Syndication Attorney, Amy Wan warns about some of the issues that have been going on with other deals out there that investors should be aware of.
This is why I only work with people with:
1) proven track record
2) people I Like & Trust
In order to avoid the below issues I have avoided larger deals with partners I don’t know.
People in the Passive Investor Accelerator & Mastermind always bring over deals and this is the reason I always as “who the heck is this person? Do you know them?”
This is why you see me doing smaller deals that although they are not spectacular 300+ unit deals it is something that I and a small tight-knitted group can qualify for the debt ourselves and organically raise the money ourselves which…
1) eliminates the need for artificial dead weight and liability in our GP and deal (risk for even LPs) and
2) we don’t have to give a celebrity GP a large portion of the deal which allows us to be fairly compensated as GP’s and do generous 85/15 LP/GP splits and under 1-2% acquisition fee deals
If this is totally foreign to you do not hesitate to contact me or setup a call if you are currently a Hui Deal Pipeline Club Live investor.
Advisory from Syndication Attorney, Amy Wan.
“What I’m about to say, I say with no judgment. I write not with the intent to point fingers, but because I know many of you have families that you love and cherish. I want you all to be able to be present with your families and be able to fall asleep at night, instead of putting your families through several years of expensive, anxiety-inducing lawsuits, SEC proceedings, and financial stress.
Something odd has been happening in the real estate syndication industry over the past few years. There is a new breed of sponsors that call themselves “capital raisers”–many of whom are violating securities laws because they’re being paid transaction-based compensation, despite not having a broker-dealer license from FINRA. Capital raisers seem to be coming up with all kinds of creative “loopholes” around broker-dealer laws that just don’t hold up.
Over the past few months, I’ve seen or heard about the following suspect practices
- Capital raisers getting paid from acquisition or asset management fees
- Deals with over a dozen individuals in the sponsor team
- “Deferred equity structures” where a capital raiser is rewarded with a slice of the management or sponsor entity depending on how much is raised
- Capital raisers claiming to be “part of the General Partnership” when they’re not mentioned anywhere in the PPM or Investor Summary/Deck
- Investors being presented with the same deal from multiple different people claiming to be part of the Sponsor
If you are considering any of the above, or considering bringing in a ‘capital raiser’ to be a part of the sponsor team, I recommend you reconsider.
If you want to know more about why many capital raisers are raising funds illegally, I explain the legal basis in more detail in this article.”
Advisory from Mauricio Rauld
Premier Law Group