There are lots of ways you can structure a small deal with investors. Some are cumbersome: Full-blown securities offering with Private Placement Memorandum, Operating Agreement, Subscription Agreement and Securities Notice filings. Others are not as cumbersome, such as a Member-managed LLC with all investors responsible for making their own profit.
Your legal compliance requirements will largely depend on whether your investors are:
- active (easiest legal documents) or passive (more complex legal documents)
- accredited (easiest legal documents – No PPM required) or non-accredited (PPM/disclosure document required)
- everything is in one state – you, investors and the property (may be an easy intrastate offering exemption you could follow), or crossing state lines (usually means you have to follow the federal exemption rules, which can be costly)
- people with whom you have a pre-existing relationship (easiest way to raise money) or want to advertise (harder to raise money, probably need a track record with similar properties and investors)
Some of the questions relate to legal compliance, but others are more logistical, such as “Who do know who might invest with you?”
A consultation with an experienced syndication attorney can usually place you on the right track and help you figure out what will work for your deal, while containing costs to the extent possible.
You should also consider getting some formal training in multifamily investing, as it’s easy to make $100,000 mistakes when you are first starting out. Better to learn from others’ mistakes versus your own.