Private Money

“Whether you think you can or you can’t you’re right”

-Henry Ford

Having more deals than equity is a persistent obstacle active real estate investors will face.  It seems there are two ways to address this reality:

  1. Stay small and grow organically over time or
  2. Invite others into your opportunity via a private money campaign.

The concept of private money is a daunting and scary beast that doesn’t have to be. My objective is to demystify the rules and provide no-nonsense advice so you may decide if this approach is something you would like to pursue.   I must counsel you to obtain legal and tax advice before acting on this information.

Do Not Talk About Fight Club!

There are two rules about fight club…. 1. do not talk about fight club.  #2. DO NOT talk about fight club. Just like fight club  – I will argue there are two rules that should be considered before group investing

Rule #1:  Make really great deals.   This rule will make it easier to sell your first group investment if you do not have experience in the type of investment.   If you find a great deal – investors WILL be interested.   You may need to partner with an experienced operator depending on the bank requirements and your balance sheet, but if you have a great deal you will always be relevant.

Rule #2:  Almost every group investment, it could be argued, is a security!  Group investments require the sponsor to take on legal risk almost across the board.   In this article, I will describe how to minimize  this risk, but any discussion of any group investment must take this aspect into consideration.   This is why rule #1 is so critical in my book -successful investments are a lot less likely to draw scrutiny.

When evaluating the cost of legal counsel vs the risk of violation, …read more