As we prepare for our seminar program that covers the concepts of successful syndication, many people are sending in questions that they have about the topic. We are organizing them into categories and I am answering them so that everyone who is interested in learning how to make money the same way that Wall Street makes money, can begin to understand how the business works.

In the coming weeks, I will continue to answer the real estate questions that come in using our Wednesday column. Feel free to submit your own questions as well. To register for our upcoming live event, go to www.SyndicateFast.com. To submit a question of your own, go to www.joelblock.com/capital.

Questions about Real Estate Syndication

1. How do state and federal requirements affect real estate syndication?
   Every time you take money from people who are not actively involved in the business that you are raising money for, then you are considered to be selling them a security. A security is like a share of stock, which is traded in the market place. The problem with selling a security is that the federal government and all of the 50 state governments want to keep an eye on what you are doing because dealing in securities can be subject to such abuse. Certain states are more onerous than others in their oversight and management of securities laws and related issues. These include Florida, New York and California so if your are dealing with securities in these states, use extra precaution to be compliant with the law. Just remember that every time you have a security issue, you are dealing with the Securities and Exchange Commission. That demands that you have a private placement memorandum "PPM", and you must prepare excellent information for your investors. The syndicator must provide all of the important information about the deal, although no one prescribes exactly what that information must look like.
2. Do you have to pick out the exact property that you want to syndicate before you syndicate it?
   Specifically, you don't have to pick the exact property that you plan to acquire before you begin the syndication process. In fact, sometimes it's very difficult to pick out the exact property, because by the time you pick out the property you don't have enough time to begin the syndication and securities process. If you do have the right property chosen beforehand, then you can describe that property in great detail in your private placement memorandum materials. However, you can also create a blind tool that helps you to retain flexibility, as long as you can describe the nature of the types of investments that you are looking to acquire. It's a lot more complicated to create a blind tool because you are not given particulars, but a good attorney can help you to make that happen and allow you to provide the specific information to make your deal come to life.
3. Do I need any special types of attorneys to work on my deals?
   Yes. You need a securities attorney at a minimum to help you to provide the syndication activities. Securities attorneys have special training in activities related to the Securities and Exchange Commission. They generally also carry special insurance that allows them to operate in that environment.
4. What qualifications do investors have to meet in order to participate in my syndication?
   The goal is to create relationships with accredited investors. These are people who have a minimum net worth of $1M, or they have made a minimum of approximately $200,000 in annual salary for the last two years with the expectation that they will make a similar amount this year. If there is a spouse involved, the numbers are just a little big higher. If you take people who are not accredited, then the disclosure requirements are much more onerous. Accredited investors are people who are deemed by the government to be people who can protect themselves because they have the money to call an attorney and ask for help. Non-accredited investors, who have less money, are not considered people who can protect themselves and therefore you have to meet a much higher standard as prescribed by the Securities and Exchange Commission.
5. Can you write a PPM after the fact if you didn't do one beforehand?
   Incredibly, you can write a PPM after the fact even if you've been operating without one for an extended period of time. However, you have to offer the investors the right to rescind their interest in the deal and receive a full refund if you're going to introduce aspects of the deal that weren't present when they originally got in. As long as you offer the right of rescission, you could offer them new terms and ask them to sign the deal and when they do then you're in a position to start your deal fresh with a brand new PPM.

All this material and a lot more will be addressed at our live seminar in April called “How to Raise Money for Real Estate: Harnessing the Power of Syndication.” If you are a real estate professional or someone who is involved on the capital side either as an investor or facilitator, then this incredible two-day event is for you. For more information, go to: www.syndicatefast.com.

About Joel G. Block

Well known in the business community, Joel Block is a best selling author, speaker, and business strategist. Frequently a principal in his transactions, Joel has raised tens of millions of equity dollars for his ventures, which have included real estate syndications and privately held businesses.

Joel’s career is highlighted by the launch of a financial publishing company which he grew nationwide and later sold to the Los Angeles Times. More recently, Joel works with scientists, engineers, technologists and others to help them optimize their entrepreneurial opportunities. Would you like to get a private phone consultation with Joel? Visit www.joelblock.com/capital for details.

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