In this episode of the Alchemist Nation Real Estate Podcast, I talk to Mauricio Rauld, a syndication attorney who specializes in helping people gather real estate deal money legally so that they don’t get sued for borrowing people’s money. One of the questions I get all the time is can I raise capital, can I ask people for money, and go buy real estate? I know that is a resounding no and what are the reasons Mauricio can’t do that. He says that you can do it if you want to end in jail or when you’re raising money from individuals especially passive investors then you’re issuing securities that you don’t think of it and doesn’t quite make sense because you’re just raising money to buy real estate. People will tell you that you have to talk to an SEC attorney and why in the world will they be bugging you. He says that the answer is because any time you’re taking money from passive investors meaning that you’re taking money from people, you’re the one generating all the return and doing all the work and putting it all together and they’re literally writing you a check, going and expect you to generate the return and send them a check hopefully once a month or a quarter. You’re issuing securities and it doesn’t matter how you structure it whether it is a joint venture, LLC, not LLC, Profit Sharing Agreement, if you’re are running the show, doing all the work, and generating all the return, you’re in the business of issuing securities and you have to follow securities laws both at the federal level and state level. In every state that your investor resides in, you have to make sure that you’re covered under his/her state’s laws.
To listen to Mauricio Rauld’s Alchemist Nation Real Estate Podcast on Anchor: #96 Alchemist Nation Podcast – Mauricio Rauld Raise Capital The Right Way Don’t End Up In Jail.
I have heard some really crazy stories about some of my buddies really getting sued by SEC yet they went, raised capital, great deal, everything seemed fine and they were getting investors’ money and that particular situation, the investor was perfectly legal on what he did because he didn’t set up the deal. Somebody else set up and for him, he was just going in and bringing money but it turned out that they had walked away from the deal, they had done something illegal and ended up getting tied up into it for years because of litigation even though he didn’t have no-fault, no knowledge. How does one protect themselves and let’s go back to the beginning of raising capital because there is a difference between private money for interest-only notes/seller financing or what we’re talking about is about sharing equity and what I’m talking about is actually sharing equity interest in the deal itself. I wanted to know what separates securities. Mauricio says not necessarily because this one of the things he talks about in his book: The five things every syndicator must do to stay out of jail and he talks about it in Chapter one where notes are potentially securities and there are some ways you can rebut that presumption and you can get away with that without the full securities things. Just because it is a note, it doesn’t somehow magically get you off the hook either, now if it an owner financing and it is a short term loan to your buddy, there are all these exceptions that are out there but issuing debt as opposed to issuing equity and that’s what he said in the beginning, the structure itself doesn’t matter. If you’re in the business of raising capital and you decide instead of giving out equity, you’re going to give five different people, five different promissory notes. You’re going to pay 10% and it is not secured, that’s going to be considered an investment contract and that’s going to be a security as well and you’re going to comply with the same rules.
I ask Mauricio what advice would he give to people that are starting off the game of syndication and are going after a million-dollar deal or a 5 million dollar deal and they want to syndicate and get this level up for them for the first time. He says that it all starts with what are you trying to get for the investors, are they looking for cashflow or are they looking for equity, are they IRS IRA investors that don’t care about anything until 20 years from now, are they looking for a tax break? Start with the end in mind and figure out what is that you’re trying to provide value to your investors. At the end of the day, you start with what the investors need not what you want. He also says that reverse engineer it then throw the deal on the spreadsheet and do an 80 20 split – 80% for investors and 20% for you and see what happens.
Mauricio offers 3 pieces of Advice to 20-year-old Mauricio on how to launch his life better.
1) Don’t Wait To Buy Real Estate, Buy Real Estate And Wait
2) Work On Developing Your Mindset
3) Read Books
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To get in touch with Mauricio and learn how to raise capital LEGALLY, visit http://www.premierlawgroup.net/
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