#042: Funding Equals Freedom Series – Part 10

Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and you’re investing with The Accelerated Investor Podcast.

So hey, welcome back to Accelerated Investor and this is our last episode in this little mini series we’ve been doing about how to get all the capital you need for all the deals you want, residential and commercial and how to be an expert at raising and recruiting and deploying private money. This last episode, I just want to give you some pointers around private placements. You know, over the last first nine episodes we’ve talked about how to recruit and raise private money. And all of this really is, is built upon the framework of the Securities and Exchange Commission. And they’ve come out with multiple different acts. But the important acts of the Securities Act of 1933 in a securities act of 1934, the Crowd Funding act, you know, the jobs act that President Obama signed into law, I think it was in 2011. Those are really three main pieces of legislation that guide the Securities and Exchange Commission.

And all I’m going to tell you in this episode is a couple of things. One, you’ve got to have a really good securities attorney on your team, okay? I’m not a lawyer, I cannot give you legal or financial advice, but what I will tell you is what I’ve been told by my attorney, okay. I’ve got a really great attorney, 35 years as a securities attorney, fantastic guy. His name is Joe Carney. And learned a lot from him over the last five years or so. And so what most people start with when they’re recruiting money is, you know, a friends and family offering. It’s, you know, it’s somebody that, you know, you’re not going to do like a big general solicitation. You’re just going to be working with people that you already know, like, and trust. Now, Reg D, Reg D came out, it was part of the part of the Securities Act of 1933, 1934, set the precedent, the law, the legislation that allowed people to basically sell securities without being a registered broker dealer.

So very quickly, anybody who sells securities, including raising money into real estate deals, that is a security, whether it’s debt, whether it’s equity, it doesn’t matter. It is a security. So you need to have a proper, what’s called an exemption because you need to be a registered broker dealer to sell securities, or you need to have a proper exemption from registration, okay? So you need to be a broker dealer or be exempt pretty straight forward. Now Reg D allows you to be exempt. It allows you to sell securities if you follow certain rules. There’s what’s called REC 504, 505,506 B, 506 C Reg A plus all these different ways to be exempt and still recruit money for your business. So what most everybody starts with is what’s called 506 B, 506 B allows you to, it’s a federal security exemption which allows you to raise money from coast to coast.

It allows you to recruit an unlimited amount of money. You can raise money from both accredited and non-accredited 35 not accredited, an unlimited number of accredited, okay. But it’s a friends and family offer. You cannot do a general solicitation. It’s got to be people that you already have an existing relationship with. Now, we’ve been talking for the past nine episodes that in order to recruit and raise private money, you’ve got to be good at working with friends and family to start every big business, including Facebook and Lyft and Uber and all these other companies started with friends and family offerings, okay. It’s really, really, really important to start there. Because strangers are not going to invest with you if you don’t have an initial group of investors. And it’s probably going to be people within your, within your network, within your spiderweb, okay? So 506 B allows you to, you know, recruit money from coast to coast friends and family, allows you to accredited and non unlimited amount of money, but it’s got to be people that you already have an existing relationship with.

So that’s why we covered the five steps in episodes five, six, seven, eight, nine. We did, we talked about exactly that, okay. Now there’s a new exemption which came out as part of the Jobs Act in 2011 called Reg D 506 C. 506 C Allows you to do a general solicitation and recruit money from everybody as long as they’re accredited, okay? You can do a general solicitation, you can do Facebook ads, direct mail, billboards, TV ads, all that different type of stuff, but they’ve got to be accredited, okay? You can raise an unlimited amount of money. You can raise money from coast to coast. But every single person has to be accredited because that’s the exchange. If you’re going to go with a general solicitation, the SEC is trying to protect the non- accredited folks. So if you’re going to do a general solicitation 506 C you’ve got to only recruit and money from accredited people.

You could have all different kinds of people opt in on your website. You can talk to all different kinds of people, but it must be the investors accredited only, okay. And so again, I’m not a lawyer, I’m not a securities attorney. I have great securities attorneys. So I just wanted to give you a little tiny taste of what that looks like. Ultimately, you need to get the advice of a really good securities attorney. If you’re in Ohio, I would recommend Joe Carney. Joe D. Carney and Associates, they’re based out of West Lake, Ohio. I know a bunch of good securities attorneys but Joe is mine. And if you look them up and want to work with them, that’s fantastic. He’s an amazing guy, knows a lot about a lot when it comes to securities laws, okay. So there’s some different options there. Again, not being a lawyer, I don’t want to go too far with that because it really got to have a good securities attorney on your team, but understand the law is black and white.

If you’re recruiting money from investors and you are the operator and they are passive, it doesn’t matter if it’s debt, if it’s equity, if it’s a note, it’s a mortgage, it’s a joint venture partner, it’s an investment contract. It is a security. Do not let other people convince you that, oh, it’s just a note and mortgage, it’s not a security. It is a security. The only note and mortgage that’s not a security is a commercial loan from a bank to a person. That’s a call to commercial loan. All right? If you’re doing business with other investors, other businesses, and they’re investing in your deals, they’re investing in your real estate. They’re investing in your business that is a security. Make sure you get great advice, okay? All right, so guys, listen, this has been just an amazing time. I love sharing this information with you because one, I feel like there’s a lot of misinformation in the market.

Number two, I feel like funding equals freedom. You’ve got to have some private funding in order to really take your business to the next level and I’m really excited for you. Now that you’ve been through this 10 part series, you know what’s going on in the stock market. You know how to recruit and raise private money. You know our different techniques and strategies for multimedia marketing approaches and following a proven sales process. You know why we hate the stock market. You know why we’re so passionate about private capital for real estate. I hope you’ve absolutely loved it and we’ve provided a ton of value to you. Thank you so much for being part of the Accelerated Investor community.

You know, share this with your friends, especially if you’re an active investor. Share this with them so they can get the best information out there about recruiting money for their business because there is so much bad information out there. This is a legit stuff and I hope it’s been a huge impact on your investing. Thanks so much for being here. For our 10 part episodes on getting all the capital you need for all the deals you want. Come back, come back often like share. Leave us a comment, leave us a review. Hope you’ve enjoyed it. Hope to see at one of our live events. Hope to see in our coaching program. We’ll see you in the next episode of Accelerated Investor.

You’ve been listening to Josh Cantwell and the Accelerated Investor Podcast. Leave a comment on our iTunes channel and let us know what you want to learn next, or who you’d like Josh to interview. While you’re there, give us some five star rating and make sure to subscribe so you can be the first to hear new episodes. Follow Josh Cantwell and his companies, the Strategic Real Estate Coach and Freeland Ventures on all social media platforms now and stay up to date on new training and investment opportunities to start your journey toward the lifestyle you’ve always dreamed of. Apply for coaching at JoshCantwellCoaching.com.

Building relationships with private lenders is a crucial part of every active real estate investor’s success story. If you have trustworthy, strong connections with passive investors, you will be ready to secure the funding you need for your investment properties.

But it’s also important – no, imperative – to go about the private loan process in a legal way. If you haven’t already, be sure to add a trusted securities lawyer to your team. They will be your best bet for navigating the private placement process in a compliant and efficient way. 

In this podcast, Josh shares a high-level overview of private placements and important legislation that guides the Securities and Exchange Commission (SEC). While this information is general in nature, it can give you the basic understanding you need, prior to speaking with your attorney about the specifics of your unique situation. 

Remember: the law is black and white. Unless you’re taking out a commercial loan (from a bank), you must comply with SEC regulations. Tune in to hear Josh explain why, even if you’re an experienced real estate investor, consulting with a securities lawyer is essential:

What’s Inside:

  • A basic overview of the Securities Act of 1933 and the Securities Exchange Act of 1934
  • What Regulation D (of the Securities Act) means for investors 
  • General info on federal security exemptions – Rule 506 of Regulation D
  • The reason why you need existing relationships with the private lenders you work with
  • The importance of adding a good securities lawyer to your team 

Mentioned in this episode​