as reliant on it and therefore are going to be a little more work, easy to work with or their, or their experience. You know, they're. We also knew everybody. It's a little, I think there is that advantage for sure. The other thing I'll say though is 506C doesn't require you have a pre existing relationship. So the law doesn't require that. But what I've seen is is that essentially getting the check or the wire into the bank account requires some level of a relationship for the great majority of people in real estate. There are people that you'll see on the Internet who can put a website up, they Have a following, they have a podcast, they have whatever, they have admirers and people just want to get in, just give their money because they, you know, partly because of the reputation, whatever it is, they don't really need to have a personal relationship with that person. But for most people that we work with, they have a relationship, they've established their, their, their reputation, they've established that they're trustworthy, that they will have good, good business plan. If they don't have the personal experience themselves, their team does. Excuse me. So, but the main thing being there is like, even if the law doesn't require that pre existing relationship, you have to have that connection with people in order to get that check written. And you can establish that a number of ways. But the reality of it is is that a lot of people, especially in the real estate world, think a ton of people will say I, I'm looking to invest money. And a ton of people will say I know somebody who's got a ton of money. But the checks wind up never being written in time for close. So we've seen that where it's like as nice as the idea is of, you know, there's some stranger out there who's looking to place their money and my deal's the one. It's just hard to execute on that. So that's just a practical, again, it's just practical advice but like build that, build that network of people. Even if they're accredited and you're only going to do five or six C's, those people are. I agree, Jonathan, A little, usually a little fewer hiccups when those, when accredited investors are involved. Not always. Sometimes those, sometimes those accredited investors are, are a major pain in the ass too. But, but either way, build it up because those relationships are what, what you need to do and what you need to establish and that expertise. So that's one way you can use, you know, social media and experience and stuff like that is to talk about what you're doing and kind of show folks what you're doing and establish that you're, that this isn't, this isn't your first rodeo and you have, you have a deal that's worth, deal and expertise that's worth investing in. So, so that's five. Go ahead.

And as far as 506C, you can advertise publicly. But in what about rules? Like if I were to just post on Facebook and say and, and talk about it, what, what needs to be included, like additional info, additional you know.

Disclaimers or the on as far as Facebook goes. So we talked about forking the road and like what, what you should do, those are the questions to ask. What you should do practically is if you get a deal, don't post the deal itself to Facebook or anything until you, you know that you are going to go with a 506C because you aren't allowed. But you corner yourself into a 506C if you post or at least you put yourself in great risk if you go back and you do a B. Because if you have that public post, if anything went sideways, what you've done is you've lost that 506B exemption which is the thing that allows you to raise the money in the first place. So don't post until you know you're, you're, you're going to go with a C and you're, once you are down that path, there's no going back without quite a bit of risk. So if, but if you do pick a C, if you just put, you know, you're allowed to say whatever you'd like put on there always. For accredited investors only or this, this offering, this isn't an offer, you know, this post isn't an offer to invest. You need to reach out to your lawyers. The short version of it, but there should be a short disclaimer, something along the lines of for accredited investors only. Contact our company for further details or for the private placement memorandum and subscription agreement, which is a good transition because that's what comes down the line. We're talking about exemptions. So you got your deal, you're putting together the team, you're figuring out your splits. The next, the next step in, in line is to, is to put together this private placement memorandum we've talked about, I mentioned. So that's a long document, It's a long offering. Document. Document. And as part of the document, the goal of the document is to make the disclosures, the company to make the disclosures about the investment so that investors can, can understand it, understand the risks, understand your business plan, see your projections on your, you know, your five year plan or ten year plan or whatever. You should always try to include as many financials and good faith projections as you can. And then you say about 100 times, there is no guarantee that this is our, you know, this is our goal. But there's no guarantee we will, we will meet our projections. There's no guarantee we will be successful. And you know, and a few times we'll say in there you should be ready to lose your money or some version of that. So that's what the private placement does and that gives them the opportunity to assess the investment. To be honest, most people don't read the entire thing but they can at least have the opportunity to. They can see your business plan, they can see you know what, what you're going to give them in return. Your projections are for preface for you should you got to nail down the equity but your projections as far as cash flow and that sort of thing and then they can invest being fully informed as much as possible and that gives you cover as a company and as the members of that company, as the general partners that we told them all these things and really it's an anti fraud document. They can't come back and say well I didn't know they were going to buy this property or I didn't know they were going to do this and I didn't know about all this capex that need to be done and as long you know if it's in the document they did even if they didn't read it. So it's really a CYA document for you as the operator and for your company so that an angry investor can't upend the business by making you know, making crazy claims about what you told them to get to get them to invest. So so the mortgage thing I talked about at the beginning, the note mortgage people are used to or they like oh I'm just going to do this. Those don't ever have any of these disclosures in them. Right. So that's the other reason this is really a document you need to do is because it covers you from those future claims of fraud or, or whatever any angry investor might be able to make My lodge at you in the company. So that's what the PM does. Once you got all that done, you're getting, you got it under psa. The timeline generally is you get on a PSA you start thinking about all the things we talked about, putting the team together, figuring out equity, figuring out returns. You put the PPM together based on that, you give it to investors, they assess it, they sign off on what's called a subscription agreement. That's the agreement between investor and company. You look at them, they tell and part of the subscription agreement is a suitability questionnaire. They tell you here's my expertise and that way you can assess them. You don't have to take everybody's money that that shows up on your doorstep if you find out oh this is grandma and she I don't really feel good taking grandma's money, then you don't accept it. You don't sign that subscription agreement. The company actually countersigns the subscription agreement. So they provide you the sign subscription agreement and suitability questionnaire, comes back to the company, Company looks at it and says, yeah, this is a good investor. We want to hop into the deal, sign it, they wire you the money, and then hopefully you get to close and everybody's happy and you move on to successful real estate ownership and operation. So that's kind of hopefully a hope. I know it's a. It's a lot. I try to whittle it down to a digestible framework and there's all kinds of details on questions I'm sure you have, and I'm happy to answer any ones you might have. That gives you a general idea of the timeline and some of the pieces that come together when you're syndicating. Let me see if I can pull up. Anybody have any questions at this point? I'll show you here a little timeline slide that might help. So this isn't actually what we did today, but this gives you the idea. You find the deal, you structure the deal, figure out the 30, 70, 70, 30 setup or some version in between. Then you figure out how you want to be able to market it. And that's between A, B and C. That was Beavis and Butthead versus marketing to the crowd. And then you get closer to close and start raising the money. You have a subscription agreement, suitability questionnaire and get that money wired together and over to title and over to closing. So that's kind of hopefully a helpful summary of how the timeline goes.

I wonder if that name's taken Adam for a capital somebody's can you capital company.

What's that? Beavis and.

But I wonder if that name's taken Beavis and Butthead Capital.

I'm sure it is. It's got a real good ring to it. I got a quick question, if you are. Yeah. Who's got a question?

I. I got a quick question. As far as, you know, advertising, a lot of people always have questions and some people in the group may, if. If they just wanted to start creating those relationships and posting on social media. Hey, I'm going to be buying apartments and going to be bringing on capital partners. If you're interested, hit me up. I think that's. Yeah, that's okay.

Right? Yeah. So, yeah. So you aren't allowed to publicly. You aren't allowed to publicly advertise the deal. Right. You can't. One other thing I didn't mention. But like this private placement memorandum is the offering document. You might have pitch that you may have whatever, but the goal is, is that you're offering and your, your investment opportunity doesn't make it into the hands of strangers if you're doing a 506B. And so that's kind of the idea is, is that you want to have control of that. In the old days, the only way people found out about it was they had a printed off PPM and you numbered all your ppms and you said, I sent numbers seven to Jack and you know, number Mary, Sally, whoever has number two. So you have like just offering documents. Real estate's a little different because the timeline's quick, but, but the idea was that you had control over who knew about the offering. That again, it goes back to private offering. And you're not allowed to publicly advertise offerings investment opportunities. But you can, you can talk about a company and what you're up to as much as you'd like, as long as you don't start kind of getting into that gray area where you're like, we're a real estate company that gets these returns for our investors, or we're a real estate company that does that. That's where you get in the gray area where like you start describing your. What investors get from joint, you know, getting involved in the company. So if you, if you're talking about what you invest in and if you're talking about like a past project, that's how you can establish that expertise and get people interested in reaching out to you. Talk about how well you're doing on a project, or you can talk about past projects. Here's what it looked like two years ago and here's what we're doing now. Or we went rents that were 550 and now they're 750 or 800 or whatever. And that's enough to kind of get people's interest. And it has nothing to do with an investment. Right. It has to do with you as a real estate professional and being. Having expertise in the field. So I think I kind of focus on the idea of your, your pitch and your company and its success and its expertise. Stay away from anything that, that, that represents some version of what, what they'll get for their money. Right. An investment. So try to stay away from anything with even past returns. I mean, it's gray area. Are you going to get good away with it? Probably, but just, you know, try to stay away from it. One other practical reason is because you're Going to get trolled by somebody else who's jealous or somebody else who wants to take it down or whatever. If you start doing stuff that's in the gray area, you're just going to get a lot of flack. So just talk about your day to day operations and you're allowed to say, hey, if you're in real estate and you think we might be a good partner on a future deal, reach out and have those conversations. So yeah, that's good. So that's a general advice, is just kind of stay away from numbers and returns and you should be fine that way. And you can, like I said, be creative about how you can catch people's interests without talking about money. Does that make sense?

Yes.

Great. The other one we then people always ask is always pre existing relationship. There's no, there's no real answer to that. Three touches people talk about, but it's not written anywhere. It's all gray area. So it's essentially you're supposed to kind of know the person's background, know the person, give them a chance to know you and, and trust you or, or at least, at least be able to, you know, assess you and your business and whether they feel comfortable with it. You know, you should get as far away from the timeshare free dinner pitch as you can, right? You want to, you want to be somebody who's got the relationship and they've had, they've entered into an investment willingly and knowingly and had a good big picture understanding of it and not, not just getting pressured into it or talked into it by somebody. So, so that's the main thing is like there's gray area on what pre existing is. But you know, try to, try to have as good of a relationship as you can. It happens all the time that people kind of shortcut that, but try to avoid that so you can sleep better at night. Any other questions?

All right, guys, I hope you enjoyed that. If you are a real estate investor and you're wanting to join a group of people that are taking deals down together, we'd love to talk with you. We are actually a faith based group that believes in impact as well as income. And we set it up that way. One, because we are impact driven more.

Than.

We'Re thinking about purpose and why God has us here. And we also want to be able to trust those that we're partnering with in business and in life. So if that resonates with you, if you're somebody who wants to join a group, a mastermind for real estate investors, we have the REI accelerator program and Mastermind. Love to talk to you about that. If that's you, click the link below. If not, have a great day. I hope you enjoy this.

Bye.