In this interview with Andrew Liss, we talk about how a private memorandum works for raising capital where he talks more about Regulation D and the primary reason for knowing REG D is for the fact that matters where he is not going to raise capital for something that isn’t regulated. So when they get into Reg D is when they take a small group of investors and pull their money together in one unified write-off and that is where Reg D comes into play and he has to make sure that he isn’t playing with it.
To listen to Andrew Liss’ Alchemist Nation Real Estate Podcast on Anchor: #72 Alchemist Nation Podcast – How A Private Memorandum Works For Raising Capital With Andrew Liss.
Andrew Liss explains why most financial advisers have to stay away from Reg D which is quite simple, they have to do something that is fully regulated. If you’re to go to Reg D, it is a small pool, not regulated by the securities exchange commission, so it is out of their scope of investing. That would be an item handled by Private Placement. If they were to handle something on that scale, they’d actually write a pure IPO for it, have it regulated, do a Reg D, full underwriting, full due diligence, and before they’re done with it, any profit one would you make of it if you did, you wouldn’t see a thing. That is why it is called for small purposes only.
I ask Andrew what is the reason behind being better off working with sophisticated investors. He says that it is really simple because they work with products where they have to have the same rules for sophisticated investors and each firm actually makes different criteria when it comes to sophisticated investors. Before it used to $100K in cash and some assets but now it is $500K minimum cash though the rationale behind that is really simple, one being that they can absorb the loss because any investment is subject to zero or it could be in a more negative way where you can be dragged down in tax liability for some investments. You must be very careful with that and have knowledge about sophisticated investors.
I further ask Andrew what is the standard definition of a sophisticated investor. He says that 10% of what you can afford putting in and $300K easily liquid which is basically the start of it and by the way on their end, when you’re dealing with an investment trust, the subscription is anywhere from seven years up to 20 years when you’re earning passive income and getting tax benefits on it.
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