My Search For Private Investors Update
I thought I would let everyone on this board know what I've been up to and what has and has not worked so far for me.
I decided late last year that I'm going to need to use private money to invest in real estate. (This is not hard money loans FYI). This is money from private individuals that I will use to finance short-term real estate investments (rehabs for the most part).
I decided I was going to hold a conference and share my program with people. I purchased a list of 1000 names from a list broker of people who "were interested in investments". I expanded to my county (74k) and then into another one just to get 1000 names as there was a minimum purchase.
I sent out a series of two postcards to the same people. The postcards were identical and read "Tired of Low CD Rates?" "Earn 10%" Free seminar...call for date and time. I hired a 24/7 answering service to take reservations.
I also mailed postcards out to people I personally knew. I advertised for three days straight with a 6" ad in the local paper.
The killer---the only people I had register were people that I knew and personally invited! Not good....
A few weeks later and nearly $1000 poorer, I'm off to figure out what I want to try next.
Upon everything else my attorney said what I'm doing is illegal. I have obviously created a security here and there are numerous rules on how you can offer a security. I won't pretend to be an attorney but I think it will come down to that I'm going to have to take a chance. Typically you need some sort of a prospectus and registration with the state. I feel I can qualify under an exemption to register but the disclosure part of the law is still in place. I'm not sure what I plan to do.
I'll keep everyone updated if I see I have positive feedback and discussion on this post. Take care everyone!
MYFROGGER:
Forget the conferences. Place an ad in your local paper:
"Tired of the stock market? How would you like to make 10% return on your money secured by a First Trust Deed".
or
"Realestate investor with proven track record looking for investors who want to make 10% on their money secured by
a First Trust Deel"
This is how I found my private investors
a few years ago. You can also tap into peoples IRA if you use a third party administrator such as Equity Trust.
Best Riches,
Jeffrey Adam
[addsig]
JeffreyAdam
[ Edited by rhillsman on Date 03/27/2004 ]
That is great advice! I was looking for information like this myself. I had run an ad and had not gotten any response. At least it ony cost me about $50.00. I'll try it again and use your advice and see where it goes.
Yes, you would be violating securities laws there, and you do NOT want to do that.
If you, through word of mouth (non-solicitation is important, and I think by having a conference, when you are AT the conference it counts as word of mouth, though not sure), work with ONE investor per deal, that is perfectly legal, as the govt wants to ensure people can come together for purposes of capital formation, but once it is two or more people, you have to comply with SEC because of the pooling of funds.
Jeffrey's advice is great.
Best of luck, Dave
God is good... all the time. I am glad that I ran across this site and this posting because I was thinking about running an ad that said:I know this is not for you, but who do you know that might be interested in earning 12 to 15 percent on their money, secured by a first lien on real estate, short-term, 6 to 12 months?[/b] How does this one sound or should I just use the one that is mentioned above? Why or why not? Thanks in advance for any info that you can provide. :-? null[ Edited by destinyb4im40 on Date 03/28/2004 ]
JefferyAdams,
How many deals had you done when you attempted this? Also, do you think what you did would have worked if you were just starting out?
Thanks,
Joe
To: Jeffrey Adams,
I'm really curious why your newspaper ad doesn't constitute public solicitation for the sale of securities? Granted you've not be investigated by the SEC, probably because no-one has every filed a complaint but as I read the SEC act of 1933 you're quite likely on the hook for 3 to 5 for an unregistered public offering. Have you considered this? Do you have some "safe haven" provision you are relying on?
Mark
Under federal law a loan of any type is condsidered a security. Also the federal law states that if your investment is local in nature (as all real estate obviously is) that it is exempt from the Securities act of 1933.
That law basically leaves the power up to the states. I've seen three ways this is handled:
1. Securities secured by a mortgage on real estate is exempt from registratoin only.
2. Securities secured by a mortgage on real estate is exempt from registration AND disclosure (it basically says that the entire chapter is excempt rather than only a specific section).
3. The law does not allow for an exemption for loans secured by real estate. In this case (as in iowa) it is much more difficult to operate.
GOOD LUCK. I am not an attorney so always seek competent legal advise.
Yes,
Jeffrey, I applaud you for your tenacity and just going for it. However, you are publicly soliciting investors, which is a problem. It needs to be done word of mouth, friend to friend, associate to associate.
As long as you keep your folks happy, you should be fine, but if a deal ever went sour, and they seek counsel, you could be in trouble. Best of luck, Dave