Transcript: ‘Dating for Dollars’

Edited transcript from the teleseminar, ‘Dating for Dollars’

Originally broadcast on Aug. 24, 2017


Listen to the teleseminar


Kim Lisa Taylor:

Welcome to the free monthly teleseminar for Syndication Attorneys, PLLC. We are a Florida law firm, but we do securities offerings under federal securities laws nationwide, so we are able to help clients in any state.

I do want to give us a little disclaimer, so everybody understands that all of our calls will be recorded and may be used for future promotion, posted on our website or broadcast in a podcast available to the public. If you do not wish to have your voice recorded, please do not participate in the live Q&A section at the end of this call and schedule a one-on-one consultation instead. Information discussed during this free teleconference is of a general educational nature and should not be construed as legal advice, which may only be sought after establishing an attorney-client relationship and consideration of your specific facts or questions. The attorney client relationship does not begin until we have a fee agreement in place signed by all parties.

Today, we are going to talk about dating for dollars.

The whole purpose of this call is to help you create a marketing plan that will give you the best possible opportunity for success in fundraising once you have an offering in hand. The process of setting up a marketing plan really needs to start well in advance of finding a deal or having a securities offering. The reason for that is because you need to establish a presence in the marketplace, you need to establish credibility in the marketplace, you need to let people know what you’re doing so that it’s not a big shock and surprise to them that somebody who they knew to be working for the local phone company last month is now selling interest in a real estate company. So, you want to make sure that you’ve got a solid plan in place, and that’s what we’re going to talk about.

The first thing is, how do you develop a database of potential investors you can draw on fast when you need to fund a deal? Well, first of all, you need a marketing plan.

What is the marketing plan going to include? It’s going to include marketing materials, things that you can either hand to people in person, send out to them in an email or post somewhere that other people can see them and read them and hear about what you’re doing.

What kind of distribution methods are you going to use to get that information out to the public? Are you going to post it on a website? If you do post it on a website, how are you going to get people to your website? Are you going to go meet people at live events, drive them to your website, or you’re going to just rely on search engine optimization and hope that they’ll show up? What are you going to do to generate traffic in order to review things on your website? If you’re going to use another distribution method, what might that be? Are you going to use some kind of a drip email system or something … getting that message out to the public.

You also need to think about, in your marketing plan, the timing. Once you have these marketing materials and you’ve got a plan for how you’re going to distribute them, how frequently are you going to distribute them? Monthly? Twice a month? Once a week? Every day? What are you going to do that’s going to get your name repeatedly in the eyes of potential investors so that they know who you are when you have a deal that you need to fund?

Another thing that’s critical in a marketing plan is being able to measure your results, because you’re going to spend a lot of money, developing different tools and delivery methods, and you need to know which ones are working and which ones aren’t. For instance, I’ve learned over time that advertising for my law firm in magazines, even real-estate-investment-related magazines, is not an effective marketing tool for me. And so, I don’t spend money on print advertising because it just doesn’t work.

And how do you measure results? You’re measuring how many people have opened whatever you sent, how many people have responded to whatever you sent and how many people have actually taken action on what you’ve sent. The next thing you’re going to have to have — and this is for securities legal compliance — is a record-keeping system.

The main reason we need to have a record keeping system is well, one, for practical reasons, you need to know who is actually a viable investor, even sending something to somebody for 16 months, and you’ve never heard a word from them, they might not be interested or somebody who’s opted out of your email campaign might not be interested. That’s one of the things you have to think about. But when you’re selling securities, if you will just do a really quick primer on, what’s the security? Okay, security is either a promissory note or an investment contract.

What’s an investment contract? It’s an investment of money in a common enterprise with an expectation of profits based solely on the efforts of the promoter. And so, if you’re selling either of those, that means that if you are selling securities, and you either have to register your offering, get it pre-approved by a regulatory agency or qualify for an exemption.

Each of the exemptions has its own set of rules. The rule that most of our clients use is Regulation D Rule 506, which has two different options. One is called 506(b) ­— “b” as in “boy” — that says that you can raise an unlimited amount of money from an unlimited number of accredited investors and up to 35 sophisticated investors, but you cannot do it through any means of general advertising or solicitation. And the way to determine that didn’t occur is to be able to prove that you had a pre-existing relationship with a prospective investor before you even offered the investment opportunity. That’s 506(b). That’s the one that requires you have a pre-existing relationship, that’s the rule that’s been in effect for a very long time.

The newest rule is Regulation D Rule 506(c), and that’s the one that everybody calls “crowdfunding,” because it allows you to advertise. The difference is that in 506(c), you can advertise to anybody, but you can only allow verified accredited investors to invest in your deal. So, they either have to be verified — there are financial qualification tasks to be verified to prove that they are indeed accredited investors — either by you, so you’ve got to look at their financials, or you’ve got to look at their income statement or you have to have it verified by a third party. They can have that done by their own attorney, CPA, registered investment advisor, or there’s some companies that will do that for them for a nominal fee, something like $69, and provide you with a letter.

But your obligation is to have reasonable assurance, before you accept their funds, that they are indeed accredited investors, and that has to be dated within 90 days of when they make the money investment with you.

Under 506(b), the investors can merely self-certify. They can check a box saying, “I meet the definition; I’m an accredited investor or a sophisticated investor,” and then they don’t have to go any further as long as you have that, and then they’re going to further testify to that when they fill out a subscription agreement. As long as that information is all consistent, then you’re safe in taking their funds as long as you didn’t get them through any means of general advertising or solicitation. That’s the 506(b) rule.

So, 506 (b): no advertising, no general solicitation; 506 (c): you can advertise, you can post it on your website, you can email blast it to the world, you can put it on somebody else’s crowdfunding platform and let them email blast it to the world. You can advertise in the newspaper, hold seminars, where you talk about your deal if you’re doing 506 (c), but you are excluding perhaps a lot of the people that you know, so your friends and family who maybe would be interested in investing with you, but they are not accredited investors.

So, just to fully flesh this out, what’s an accredited investor? That’s somebody who has over $1 million net worth exclusive of any equity in their primary residence, or they make over $200,000 a year if they’re single, or $300,000 a year if they’re married, filing joint income tax returns.

What’s a sophisticated investor? That’s somebody who, by themselves or with the help of their investment advisor, has the financial educational background and experience in order to evaluate the merits and risks of the offering and understand whether it’s suitable for their portfolio, and that they can withstand the loss of the investment if they needed to.

The SEC says if you’re going to be doing either of these exemptions, if you’re going to qualify for any exemption — and there’s other exemptions too, these are just the most common ones that that our clients are using—  if you’re going to qualify for an exemption, you must have a record-keeping system in place to demonstrate how you complied with the rules for that exemption. These are self-executing exemptions; it means the burden of proof is on you to prove that you are entitled to claim the exemption.

If you cannot prove that through some record-keeping system, if you were ever audited or investigated by a regulatory agency, they would disallow that exemption. And then, you would probably be in trouble for selling securities without a license or selling unregistered securities. So, you need to know when you’re selling securities that you’re going to be following an exemption, you need to have very clear understanding of what those rules are and have a record-keeping system in place.

And that should be part of your marketing plan — to make sure that you are properly documenting all of the responses that you get and all of the people that actually do invest with you to make sure that they indeed qualify under the terms of the exemption that you’ve selected.

All right. What kind of marketing tools do you need to be able to show investors that you’re serious about your business? Well, the first thing is that you have to have a company name that is not offensive, easy to remember, easy to spell and portrays what you do.

So, beware of using really odd Latin sounding names or Greek names or something like that, that nobody knows you. Yes, it might have some meaning to you, but if nobody can spell it, nobody can pronounce it, it’s going to be difficult, other names that aren’t so great, or names that are just a bunch of letters and words that are letters and numbers that don’t mean anything to anybody but you. So, you’re trying to brand yourself here. You think about Apple computer or Nike, somebody like that, you want to create a brand that is going to withstand the test of time and that you’re going to use as a common element in all of the securities offerings that you’re going to do.

Why do you need that? Well, first of all, nobody is going to believe that you’re in business unless you have a business card. So, you’ve got to have a business card that you can hand to people when you meet them saying what you do. The second thing about your brand is that you need to have a title that would invite conversation.

Company names and your title, I call these things conversation starters, right? So, what is your conversation starter? Another conversation starter is the response that you have developed when somebody asks you, what do you do?

So, what’s our conversation starter? It’s called various things; it’s called an elevator pitch, conversation starter, magic statement. Ours is: “We help entrepreneurs create successful investment companies by providing them with the tools they need to raise money from private investors, legally, ethically and profitably.” I’ve practiced that a lot. That’s why it was able to come out as easily as it did. We use it as a tagline in our banners when we go to trade shows and on our website.

You have to practice your magic statement. It shouldn’t be so long that you’re stumbling over it, or that people’s eyes are glazing over when you’re saying it. It should be short and to the point, and explain to them explicitly what you do. And so, the whole idea here is to give them a statement that piques their interest so that they will say to you, “Oh, really? How do you do that?”

Because you want them to be interested enough to ask about you so that you can engage in conversation with them about what they do, what their interests are, determine whether they might be a potential investor for you, and just start up that relationship. That’s the conversation starter.

I liken that to, what would you do if you met someone at a bar? So back to our “dating for dollars” theme today, if you met somebody in a bar, what are you going to do? You’re not going to jump right in and launch about how you want to get married and have three kids; you’re actually going to start with something like, “Hello, my name is so and so,” and then somebody might ask, “What do you do?” And you’re going to talk to them about what you do, and you’re going to ask the same questions of them. And by the time you’re done with that initial conversation, then perhaps you exchanged contact information. And then one of you, or both of you, are going to follow up at some point in the future.

That’s your conversation starter: What do you put on your business card, and what do you say when somebody asks you, “What do you do?”

The next thing you got to figure out is how are you going to meet potential investors? Where are you going to go that they are? You could do that at chance encounters … on a plane, standing in a line at a bank or a grocery store … you can strike up conversations with people. But that’s probably not your most effective way to do that. You can go to real estate educational events, where there are other like-minded people, so real estate investment association meetings, or nationwide events held by various real estate trainers around the country where there’s groups of people that are like you, they’re looking to invest. The problem with only going to both events is that you’re going to meet a whole lot of people that are trying to do the same thing you’re doing, so you’re really going to meet a lot of your competitors, probably going to meet more competitors than real investors. But if you continue to go and you make a presence and you go for two or three years religiously every month, you will meet people who would be interested in investing with you eventually.

The other thing you can do involves orchestrated events. You are going to invite people to something; you’re going to invite them to your live event. Just like we’ve invited you to join us on this teleseminar, you could hold a teleseminar inviting prospective investors who might be interested in your company and what it does to talk to them about how you look for deals and what kind of deal has to make sense before you would even offer it to investors, or something like that. So, you could do a live event where you talk about it, you could do a webinar, you could do a teleseminar or a podcast.

The other way you can do this is to offer something for free on your website. How many of you just noticed that you got a newsletter from us that said that you could download a free chapter of our upcoming book? And what do we want in exchange for that? We’d like your contact information, which is your permission to continue to contact you in the future about other things we think might be relevant and interesting to you.

So that’s the other thing that you’ve got to have, is if you’re going to do these free things, live events, webinars, what is it that you’re going to offer them? You have to offer something of value to them. Not of value to you. You want to give away something for free in exchange for permission to strike up a relationship with a person and to create some common ground.

All right. So, you’ve got people that you’re meeting at these events, you’ve got a business card, you’ve practiced your magic statement, you’ve got that down pat, and now you got this idea, you’re going to do some of these live events. Well, so what are you going to talk about?

If you’re doing a 506(b) offering, then you can only talk about generic educational topics. You cannot hold an infomercial about your deal, because that would be considered a general solicitation or advertising. You can talk in generic terms about your company and what it does, you can talk in generic terms about why you do what you do, why do you invest in multifamily? Why do you invest in multifamily in the Southwest U.S.? Why do you invest in single-family fix-and-flips in your local community? You’re going to talk about your “why” and your “how,” but you’re not going to be doing it in a way that’s saying, “Invest with us right now.” Okay? Because that would be general advertising and solicitation. You’re going to be doing it saying, “We’re just teaching you what we do because we think that you can increase your investment portfolio by diversifying into real estate, and we want to educate you on the alternatives and we’re giving you valuable information that you can use to better your own future, and perhaps at some point in the future, we might be able to help you do that, but not today. We’re not looking for that today.”

If you were doing a 506(c) offering, your teleseminar or your live event or whatever it is, your free report could be very targeted. You could say, “Here’s our deal, here’s our offering, here’s what we have available right now, and if you want to invest, click here.” That’s the difference between 506(b) and 506(c), and how you might have a live event in order to generate contacts that have given you permission to stay in contact with them and potentially become investors with you.

What else do you need to have? You’re going to have to have some professional marketing materials. Because when you’re meeting these people face-to-face, you need to be able to hand them something that they can take home. Because maybe it’s a married couple and only one of them came to your event, but they still have to convince the other that this is a for-real company that is not going to just fly away with their money. So, you want to have some professionally done marketing materials.

First thing you’re going to have in your marketing plan, what materials you need to generate, and then you’re going to systematically create these marketing materials to enhance the credibility of your company and your image as you go out and you begin to meet these investors. So, what kind of marketing materials might be a fit? You need some kind of a company brochure, two to four pages that you can hand out to somebody when you have a face-to-face meeting with them. If you were going to go and advertise your company at a trade show, then you would have a brochure that people could walk away with. If you were going to go to a luncheon where you’re going to meet an investor, you would want to have something that you could hand out to them.

The other thing you’re going to need is a detailed investment summary. If you’re doing what’s called a blind pool fund, where you’re raising money over time for multiple properties you plan to acquire, you’re going to pool investors funds and an entity in order to do that, then you have to have an investment summary.

It’s really an abbreviated business plan that describes what you’re doing, what geographic area it’s in, how it’s going to generate a profit, how that profit is going to be shared with investors and how eventually they would get their money back. So, that’s just a real abbreviated version.

If you go on our website and join as a member, then you’ll have access to all of our articles. One of the articles on our website is called, “How to Write an Investment Summary,” so you can write your own. We also write them for some of our clients, and that’s been very successful. When you do your investment summary, it’s going to be important that you don’t just draft it in Microsoft Word and hand it out to people with typos before it’s been reviewed by your securities attorney. Ideally, you should have it reviewed by your securities attorney to make sure that you’re not making promises or saying things that are going to get you negative attention from a regulator, and also that it has the right information in it for your investors.

Not too much information, written in a cohesive fashion, but more importantly, presented in a very professional way with professional graphic design and actually taking that next step and making it look like something more than something you wrote at home at your home PC.

The other thing is, eventually, you’re going to want to have a website, because what does everybody do when you hand them a business card? They’re going to look at your domain, and they’re going to try to look it up on the internet. And if they go to a parked GoDaddy page, it’s not going to give you a lot of credibility. You’re going to want to have a website so that when they go there, they see information that’s consistent with the information you’ve already told them or presented them with, and ideally should be all themed so that it looks like it’s a very cohesive package using the same colors, the same fonts, the same themes throughout, and it just has that nice polished look.

How are you going to then stay in contact with people that you’ve met, because you can’t meet somebody today and then six months later call them and ask them if they’d like to invest with you; they are probably not going to remember who you are. And again, let’s take that back to a dating scenario. If you met somebody in a social setting, at a wedding reception or something like that, you exchange contact information, but then you didn’t call them for six months and then just said, “Hey, we really like you. I met you six months ago at this wedding reception, and I’d like to get married.” They’re going to think you’re a freak, and investors are going to feel the same way. You have to take the time to develop an actual relationship. That relationship will develop over time, and it will develop through repeated contact, live face-to-face meeting followed by some a follow-up telephone call. This is all going to be part of your marketing plan: “How am I going to follow up with people I meet?”

And you would want to, ideally, establish policies and procedures on how you would actually follow up with potential investors that you’ve met and what timing you would do with that. So maybe you meet them, and five days later or within the next three to five days, you give them a call and have a one-on-one conversation with them, what are you going to talk about at that conversation, what are you going to do to take that even further beyond that next call to see if you have some common ground and then try to continue staying in contact with them through some kind of a marketing program where you have periodic contact or interaction with them?

So, how can you legally get other people to share their investor contacts with you? This is a situation where you have deals but you don’t have enough investors. Well, the best thing to do in that situation is to team with other people that have investors.

It could be other people you know, people who know people with money or it could be other experienced syndicators who’ve already raised money and like your deal, and they’re willing to cut you in for a piece of the deal, because they’re going to have a say in it, they’re going to take control of it perhaps, they’re going to teach you the ropes, maybe along the way, but they’re also going to bring in their own investors as well. That’s how you do that.

How can you leverage your investors to get into other people’s fields and be legally compensated for it? Well, this is a situation where you have investors, but you don’t have deals. So, if that’s the case, you can go through the process I just described, developing relationships with investors and eventually, they’re going to lose interest in you if you don’t have something to offer.

So, if you’re not finding the deals that you can present to them, then you should be looking for people that have deals and teaming with them and saying, “I have investors who’d be interested in investing in deals, so if I can team with you, I’m willing to bring my investors into your deal.” You could do that either by having them invest one by one into somebody else’s seals, but then you lose control over your investors. Now, they become their investors. So, that’s a little bit risky. Or you could create your own separate fund where you become a “fund of funds.” That’s what that’s called, where you pull your investors in an entity, and then your entity invests in somebody else’s deal. You do the heavy lifting, you do the vetting of that other syndicator, and that deal, make sure that it’s a good deal for your investors. You invest part of their money in that deal, and maybe you invest in multiple deals.

I think we’ve pretty much covered the topics that we wanted to cover today, and now it’s time for us to go to live Q&A. I will go ahead and do that.

I hope that this information has been valuable to you. I think that everybody can learn the mechanics of setting up a securities offering and drafting the documents, and how all of that process works and how you can qualify for an exemption. But the hardest piece for most people is what I’ve just taught you; how do you set yourself up so that you have the means to fund that deal now that you’ve got it? And if you knew that you had that system in place, it would increase your confidence level to a point where you would no longer be afraid to submit letters of intent. You would have much more confidence as you talk to new investors and as you talk to potential partners.

I understand we’ve got our first caller. What’s your name?



My name is Dan. I have a question about the level of information that you need to provide to an accredited investor versus a sophisticated investor under a 506 (b), or … I’m sorry, under the 506 (b) or (c) offerings or exemption.

So, is the level of information that you need to provide a PPM or OM — you hear those terms — what do those mean and what level of information do you need to give to someone under each type of exemption?


Kim Lisa Taylor:

Okay. That’s a really great question. It’s a long answer, but I’ll try to condense it. First thing is, what’s a PPM? It’s a private placement memorandum. It’s a disclosure document that describes how the general overall offering is structured, who’s involved in it, and what kind of conflicts of interest there might be, and most importantly, what are the risks of loss that these investors could experience if they were to invest in this offering. The format for that is prescribed by the Securities and Exchange Commission in something called Guide 5, which is a guidance document that explains how to structure a real estate offering perspective. The PPM is required if you have even one sophisticated investor in your deal. It is not required if you only have accredited investors. However, what the PPM does is, it shifts the risk of loss from you to the investors. Because if you’re selling securities, you have an obligation to give all of the investors all of the material facts they need to make informed consent, and the PPM is your avenue and your place to do that.

If you don’t have the PPM and you offer it to accredited investors, even though you’re not required to disclose all the risks to them, they could still complain that you didn’t give them all the facts that they needed to make informed consent, and they could complain later, “Gee, if I’d known that, I wouldn’t have invested.” Legally, it shifts the risk of loss from you to them because you’ve told them all the things that could go wrong, and if one of those things happens, then they don’t have any grounds to come back and complain and sue you. If you don’t tell them, and it happens, they’ll complain they didn’t get the material facts, they could still sue. So, the PPM is a really great idea.

When might you not need a PPM? If you’re doing a deal with two or three accredited investors who you know very, very well not to be litigious, then that might be an okay situation in which to not use a PPM. But once you get beyond that, there’s no way that you can prove that you’ve told everybody all the same information when you start talking to different people on the phone.

So, it’s just not a good idea to fly blind. It’s like driving without an insurance policy. That’s the rule. Dan, did I answer your question fully?



Yeah, that was very useful. Thank you.


Kim Lisa Taylor:

Okay. Very good. Thank you for being on the call and thank you for asking. Before we go much further, I am going to give out our contact information because some of the people might have to drop off this call. We try to keep these calls to 30, 40 minutes so that people can listen to them on their lunch hour and keep it short. So, our contact information, if you wanted to call or contact us: You could also call Charlene Sandridge. Charlene, will you just pop on and give out your phone information?


Charlene Standridge:

Hi. Sure. The best number to reach us would be (844) 796-3428.


Kim Lisa Taylor:

What does that stand for?


Charlene Standridge:

That is 844-SYNDIC8.


Kim Lisa Taylor:

Yes, that’s it. S-Y-N-D-I-C and the number eight. Feel free to contact us if you have any questions. We are, as you may have read —  if you read the entire newsletter, I know it was long —  we are offering a program which we call a Quick Start Annual Retainer Agreement. And with it, we have added a feature that will help you with your marketing efforts. We call that our Quick Hit Strategy Session. So, if you enter into our Quick Start Annual Retainer program, it’s $1,000 for three hours of legal advice over the course of a 12-month period. If you end up doing a syndication within the course of that 12 months, we will credit that $1,000 toward your lump sum fee.

But in addition, you get once-a-month, 15-minute Quick Hit Strategy Sessions, and this is a place where we’re going to start hammering you and holding you accountable for developing that marketing plan, developing those marketing materials and getting yourself set up to go out and start meeting investors, talking to them, working on your magic statement, all of those things so that within six months, you are going to be up and ready to go. Some of you are going to do it within two weeks, but some of you are going to do it over time. And so, we want to keep you on track, something that we’ve seen happen again, and again, and again. I mean, some of the people on this call, I’ve talked to two and three years ago, and perhaps some of you still haven’t done a deal.

So, we want to help you accelerate your progress by getting that system in place so you’ve got investors that you can use to bind and invest in your own deals, or you can bring in to other people’s deals, and now you’re a syndicator. That’s the whole goal: to help you get from where you are today, to where you want to be, and then have you be loyal and repeat clients for our firm. That is our goal.

All right. We’ve got several other questions, so I’m going to go on to the next caller. Hello? Can you state your name and give us your question?



Yeah. My name is Alex in Orlando. I’ve put together one deal; it’s a mobile home park and we structured it where when it gets 45% equity and 8% preferred return, and then once we refinance out, that it reverts to a 33% equal share, there’s one other partner as well. So we all, at that point, once we refinance, she gets all her funds back, we’re all equal owners. I was talking to another big-time mobile home investor who buys tons of parks, and he says the way they do it is the lender gets their preferred return and the payout out of the refinance, and then no ownership and reverts to the partners who put the deal together. How do I structure that? Was there a certain way that that’s called, or I just had to put it in the paperwork that that’s what we want to do?


Kim Lisa Taylor:

Well, you can do it, but I’m not going to recommend that you do it at your stage of becoming a syndicator. They can do it because they’ve got constant deal flow, and as soon as those people are out of that deal, they can put them in another deal, right? You’re starting out and your investors are not going to like knowing that you’re going to be using their money to acquire the property, and then you’re going to cash them out, and you’re going to get the windfall at the end when you keep it for 10 years and it’s worth two or three times as much. So, be cautious of that. Now, if you’re using private lenders, okay, then you do have the ability to do that. You just pay off their loan. You have a promise right now: “This is when I’m going to pay you back, but then when I finance the property, and once I’ve paid you back and I paid you all the interests that I’ve agreed to pay you for that entire period of time, then your promissory note is redeemed, and I continue to own the property.” That’s not a problem.

But buying properties with promissory notes is going to keep you small. You’re only going to be able to do deals where you also don’t have a bona fide institutional lender in the deal, because they’re typically going to require, or they’re going to preclude, that you have any kind of subordinate debt on the asset that they’re lending on. So, if you’re going to do that, you’re stuck with only doing all-cash deals, then as long as you got a couple investors that’ll put up all the cash, then perhaps that’s going to work for you. But if you want to get bigger, where you’re pooling investors’ money, the way to do that is you buy it with an LLC, you’re going to usually offer them not interest, but a preferred return. Preferred return just means they get all of the distributable cash before you take your cut. So, you’re just going to give them all the money to make sure they’re taken care of first, and then you would get your cut. And then if there’s anything left after that, then you would split it in some fashion, like what you were saying.

They’re going to like that much better. Those equity investors typically don’t like to be cashed out early. And if you are going to be cashing them out early, they’re going to want to know that you’ve got another deal in place. So, when you get to a point where you’ve got 10 deals going at once, then you’ve got constant deal flow, that might be an appropriate place for you to go. But I would say, starting out, you probably don’t want to do that.



Okay. Can I get a follow-up question real quick? You said when preferred —  because I have a preferred investor in this project we’re working on —  and so after she gets her 8%, then I would get my cut and then it would distribute to our equity? Because I don’t have it set up like that. I just have it as like…


Kim Lisa Taylor:

That depends, and this is why you want to work with experienced securities counsel to make sure that you’re setting it up the right way that’s going to take care of you, as well as them. And there’s also tax implications on how you set these things up, so if you do it wrong, you could get hit with a big-time taxable event in the first year of operation. So, you have to be very careful. But what you’re describing is called a “waterfall.” You’re going to have two sets of waterfall: a waterfall that says what do we do with cash that comes in while we own the property and it’s using income, and then you’re going to have another waterfall that says what do we do now when we have a capital transaction, such as a refinance or sale. That waterfall is going to be slightly different because it’s going to probably have some element that requires a return of capital before you start getting into the other waterfall where you’re splitting profits.

So, that’s something that you just need to carefully set up. If you haven’t set it up that way now, then you need to be careful. You could spoil these investors so they won’t invest with you again. If you’re doing a preferred return to them and then a straight split, they’re getting much more of the profits that you might otherwise entitle them to, if you had set it up a different way.



Sure. Okay. Thank you so much.


Kim Lisa Taylor:

All right. Thank you. All right. Next caller, please state your name and your question.



Hi, it’s Joe out in Orange County, California. Thanks for having the call. I joined a little bit late today, unfortunately, and I don’t want to ask you to repeat some things you may have said earlier. But maybe, could you give me in a bullet point format, the materials that investors typically want to see? I have a deal that I have right now, and then I have another one that I’m working on, and I think I have the materials that I need, but I’d like to hear just briefly, those that you mentioned earlier that would be appropriate.


Kim Lisa Taylor:

Well, I think that that’s actually maybe a little bit tangential to what we did discuss, so I don’t think it would be redundant to talk about what you would provide to investors when you have a deal. The first thing they’re going to want to see is some kind of a … we call it a property information package. You can call it an investment summary, but really what it is, it’s describing the property. So, you’re taking the information that you got from the real estate broker — now, notice that the real estate brokers are calling what they are generating an offering memorandum. It’s not at all the same as what we’re talking about here with a private placement memorandum. Their document is describing the property, where it is and maybe some demographic information. They’re going to have some pro forma projections in there, which are usually based on some kind of an unrealistic assumption, property 100% occupied, everything that the current owner hasn’t been able to do with it. If you can do all of that stuff, then you would be able to realize all of these profits.

So, their projections are different than yours, and you’re going to put together something that’s similar, but it’s targeted to a different audience and it has a slightly different focus. So, yours is going to talk about the property, where it is, how many units, print some pictures about it, what kind of demographics are in the area, what other competitive properties are in the area, maybe a price comparison on what other properties like it have sold for and what their rents are in comparison to yours. And then, you’re going to tell a story to your investors about what your operating plan for that property is. That you’re going to go in, you’re going to buy it, and “here’s the acquisition expenses that we need to cover. In addition to that, we’re going to need some extra money because we want to do these improvements, and when we do these improvements, we think it’s going to generate X dollars. And as people move out over the next six to 12 months, we will be jacking up our rents and improving each of the interior units so that we can command a higher premium, maybe talking about the fact that it’s below market value now, we’re trying to get these rents up to market value. In so doing, we’re going to increase the value of the property and the net operating income and the distributable cash that we have to share with our investors. And so, once we’ve done all of that, then you’re going to see some increased returns and some increased equity. We’re going to hold it for X number of years, and then we’re going to sell it, and then after that, we will share that equity with our investors in this fashion. And here’s what we project the sales price would be. If we are able to realize that, here’s what we project the profits would be, and if we can achieve these goals, then here’s what your annualized returns might look like over the life of that property.”

That’s what you would put in your property information package for a specific deal. If you don’t know how to put those together, there are companies that will do them for you, or have some software. There’s one called, that will do those kinds of prospectuses for you. Another called Property Metrics, and then there’s a third one… and then apps … They’ll help you with putting together some of those projections and some of them might have some actual software you can dump it into a format. Does that help?



Yeah, it does actually, confirms I’ve got a package of all that put together along with financials now. So yeah, that’s very helpful. Thank you.


Kim Lisa Taylor:

Very good. Thank you. Make sure you have that reviewed by your securities attorney before you hand it out. But most common mistakes in a property information package is that you are naming the wrong companies as the people who are presenting it. Because typically, once you’ve consulted with your securities attorney, you’re going to end up creating new companies to acquire that property, and they’re going to be structured in a very specific way, and there might be more than one. And so, it’s very important that you don’t make fraudulent statements in that document about who the players are, who the companies are, who’s the manager of those companies, and also your securities attorney might have some very definite opinions about your waterfalls. It’s like, I spoke to the last caller about, and say, don’t do it that way. And once you’ve shown it to your investors, it’s very hard to take it back, because they’re going to…



Yeah. No, that’s great. I’ll be talking with you folks a little bit later on this, because we’re up to that point now. We haven’t gone out to the market yet, but we think we are pretty close. So, I’ll be talking with you offline.


Kim Lisa Taylor:

The other thing to think about with this just as a follow-up is timing, because your securities attorney may need some time to generate those offering documents. The first set of documents — your first of documents when you worked with an attorney — are probably going to take you three to four weeks to get done, because in part of that, it’s going to take a week to 10 days for say, us to generate the draft for you. But then you’ve got to review them and that’s about 120 pages of legal documents, and you have to do it at the same time that you’re doing due diligence, and you’re keeping the deal going, and you’re looking for investors and you’ve got a whole lot of other things to do. So, you need to give yourself a good three to four weeks to get that done. Ideally, you should be hiring your securities attorney when you have a signed purchase and sale agreement —  not an LOI, but a signed purchase and sale agreement.

You have reviewed the last two years income and expense statements for the property, so get those as early as you can, even before you signed that purchase and sale agreement, if possible. If not, get them immediately afterwards and somebody from your team has physically visited the property. And based on my own experience investing — I too own a syndicated property — based on that, I believe that you’re, in a year, are going to be 90% likely to close on that property. The rest of the things you find during due diligence will not be deal killers, but would maybe be grounds for renegotiation or seller credits or something like that. So, you’re probably going to close, but you got to have your securities attorney drafting your documents while you’re doing the rest of that due diligence. If you wait, you do a 90-day close on a property and you try to get your securities attorney to come on board after you’ve done all of your due diligence, you’re going to be squeezing the time down that you have left to find investors.

So, you’re going to very much compress that, and it’s going to be very stressful for you and your investors. So, to just be aware that timing is critical as you’ve got these properties under contract.



Right, right, okay. Thank you.


Kim Lisa Taylor:

Thank you. All right. We’ll go on to the next caller. Please state your name and your question.


Jacob Garcia:

Hi there. This is Jacob Garcia from Sacramento. How are you doing?


Kim Lisa Taylor:

I’m good. Hey, a lot of people from California today. I’m actually in San Diego today.


Jacob Garcia:

Really? Yeah. I had an opportunity to meet your team at UP9 and it was a great event and they were very helpful.


Kim Lisa Taylor:

Good. Excellent.


Jacob Garcia:

Yeah. A quick question. You probably answered some of it with the previous caller, but I actually have … one of my positions right now is that I have an opportunity to bring my investors into another syndicator’s deal. I was just wondering, I’m fairly new to the industry and also to the program that was offered at UP9 with Dave. And so, my question is, what would be some good questions to ask the syndicator in regard to bringing my investors to deal and how would it be structured?


Kim Lisa Taylor:

That’s a really good question. You’re not going to want to ask the same questions of that syndicator that your investors are going to want to know about you. All right. On our website, one of the articles is called “10 Things Investors Should Know Before Investing in a Syndication.” That’s a good place for you to look, to find out what you should be asking of the person you’re thinking about investing in, but it’s also an article that you can hand to your investors so that they can ask you those questions. And if you’re using a reputable securities firm, hopefully us, then you would be able to answer those questions for your investors as well. But generally, that list includes who drafted your offering documents.

Make sure that they were drafted by a securities firm and not self-drafted by the syndicator because that’s always a red flag that they may not be doing things right, they may not know that they have to do securities notice filings in addition to having the right documents, they may not understand the rules of exemption that they’re following, so they may not be following them correctly. And somebody who’s not following the rules, puts the entire investment of risk, because if they get in trouble, then they’re going to freeze all of the distributions and start using them to pay their lawyers to defend themselves. And so, you’ve just got to be cautious about that. You just want to make sure also you add Dave Lindahl’s program. If you’re involved with his coaching program, then you will be able to have access to your coaches who can help you analyze that other syndicator’s deal to make sure it’s a good deal for your investors. And then you also have to figure out, how are your investors going into that deal?

Are you going to create your own syndicate and have your own private placement memorandum for your group, your own tools, the fund of funds, like I suggested. And then, you can invest as a single investor in their deal, or your company will invest in a single investor, or are you going to hand over your investors to that syndicator who can now market to those people? So, you’ll have to think about those things. But we do offer free 30-minute consultations. That would be a good place for us to talk about that, but also might be a good place for us to get you on that Quick Start Annual Retainer so that you can have access to us to talk about those questions and to review those documents by that other syndicator, assuming they weren’t drafted by us, in which case, of course, they’re perfect and everything. No, I’m kidding. I’m just kidding. So, we might be able to help you with that. All right?


Jacob Garcia:

Okay, perfect. Thank you. And then, one last quick question. I recently received an opportunity with my broker to go to Shanghai, China, to participate in an exclusive investing event for high net worth individuals. And so, how would I go about structuring the possibility for raising foreign capital?  Is it something that I should…


Kim Lisa Taylor:

That is a very complicated question. Yeah. We can absolutely help you with that. We have a number of investors that are now raising money internationally. It’s more complicated than raising money locally because you have to consider number one, if you’re doing a solicitation in China, then you need to comply with Chinese securities laws and their offering requirements. You also need to consider the tax consequences to the Chinese investors of investing in your U.S. company, because there’s something called the Foreign Investment in Real Property Tax Act of 1980, that requires that you recall tax on money that’s being sent out of the country and send it to the IRS. And the person who signs the check is the one who remains personally and primarily responsible for that tax if they don’t withhold it correctly. So, we’ve got to structure it in a way that’s going to minimize that tax burden on those investors, and also make sure that you are correctly using international CPA or advisors who will help you correctly withhold that tax.

And then, we also have to worry about Homeland Security laws, because if you’re meeting people at an event and you don’t personally know them, friends of your family in China or something like that, you don’t know who these people are, and you have to be very cautious that they’re not trying to use you to launder money. Because if you are found to be laundering money or helping in that in some way, then all of your assets can be frozen and seized by the Department of Treasury. So, we want to make sure that you’ve got a mechanism in place for vetting those investors to make sure that they are legitimate and that they are not using your money using illicit purposes. There are, again, on our website, two articles on raising money from foreign investors that discuss that further.

All right. Those are good questions, and we’d love to help you with that. We’re going to go onto the last question. Hello, this is Kim. Please state your name and your question.


Speaker 7:

This is [inaudible] from Bay Area, California. I like to raise money where I can invest in mortgage non-performing loans or the [inaudible], and I’m thinking, this fund with the perpetual, and I’m assuming this should be like a blind pool fund. So for the investors, I like to return a fixed preferred return, because then that way, when there is no exit point and the fund kind of perpetual… So, can this be structured? That is one question. And second question is, the investors, what are they called? I mean, they are debt investors or liquid investors?


Kim Lisa Taylor:

It doesn’t really matter what you call them. You can call them debt investors, but they’re not getting promissory notes. They’re going to be investing in an LLC, and they’re going to be in a preferred class, they’re just going to get a fixed return. We structure deals like that all the time; blind pools like that are not uncommon at all. Your biggest challenge with that kind of a fund is going to be record-keeping and making sure that you have a system in place for keeping track of who’s in, who’s out of the fund. We have to be careful about offering some kind of a redemption abilities for your investors in a perpetual fund, so that if somebody needs to get their money back out can, but they can’t do it in such a way that all of a sudden there’s a run on the bank because of some article or newscast on CNN that says the sky is falling.

So, you put in some redemption clauses with some breaks on them that allow you to keep this funds liquid, even in the event there was a downturn in the mortgage industry and you had to look at it. So yes, we can absolutely help you with that. I’d love to talk to you about it. All right. We’re going to wrap up-


Speaker 7:

One quick followup. So, whether you call blind pool or fund of funds, doesn’t really matter whether it’s 506(b) or (d), right?


Kim Lisa Taylor:

Well, there is (b) or (c).


Speaker 7:

(b) or (c)?


Kim Lisa Taylor:

Yes. It’s Regulation D Rule 506(b) or Regulation D Rule 506(c). I want you guys to know that because that’s important, because 506(d) is actually a clause that talks about bad actors and people that can’t be in securities offerings. So, you don’t want to mix that up. In fact, I want you guys to be educated syndicators. It doesn’t matter. You can do it either way, it just depends on who you want to raise money from and how you want to … If you need to be able to advertise, or if you know enough people that you’re going to raise money from people with whom you already have pre-existing relationships and no advertising, then we would pick the 506(b). It also depends on financial qualifications of who you know. You can do a 506(b) offering to accredited investors only if you only want accredited investors in your deal. But if you know a lot of people that are not accredited, then you may want to do a 506(c) offering then to sophisticated investors.  And you can offer different fixed returns to people who invest different amounts. So, somebody who invests more than $100,000 might get X and somebody who invests less than $100,000 makes Y.

All right. Well, we’re going to wrap up this call. This one has gone long, but we covered a lot of material today. For those of you that had to leave early, don’t worry about it. We are going to be sending this out to everyone so that you can access it later if you want to, and we will also post it on our website. We love the fact that all of you are getting on these calls and educating yourself about syndication. We’re really happy to be part of that, and we’d love to have all of you as clients in the future.

So, please feel free to contact us,, or you can call 844-SYNDIC8, S-Y-N-D-I-C and the number eight. All right. Thank you again. We’ll go ahead and sign off now.


Are you ready to raise private capital?

At Syndication Attorneys LLC, we are committed to your success – book a consultation with one of our team members today!

Are you ready to raise private capital?

At Syndication Attorneys LLC, we are committed to your success – book a consultation with one of our team members today!

About Syndication Attorneys

We are NOT your stereotypical law firm. We don’t believe in simply taking your money, handing you a stack of technical, often-incomprehensible legal documents and then bidding you good luck and good-bye. At Syndication Attorneys PLLC, we are committed to your success – not just with the project at hand, but your continuing success in business and investing. We are your long-term legal team.

More Resources

Should You Really Start a Fund?

We get potential clients who reach out to us every week who want to start a fund. While we could simply take their money and set them up with fund offering documents, we actually talk a lot of people out of doing a fund. Why? Because they don’t have the necessary...

How do I Create a Substantive Relationship?

Question: If I am doing a 506(b) offering, do I still need a pre-existing substantive relationship before I can solicit from an Accredited Investor (AI)?  If “yes,” is there still any waiting period after I get that Accredited Investor to sign a document attesting to...

What is Real Estate Syndication?

If you have a self-directed IRA or substantial investment funds, you probably have considered investing in real estate. But perhaps you have concluded that you lack the funds to invest on your own. Or maybe you simply don’t want to deal with the hassles of property...

Are you ready to raise private capital?

At Syndication Attorneys LLC, we are committed to your success – book a consultation with one of our team members today!