Syndication Attorneys Podcast
So you’re doing a Regulation D Rule 506b offering, and you need to establish a pre-existing relationship with your investors that may not be as strong as you’d like them to be. How exactly do you do that? That’s what we’re going to talk about.
My name is Tilden Moschetti. I’m a syndication attorney for the Moschetti Syndication Law Group. We’re going to talk today about 506b investors, how you make it so that you have a pre-existing relationship with them prior to making an offering. So it seems rather straightforward, doesn’t it that you would bring in investors and that you’d automatically have a pre-existing relationship. But a lot of times that relationship isn’t very strong. Many times I get asked about, well, what if I have a situation where it’s a friend of a friend? And I don’t really know that person? How do I bring them into a 506b offering? Because they be a really good investor? Well, that’s a great question. So when it comes into the analysis of if there is a pre-existing relationship with them, which is important, because we need to establish, hey, these investors, I didn’t make any solicitation to write a solicitation is only for Rule 506c, and we’re doing a 506b. So there must be just by fact, a pre-existing relationship. So how do I establish that that actually occurred? And what what would a court or what would the SEC look at? So the SEC is really looking for two distinct factors, one from the investor’s point of view, and one from your point of view as the syndicator. Let’s talk about the syndicator’s point of view, first, that we need the answer. So what the SEC, or what a court would be wanting to see is, do you as a syndicator, understand the needs the goals, the general idea of what that investor is looking for in an investment vehicle? Do they have a level of sophistication, where they can understand what your investment is, what the downside risks are, and can weigh them reasonably, and come up with a good decision whether it was a good fit for them or not? Now, obviously, that’s not a very easy thing to just say, Well, yes, of course, I knew that they had that. But we can do it through issuing, for example, a questionnaire. So a lot of people and including my clients as well will give their clients an investor questionnaire that starts to establish that you have that knowledge. And that basis for being able to ascertain not only their goals, but also their level of sophistication in be it in this investment of prior investments, or education, or whatever it is. The second piece that a court or the SEC is going to look at is whether that investor, in their own mind feels like if they have a question, which they probably would, that they’d feel free to just pick up the phone and call you and ask you a question, whether that question seems outrageous or stupid or anything like that, that they feel like it would be something that they can easily do and don’t feel like it’s this black box that they’re going to be putting money into, without any sort of answers coming out. So those are the two criteria looking at it from both the investor’s point of view and from the syndicators point of view. Now, how do we exactly establish that as a practicality. So here’s what many people choose to do. And it is a good practice, and it will work. And I’ll tell you where the gray area is on it as well. So first off, you know that there is an investor that who wants to who may want to invest, and you’ve identified that person. And so you go to your brother in law, or whoever has that relationship, and you say, Hey, I’d really like to meet with them and talk with them. You have those conversations, and you probably started with an email of, hey, I’d really like to talk to you about real estate investing in general or whatever it is that you’re offering in general. And you’re just making a nice sit down meeting either on the phone or in person or on Zoom and have a good conversation about what it is that generally that they’re looking for, you know, what kind of criteria that there is or what how they think about the market or how they think about investments in general. You have a nice good dialogue that that goes through that. You document that either in an email just the easiest way that says, hey, it was great to meet you last Tuesday and talk about how your thoughts on the market. And I’ll get to compare notes about what I think too, it was really nice to meet you. And I look forward to talking with you again soon. And some time then goes by between that initial meeting. And when, when you talk to the investor again, and so maybe you talk to them again, and still have non-substantive as it relates to your investment conversation. But to you some time goes between that initial conversation. And when you decide to discuss your investment. Now, it would be ideal in the in the grand scheme of things, if you didn’t even have another investment lined up, right, if you didn’t have one in the offing, and then now suddenly you do and then you go to the investor. But the reality is, that doesn’t happen in today’s world. And so what we need to do, and I don’t think it’s prohibited based on no action letters that we’ve seen from the SEC, to still have those kind of those substantive conversations later about an investment that may have pre existed that initial conversation to begin with, as long as you didn’t have it at that outset meeting. So now you go back to them, ideally, two weeks, three weeks, four weeks later, you can probably get away with one week, but one week was a little short. So just know that that’s there. That’s the gray area that I alluded to before. So you go back to them some period of time later, and you say, Hey, Joe, we had such a great conversation about real estate investing, or investing in stocks or investing in crypto mining operations, whatever it is that you’re doing. And you say, I’ve now got this opportunity. And I’m letting friends and family invest into it. I’m not advertising it to the general public. I’m just doing it to people that I know. And I’ve thought maybe you might be interested, would you like to see it and discuss it later? And that’s when you establish that now you’ve also got since you’ve sent that by email, ideally, or maybe you’ve just called them in send a follow up email about it. Now you’ve got another clear demarcation of time. So you’ve showed this lapse time between the initial meeting, and when you’ve actually discussed that investment possibility with them, whether or not they want to invest? And that’s the way you do it. That’s the way most people do it. And it’s probably very, very good. Now, what are the things that will make it not as good, it’s that length of time from that first meeting until that introduction of the of the security itself, as well as the gathering of an investment questionnaire and getting a really good sense of who that person is and what their investment thing is. Now, is the investment question are always like, critically required? No, because what if it is your brother, I mean, your brother, you have a very substantive relationship with probably. And so there, that level isn’t really required, right. So it’s sure it’s still helpful to have, but it’s not like you’re going to lose the case if your brother was to bring an action. And he made a claim that there was no pre-existing relationship, because it’s kind of clear that there would be. So that’s the general thing we look at. Now, here’s the key takeaways for this. Number one, the process of turning someone with no prior relationship into someone with a pre-existing substantive relationship. It involves several important steps. And we talked about what those steps were, it’s meet with them do not discuss the investment, then you introduce the investment some period of time later. And it’s helpful along the way. If you get at that time, an investment questionnaire or prior to an investment questionnaire, it’s best practice to provide a detailed questionnaire to get to understand that investors level of sophistication and goals. Building a substantive relationship requires offline conversations, preferably through a phone call or in person to discuss goals and experience. This is not something that you can do. Well, they were my friend on Facebook. Fostering interactions that allow for the establishment of a substantive relationship is crucial. And the quality of those interactions is more important than the time it takes to actually establish the relationship. So more time that goes on is helpful, but it’s not dispositive. What really matters here is the quality of those conversations. So now you have the basic toolkit in order to go change the relationships from didn’t know them at all to probably could qualify fine for your 506b Reg D syndication. I hope you found this helpful. My name is Tilden Moschetti. I’m a syndication attorney for the Moschetti Syndication Law Group. We specialize only in Regulation D syndication. So we help in syndicators put together all their offering documents and also offer the support and guidance needed to be successful with their offering.
When you are a syndicator, or a fund manager, you have certain duties to your investors, it’s not only good business sense, it’s a matter of law, that you treat your investors, right, and you have certain fiduciary duties to them. So in this video, we’re going to describe what those duties are, and the best practices to comply with it. To keep you out of trouble, keep your investors happy and help you be more successful. My name is Tilden Moschetti. I’m a syndication attorney with the Moschetti Syndication Law Group.
There are three main duties that are owed to all of your investors. They’re all members of the LLC that you’re using for your private equity fund your syndication, whatever. And these three duties are always present, you can’t get rid of them entirely. But you may be able to establish a way to work with them. And we’ll discuss how that happens in a minute. Now, it’s important to note that we put an asterix on this and say, Yes, we know that you have an operating agreement that probably says something like that the manager, meaning you don’t owe a duty to your to all members, meaning your investors. Now that is true in some respect, but it’s not true. In all respect. It’s not true as it relates to these three duties, which are sacrosanct. So the first duty is the duty of care, you, as a manager, have a duty to safeguard your investors money in order to make reasonable decisions, right, you cannot just throw your money away their money away, you cannot be negligent on the care of their money. You can’t do things that wouldn’t a normal reasonable person wouldn’t do. You must do be diligent and do your due diligence and look out for that. That’s one of the most important duties, if somebody is trusting you with that amount of money, they also are expecting to have that you’re at least gonna make reasonable decisions and not screw up and just totally be negligent, right. I mean, that kind of goes without saying. So that duty is always there. Number two is the duty of disclosure. So that means that you should be an open book to your investors. I’ve had syndicators ask for, for the work to create a world that’s a closed book. And I don’t recommend that it certainly is possible that you could narrowly tailor these rules, but it’s gonna start to look very fishy. I’ve had people ask me before, well, can we make it so that they can’t ever see the books or the accounting? Well, we can put that into an operating agreement. But I don’t think you’d actually be able to win a court battle. If an investor was to say, I just want to see how my money’s being used. And to make sure that it’s following a good duty of care, or that it’s not being stolen from under me. So I don’t think it’s a good policy, not only for PR reasons on being transparent. But it’s just also the right thing to do, to let investors know exactly how their money is working for them. And if you’re doing a good job, this is a great thing to be telling them. Because here are the books, here are the great things we’re doing for you to make you more money. So the duty of transparency is something I don’t think you can just get rid of. And I don’t think that you should narrowly tailor it. And at the end of the day, it’s just bad policy to try and do it. The third duty of care is the duty of loyalty. So these are investors who have trusted money with you, you owe them loyalty and not can engage in self dealing. self dealing is where you’re putting your interests ahead of your investors interests. Now, it’s important to note that there are many inherent conflicts of interest in this very duty, right? If you’re making a large management fee, and it’s time to sell the property and you don’t want to sell the property, or your whatever the assets or the whatever the fund is. And you’re so your own self interest says, Hey, keep this thing going for another 10 or 20 years, and I’ve seen this happen. I’ve seen people syndicating try and do this and it’s wrong. You owe a duty to your investor to put their interests first they trust to do You want this money to do the right thing to make those reasonable decisions under the duty of care, and to be an open book and the duty of transparency, but you also have that important duty of loyalty to them. Now, like I said, Before, there is a conflict of interest inherent here, for example, you may be trying to do a, trying to sell the property, sell a property or sell an asset, because it’s time to exit and you’ll cash out good, right? Anytime you’re making money at the expense of whatever the acid is, there’s this question about whether or not there is a self dealing going on, because you’re about to make some additional money based on whatever happens with their asset. Now, why that’s okay, is because it’s the very beginning, at the very beginning of the investment, you gave them a private placement memorandum. Now, let’s put it in a real estate context, because that’s the easiest for given example. So in the real estate context, let’s say you bought a building and you say, okay, in five years, we’re gonna sell this building at a high price, I’m gonna get an A, not only am I going to get a disposition fee of 1%, but I’m also going to be the selling broker, that’s, that’s going to be taking a commission on it. Now, some time goes by two and a half years, three years go by you told them five years, but three years have gone by an offer comes in, you didn’t solicit it, it just comes in hits your table, you obviously because of the duty of transparency, have a duty to report that to your investors. But you also want that transaction to occur, because now you’re going to get cash pretty quick. Right? So you actually want that transaction to occur early. So that automatically is self dealing. But in your private placement memorandum, you said, hey, look, I am a reg, I am a licensed real estate broker, I am going to be making this disposition fee here. And then when it comes time for that transaction to occur, you say, hey, I want some input on this to decide whether or not this is a good idea. And whether or not we should go forward with it. You’ve let the investors know that you’re going to let the market dictate when you actually sell the property. So you’ve given them all this information that says, hey, there’s also this possibility that I’m going to be self dealing here, I am going to look after your interest and I’m not going to make unreasonable decisions. And I’m not going to be non transparent to use a double negative. And I’m going to let you know when things are what things are going on. So you’ve complied there. But you’ve also acted in a way that’s been loyal, because you’ve told them what those conflicts are. And you should continue to tell them what those conflicts are so that people can make reasonable decision. And I’ll tell you what, if you’ve been straightforward with your investors, up until this point, they’re gonna go along with you anyway, because they’ve already trust you. They already see what you’re trying to do. So you have nothing to lose. But by being more transparent, more, do more, do caring for their money, and just being loyal to them. They will allow, they will do what you want them to do. Anyway, almost always, unless it’s a bad decision. Unless there’s a very good reason that they that you’re not making a good decision, they’re gonna go along with you anyway. So those are the three main duties that are owed to your investors as a syndicator, or fund manager. Now, the key takeaways here are this. The fiduciary duties including the duty of care, duty of disclosure and duty of loyalty are the foundation of the financial relationship between you and your investors. And breaching these fiduciary duties can result in severe consequences, such as legal implications, reputational damages, and possible criminal misconduct. Engaging in separate deals that do not conflict with the companies or investors interests are always going to be permissible. And understanding and upholding your fiduciary duties are crucial to maintaining that trust. And that ethical conduct in the financial relationships is only going to make your job as a syndicator or fund manager even easier. My name is Tilden Moschetti. I am a syndication attorney. With the Moschetti Syndication Law Group. We help syndicators and fund managers organize and set up their syndications or investment funds and give them the support that they need in order to be successful. If we can help you don’t hesitate to give us a call.
Regulation D rule 506b and 506c involves us indicator finding investors. Now when it comes to finding investors, either we’re pulling them from our own internal network, or we’re finding them outside. Now one of the ways we can do that is to make sure that those people within our network and those people outside hear our message. And we do that through a solicitation. But what is a general solicitation? And what does that mean in this modern day and age? That’s what we’re going to go through today.
My name is Tilden Moschetti. I am a syndication attorney with the Moschetti Syndication Law Group. We’re talking about general solicitation today, we’re actually going to narrow it down a little bit more, because we have one question that comes up in my office all the time. And that is, how social media could possibly fit into this context. Now, to put this into its proper frame, I think it’s important for us to look at the rule itself, of what constitutes a general solicitation. Now in the code itself, it’s under Reg D Rule 502, where they actually describe it, and they don’t call it general solicitation there, they call it the manner of offering the limitation on the manner of offering what helps describe it. And that limitation applies directly to Rule 506b. Because remember, under 506c, we can make a general solicitation, well, you can put a billboard up on Main Street, we can do whatever, but 506b, we have a limitation on offerings. So what exactly does the SEC tell us what that means? What is a general solicitation? Well, here’s what you can’t do. First there is, what we can’t do is we can’t have a seminar where the whole purpose of it is just to market the offer. So that’s 502c(2) that describes it. But Rule 502c(1) one actually describes a little bit better and starts to get on what we’re talking about today. And so it says, And they meet any advertisement, Article notice or communication published in any newspaper, magazine, or similar media or broadcast over television or radio? Oh my goodness, do these people live under a bridge? Or what? Because that needs to be severely upgraded. Newspapers? What are those magazines? I’ve heard of them? They mean, like those digital magazines talking about? What about social media? And that’s a question that I get all the time. So the argument could be made, and I think not correctly. And we’ll go through why in a minute. That? Well, when I add when I post something on Facebook, I’m posting just to my network itself. So those people who already know me, right, so those people who already know me, they can know that I’m doing it, and it’s not a general solicitation, it doesn’t really fit in to what they were talking about under Rule 502c1. However, the difference is the substantive ness of that relationship with those people that you have on Facebook. I mean, my Facebook account has many, many followers. And the reality is, I probably know 100 of them. There’s probably 400, 500, 600 people who have liked my page, and I’ve accepted their friend requests. And I don’t actually know them. Now on LinkedIn, that’s also very common. So these are be friends, friends of friends, friends, of friends, of friends of friends and friends of friends or friends or friends, or people who just sent me advertising and we’re in similar industries. And so I add them. That is the case and the SEC knows it, and the courts know it. So when it comes to actually making a solicitation, if I were to post about my Rule 506b offering, hey, come look at this that I’m offering. Come invest with me now. I’m making a general solicitation because it’s going out to people who really aren’t part of my internal network. So it is taking advantage of that similar media broadcast, right. So I’m broadcasting it out over the wide spectrum. So social media itself needs to be very careful when you’ve got a 506b offering. Now, certainly I could probably say something like, Hey, I’m a hey, I’m going I am going to be invest stick into XYZ and not make anything about investors or come invest with me or anything else. Or, Hey, I’ve been doing a lot of work in real estate or securities or private equity or crypto mining or whatever it is that you’re doing. I’d love to talk to all of you about it. And then as part of those conversations, not pitch them immediately unless it happens to be somebody you actually already have that substantive relationship with. But then you can take that conversation offline, you have a conversation in general about those, you wait a period of time and you reintroduce it, we have other videos that talk about exactly that process. And you can find them on my channel. Where the key takeaway here is this when you’re selling securities, which involves the sale of stocks, bonds, mutual funds, real estate, and the sort of interest where somebody has a passive role, you as a syndicator must comply with the securities law, obviously. Now, syndicators can choose to register with the SEC, or you can find an exemption, or you can risk being considered an illegal activity. Exemptions like Reg D Rule 506b, and 506c, are very popular and useful. And it’s what my law firm specializes in. And they provide a certainty and save time and money. But here’s the main key takeaway. Social media advertising is a major concern for you. It can impact the exemption ‘s use, and it can require an enormous amount of penalties, which you don’t want to hit if it’s been used. So treat social media as if it is really media, the emphasis in that term, as it would be looked at by the SEC or court is media which means general solicitation almost always. So use it with caution. If you’ve got a 506b offering, do not talk about your your offering in any sort of specific terms or that there’s even a possibility of investing with you, because that will be eventually used against you, either in this offering or in some offering that you make down the road. My name is Tilden Moschetti. I am a real estate syndication attorney with Moschetti Syndication Law Group. And if we can help you do your own syndication with by providing you the documents and the assistance you need to make yourself successful, we would be happy to help you.
So you’re putting together a real estate syndication but you want to know who needs to be on your team. A lot of times people will call me first, they’ll say till then you’re a syndication attorney who needs to be on my team. Well, in today’s video, we’re gonna go through the five main players and a couple other ideas on who needs to be in your Rolodex as key players so that you when you’re putting together that’s indication, you know who is on your team.
My name is Tilden Moschetti. I am a syndication attorney with the Moschetti Syndication Law Group. We specialize in putting together Regulation D 506b and 506c offerings for real estate syndicators, real estate developers, businesses, anybody who’s looking to raise outside capital for the acquisition of assets, and those outside investors get compensated. So let’s talk about some of the key players who need to be part of your team. First off is the real estate syndication attorney, such as myself, I specialize in this field, I’ve done many deals for myself, as well as acted as an attorney on hundreds of real estate syndication offerings put together by my clients, but I do my own deal. So I boots on the on-the-ground experience. And I have know firsthand the situation that you’re going through. So a lot of times people will come to me first, because I already have been there and bend down the path that they’re that they’re looking for. And they know, I probably know people, that would be good additional team members. So real estate syndication attorney, my job is to make sure that you are compliant with the rules of the SEC in the States and that you’re complying and doing all the things that are necessary when you’re offering a security because that’s what you’re doing in a syndication is you’re selling a security, it’s a free pass to sell that security, but you need to follow the rules, you know, just like a stockbroker, you know, they’re selling securities, and they probably have an MBA. In this case, you’re getting to do all that work. And you’re getting to make money as somebody selling a security your own. But you need to comply with those rules. So our job as a syndication attorney is to make sure that you’re compliant. Our job is also to make sure that you go down a road and that you’re ultimately successful, because then you can keep doing more and more syndications, right. Another major key player, the probably number one on your list, or number two on your list is a real estate agent or real estate broker, you need a way to be able to find properties and and be able to source those. Some people have those in house and that’s or they come to the doing real estate syndication as a broker agent themselves. But if they’re not, it’s very helpful to have at least one and probably a multitude of real estate agents or brokers to help them find the right property and to set up that deal for the acquisition of the asset that will be part of their syndication to begin with. Another key person is, is an accountant. Now, the accountant certainly is going to be doing the taxes and making sure that the K ones get filed most syndications that our partnership returns, which means that we issue K ones every year. And that account is critical to make sure that all the benefits of owning real estate such as depreciation, are passed on in the appropriate way to your investors, as well as giving tax returns which need to get filed every time. And you along with that accountant, you will also want a bookkeeper. And so you want to be able to keep track of all those expenses and make sure that they’re being attributed properly to the investment vehicle itself. We want to make sure that distributions are happening in an appropriate way and make sure that those distributions are happening and a bookkeeper can help you with that. Lastly, you may choose to have a property manager, a property manager is the one on site or near the site that can be the boots on the ground and make sure that tenants are paying their rent to make sure that improvements are happening to make sure that expenses are getting paid. All those things that a property manager does. Having a great property manager is a lifesaver for a syndicator I’ve never had a syndication go south where I haven’t had a I should put that differently. I’ve never had a syndication go south. And that is because I’ve always had the very best property manager I could find to make sure that the property was being managed in the best possible way in the most efficient way possible. Key key key to have a great property manager. Other people you may want to consider as part of your team is maybe especially if you have a more complex structure, you might want a business attorney to make sure that all those deals that all those arrangements that are being made, maybe with vendors, or maybe it’s contracts that are being made with developers, things like that are being done in a way that is legal and compliant. And under your local state-specific rules. You also may want to hire a tax attorney, certainly if there’s going to be some sort of 1031 exchanges as part of this or if you’re going to be doing anything different than just straight line accounting. A tax attorney can be very helpful as well, especially or if you’re doing an opportunity zone fund. They will be the one who can help structure that opportunity zone. And then the raising of the capital gets done through a securities attorney such as myself. My name is Tilden Moschetti. I’m a real estate syndication attorney with the Moschetti Syndication Law Group. We specialize in Regulation D 506b and 506c offerings for real estate syndicators and developers but also for businesses or anybody who’s looking to raise outside capital from investors.
How do waterfalls work in a syndication? Well, that’s what we’re going to be talking about right now. My name is Tilden Moschetti, I am a syndication attorney with the Moschetti Syndication Law Group.
You may be wondering to yourself exactly how our distributions going to happen, what are these things called waterfalls that I hear about how to what our preferred returns? How does it all fit together? That’s what we’re going to be talking about right now. So let’s go to our whiteboard. And take a look at what of just a very simple scenario so that we can be better understood. So let’s say we have a property that we bought for $5 million. All cash. And we raised that $5 million entirely from investors just for the ease of doing the analysis. And out of that $5 million, so it pays rents, right? That’s how most properties happen. They, they pay rents, and then there’s some sort of appreciation that gets distributed at the end. So let’s say we’ve told our investors hey, look, investor, we’re gonna give you this deal, we’re gonna give you a preferred return offer, also called a pref, of 7%. And then any money that comes after that preferred above that preferred return of 7%, we are going to split 7030 70%, to you, investor, and 30%, to me as the syndicator. So then, let’s, let’s look at it from the investor’s point of view, and the sponsors. So let’s say that those rents are being collected. And let’s say it’s about let we’re getting, say 55 $550,000 annually on that investment, so $550,000. So first, we take that $550,000, and we need to give that preferred return this pref to the investors first, that’s the first thing that happens on all those cash flows. So they first get 7% 7%. Right, which equals $350,000. out why $350,000? Well, it’s $505 million, that we paid for it 7% of 5 million is $350,000. So that is their annual preferred return amount that they’re getting. On top of that, there’s still this bought this amount of money, this $200,000. Right, so the 550 minus the 350 K is $200,000, that still needs to be divided between investors and the sponsors. So that 350k, the split is 7030. And so they get another 140k, right 70% Of $200,000 goes to that goes to the body of the investors. Now the sponsor, they get 30% of that 200,000 that’s leftover so they get 60,000. So out of that those cash flows in you as a sponsor getting $60,000 Every year, this is after fees have already been taken account, the investor is getting 350 plus 140. So they’re getting $490,000 paid out to them every year. So as part of their investment, so pretty good deal. That’s that’s a nice return. So you’ve decided to sell the property. Let’s say you sell it in year five. So year five, you are able to sell the property and let’s use $6,500,000 Is your sales price. Alright, so first, how do we divide up that amount of money? So first we have to return so to investors We have to give them their principal. How much they initially gave you that was 5 million remember? After the payment of their principal, we then need to get paid them the preferred return, as I bet you’re thinking, well, actually, we don’t. So let’s say that sale is paid at the end of year five, and we’ve been paying regularly, those preferred returns at that 7%. So the end of year on December 31, in the year, in year five, that preferred return has already been paid that 7% has already been paid. So now there’s just the division of the assets that are remaining. So that is leaves us with with, we have to return their capital. So we then have $150,000, to divide, I’m sorry, $1.5 million to divide between the investor and the sponsor. And so 70% of that return is belongs to the to the investor. And that is 105, or 1,000,500, I’m sorry, 1,050,000. gets paid out to them. And then the remaining $450,000 gets paid out to the sponsor. So that’s your money to get there. So now they investor then gets this $6,050,000 At the end of the investment. So is it just the is that just the the total amount? So how do we with that amount? How do we figure out what the internal rate of return is? So for this, you’re gonna need a calculator. And we draw what’s called a T bar, a T bar says we start at time zero, where they paid out $5 million. Right. And then we held that for one year, one year, two year three year flips to choose your three, year four and year five. And remember, in those, we were making payments of $490,000.
In here, I’m going to write it off to the side because I’m going to total it underneath. Plus, then we also have this payment of the 6,050,000. Right, and so that total is six 540. Oh, so let’s just delete this. So it’s easier to read. Right? So that 6,000,500 Now what you do is you select this entire range, you put it in Excel, it tells you what the answer is, it’s been a 13% annualized return that the investor has gotten so not bad. So the IRR is 13%. Hope that explains a little bit on how you do these waterfalls. And you do those preferred return payments and you split out the cash for typically in a real estate investment but really any kind of syndication. This is how those the water, the water flows. So if I can be of any assistance to you, my name is Tilden Moschetti. I’m a syndication attorney with the Moschetti Syndication Law Group. We specialize in Regulation D Rule 506b and 506c syndications and funds.
Newer Episodes:
Episode 69 – What Happens When an Investor Wants to Exit Early in Your Reg D Syndication Or Fund?
Episode 66 – How to Start a Real Estate Fund: A Step-by-Step Guide Using Reg D, 506b, and 506c
Episode 65 – Mastering Financial Analysis: A Key Skill for Reg D Syndicators and Fund Managers
Episode 64 – Raising Money From Friends And Family: Unlocking the Legalities of Raising Funds
Episode 63 – Are You Creating a Security? The Howey Test Knows: A Look At SEC vs. Howey
Episode 62 – Deconstructing a Reg D Real Estate Syndication Deal A-to-Z: Part 2
Episode 61 – Regulation D Waterfalls 101: Understanding Investment Distribution
Episode 60 – Choosing Between Regulation D Rule 506b and 506c for Your Syndication
Episode 59 – Deconstructing a Reg D Real Estate Syndication Deal A-to-Z: Part 1
Episode 58 – 10 Essential Tips to Secure Investment from Family Offices for Your Reg D Offering
Episode 57 – The ‘Syndication LLC’ Disaster: Consequences of Bad Advice
Episode 56 – What Is Equity Dilution In A Regulation D Syndication Or Fund Offering?
Episode 54 – Demystifying Open-Ended and Closed-Ended Funds In Reg D Private Equity
Episode 53 – An Innovative Example Of A Syndication Investment Strategy: F.I.T. In Action
Episode 51 – Cash Flow vs. Appreciation: Understanding Reg D Syndication Investor Types
Episode 50 – Choosing Between Regulation D and Regulation CF: An Attorney’s / Syndicator’s Analysis
Episode 49 – How To Find Investors For A Regulation D Offering Without Using A Broker-Dealer
Episode 48 – The Difference Between REITs and Real Estate Funds & Syndications
Episode 47 – Securities vs Joint Ventures: Know the Critical Differences or Risk the Consequences
Episode 46 – Eight Steps to a Successful Real Estate Syndication
Episode 45 – How Long Does It Take to Raise Money for a Reg D Syndication?
Episode 44 – How to Ensure Your Reg D Syndication Offering is Marketable and Legal
Episode 43 – 5 Mistakes Rookie Regulation D Syndicators Make
Episode 41 – How Capital Accounts Work in Syndications
Episode 40 – Why You Need a Private Placement Memorandum (PPM)
Episode 38 – Strategies for Managing Multiple Reg D Offerings: A Guide to Fundraising
Episode 37 – Understanding Real Estate Syndication Through a Practical Example
Episode 36 – The Art of Getting Investors’ Commitment: A Six-Step Guide
Previous Episodes:
Episode 30 – Choosing the Right SEC Exemption for Your Investment: Alphabet Soup
Episode 29 – Understanding Reg A, Reg CF, and Reg D in Syndication: The Alphabet Soup Explained
Episode 28 – LLC vs. LP vs. Corporation: Which to Choose for Syndications?
Episode 27 – Can You Get a Bank Loan?: Leveraging Traditional Financing in Syndication
Episode 26 – Securities Licenses and Real Estate Licenses for Reg D Syndications
Episode 25 – Unlocking the World: US Syndications Open to Non-US Investors
Episode 24 – Syndicators’ Guide to Self-Directed IRAs: Maximizing Capital Sources
Episode 23 – GP and LP: Exploring Syndication’s Key Players
Episode 22 – Syndication Fallout: What Happens When Losses Happen?
Episode 21 – Business Funding Unleashed: Embracing the Opportunities of Regulation D
Episode 20 – Behind the ‘Bad Actor’ Rule: Rule 506d Demystified
Episode 19 – The Myth Of The Friends And Family Securities Exemption For Syndications
Episode 18 – Demystifying Form D Filings with the SEC: In-Depth Walkthrough and Tips
Episode 17 – Can An LLC Invest Into A Regulation D Rule 506b Or 506c Syndication Offering?
Episode 15 – How Does Regulation D Rule 506c Work For Syndication?
Episode 14 – Syndication Attorney Webinar – ‘Ask Me Anything’
Episode 12 – ‘Can I do both a Regulation D 506b and Reg D 506c in one LLC?’
Episode 11 – ‘Can I do a 1031 exchange in a Regulation D syndication?’
Episode 10 – Regulation D Limitations on Resale: What You & Your Investors Should Know
Episode 9 – How does Regulation D Rule 506b work for syndication?
Episode 8 – How do I pay people to market my Regulation D syndication?
Episode 7 – What information must be disclosed in a syndication private placement memorandum?
Episode 6 – What are ‘Blue Sky’ laws when it comes to syndication?
Episode 5 – How can you structure sponsor fees for a Regulation D Rule 506 syndication?
Episode 3 – Should I do a Regulation D 506(b) syndication or a 506(c) syndication?
Episode 2 – How do I market my Regulation D Rule 506 offering?
Episode 1 – How Should I Structure My Regulation D Syndication?
