What Do You Guys Think?
My father was thinking about creating a mutualfund-kind-of corp, but he is going to bring the funds from latinamerica.
But. Now we're thinking about creating something alike but using tax liens and real estate as the investment and giving the investor a 10% or 11% guaranteed on his investment. Maturity time will range from 6, 12, 18 years. What do you guys think?
we'll be working only with latinamerican investors.
latininvestor--(NJ)-------------------
I'd suggest that you talk with a securities attorney. There are a lot of laws affecting people who run funds for other people's money.
I'd suggest NOT guaranteeing a specific return. You don't know what return you will actually get. How can you guarantee what you pay out? Nope. Don't do that.
These days the tax sales and tax liens are drawing big crowds. If you will over some of the postings on this forum for the past few months, you will hear stories of no good deals at the sales. Many of them.
Also, unless you have experience with real estate investing, you may not know a way to make the kind of return you mention on a consistent basis. When mortgage interest rates go up, which most people expect to occur over the next two or three years, property values are likely to fall.
Those time periods you mention are pretty good for your fund, but may not be very attractive to the investors. You will notice that many investments and savings plans, such as bank certificate of deposits (CDs), have maximum periods of 5 years. Now, with real estate, longer holding periods are better, as real estate investing is long-term. But you need to have some plan in effect. Assuming you had people agreeing to leave their money in for 6 years, what are you going to do to pay them back when the term is up? Sell the properties? Not a good plan, in my opinion. What if market prices are down at that time? Sell the properties at a loss? How do you pay what you promise in that case?
Working with other peoples money (OPM) is often suggested to help produce better returns for you. However, the usual suggestion is to use LOANS, not partners, and not investors in a fund.
These days the interest rates on mortgages are quite reasonable. If you can buy properties with institutional loans, I suggest you do that.
Good Investing*************Ron Starr***********
From the way you are describing things you are already crossing the line. I was with an attorney yesterday concerning LLC's. We ended up talking about some problem situations and they were very close to what you are proposing.
You can do this cleanly but you really need to be careful. One thing that causes problems is posting public messages as it looks like you are looking for investors. The programs that are exempt normally specific that you can only talk with X people and from that only take money from Y where Y is a subset of X.
Guarantees are definitely a problem area.
Oh, the laws that apply will likely include the other countries where the people live.
John
[addsig]
Hey guys, thank you very much.
Ok no guarantees.
This post wasn't intended to look for ivestors, cause then i'll have to file this corp. with the SEC.
We will be looking for investors out of the United States like if it was an offshore.
Ok, another question do I have to register or ask for permission to the SEC to do this offshore corp.?
1st never quote rates of return. that'll get you nailed.
and esp. not a guaranteed return. If you can guarante me 10% a yr, for the next 6,12,18 years, there are prob billions in $ that would want that return.
If it's offshore money, why not use and offshore company?
Bring the money in directly, might flag money laundery laws.
this can get a little complicated, but if you think it's worth, check it out.
Foreign corps can't own land, but they can lend money to you and your dad which can be used for whatever your want. You must pay interest on the loan, otherwise it's not a loan and a IRS flag.
Get some very sophisticated CPAs and attornies involved in this.
I didn't see your last question. it depends on what the offsore entityis doing. Certain transactions cause a red flag to irs, sec, etc.
Thanks guys.
Ok so I'll be using an Offshore company.
The money will come from investors only. Not from foreign companies.
Realize that it's very easy to get in trouble doing this. http://www.So.the I's and cross all the T's
latininvestor--(NJ)--------------------
So, if you have an "offshore" business, you need to study the laws for the country in which you have the business. So it becomes even more complex.
Best is to work with your own money and perhaps family money and don't work with strangers money.
Good Investing***********Ron Starr************
Hello,
There are a few private funds who do this type of investment. Check out the Orion Fund and the Optimum Fund. Both are private investment funds using retirement money from investors. However, because of SEC regulations they only accept funds from accredited investors. Check the SEC website for the definition of accredited ($200K yearly income for an individual or $300K for a couple OR $1 million Net Worth).
If you do become a private fund you still need special SEC exemption filings. If you want to take everyone's money (outside of accredited investors), you will need to be SEC regulated and offer a PPM (Private Placement Memorandum) which will cost you a bundle (at least $30K just to get the PPM).
Good luck.
Francoise