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Congratulations, you’ve gotten all your forms together! Now let’s talk about marketing the investment opportunity that you have. How do you put it out there? You’re going to do a lot more marketing in the context of a 506C, then a 506B. This isn’t to say you don’t market in a 506B. But marketing for a 506B, really just means the pitch between you and the contacts that you already have – those pre-existing relationships. Remember, we cannot market out to the external world in a 506B. So in this section we’re making the assumption that you’re going to be doing a 506C. 

Accredited Investors

First, let’s talk about accredited investors, because they’re the people that you are marketing to primarily. Again, we’re talking about a 506C, because with that rule, we are only able to take money from people who are accredited investors. For someone to be an accredited investor, they have to meet one of three criteria that we normally encounter. 

The first criteria is their income level, which needs to be either $200,000+ of taxable income if we’re relying just on one person’s income, or $300,000+ if we’re using the joint income of a spouse as well. Again, this isn’t net income. This is actual taxable income. That’s what matters here. 

The other test is the wealth level of the investor, which needs to be over $1 million. Now in what we do, we cannot count the personal residence of the investor. That is a huge amount of wealth that is not being counted towards what’s there, but it can be included in terms of money that’s not there. For example, if Bob Smith has a net income, or a personal wealth of $1.2 million, Bob has that money ($1.2 million) in cash in his checking account. Does that mean he is an accredited investor? Maybe, maybe not. That’s where personal residence comes into play. So let’s say he owns a home that at present is valued at $800,000. However, he bought it right before the market crashed for $1.1 million. So that property is technically underwater by $300,000, which we subtract out of his personal wealth of $1.2 million. Now, his personal wealth is $900,000. He is not an accredited investor. 

The third category is the securities license, now allowed by the SEC. So people with securities licenses can be considered accredited investors as well. 

This is how we determine who is an accredited investor, and those are the people that we’re selling to. 

Marketing Ourselves

We talked a little bit before about marketing to investors, but we want to make sure that our branding really is in place. When somebody looks you up, you want them to see you’re the real deal. So you need to have a good website, and maybe a sales funnel, in order to make it clear that you’ve got a good presence and know what you’re doing. 

If you do not have any developer and marketing team then you can outsource your work from an agency. Before hiring any agency, see their portfolio, match your requirements, and have good resources like expert persons for web development and digital marketing, SEO and digital marketing software, video editing tools, and great reports and presentations.

So you’ve got a location on the internet, your logo, and an About Us page. Maybe you’ve got a video or something. Then, include an Investments page with a lead capture form that gathers name, email, and phone. Remember, if you have a 506B, you do not want to be putting any of this on the internet, because that will get you in trouble.

Now you’ve identified this group of accredited investors, how do you actually pitch this deal now? Part of what you do is put together a pitch deck, which is just like a listing presentation. However, know that it’s difficult to get an investor to just give you a lot of money with just a listing presentation. The conversation needs to change. 

First off, investors tend to be rather conservative about who they give their money to. They don’t have $250,000 to invest because they just give it out willy-nilly. Smart investors need to be convinced and persuaded that this is something that’s worthwhile for them to do. And in order for them to make that leap, they need to first make sure that they understand the deal. So that’s part of the conversation. 

But even further, they need to have an emotional change that takes place. When you do a listing presentation, you are going at it directly from a logical basis, walking them through the decision making process. The reality is that the emotional part is enormous. And we make our decisions first with emotion, then by checking with our rational side to confirm that we’re making a good decision. 

Yes, you need to talk about the rational side. But you need to create an emotional shift in your investor. How do you do that? Remember, this person has a backstory, they have all these beliefs about themselves and the world, they have a lens through which they see everything that happens. This person has feelings, emotions, and problems. And they want answers and resolutions to those problems. 

For example, one problem that many people have is diversity in what they’re invested in. They may have all of their money in stocks, and that is just not a proper way to do a portfolio of assets. Or they have all of their money sitting in their company’s stock and if their company goes bankrupt, they are screwed. Or they’re just concentrated in non alternative investments. So asset diversity is a real problem. Real estate is considered an alternative investment. What you’re offering is to actually diversify into another asset class, which is real estate. And while they may not have the $5 million dollars to invest in the property that you’re syndicating, you’re giving them a way to get in with much less and without the time and effort of fully managing a property. 

Maybe they’re very concerned about inflation. Real estate is an excellent hedge on inflation, because you’re using today’s money in order to make money at tomorrow’s rental rates. Then there is credit risk. Maybe they just don’t want to be signing a loan for a $5 million property or take on more debt on their name for themselves. You can solve these problems and speak directly to them. With you as their syndicator, managing the property or the asset, you’re maximizing that value and allowing them to invest less than 20% into the property in general. They suddenly are now a minority holder who doesn’t need to sign on loan documents. They’re diversifying, getting real estate exposure, and not putting forth a ton of effort or money. You’re solving the problem through your syndication.


Are you ready to get started with your own syndication and need a private placement memorandum? Moschetti Law Group is a real estate syndication law firm and we’d be happy to meet with you to put together your Reg D PPM from a syndication attorney and guide you through the process of launching your own offering.

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