#088: Staying Compliant With Real Estate Syndication

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.

Josh: So Hey, welcome back to Accelerated Investor with Josh Cantwell. I’m so excited that you joined me today or wherever you are at in your real estate business, your multi-family investing. Maybe you’re home hanging out on the couch, getting ready for bed. Maybe you’re in the gym, out for a walk. Thank you so much for engaging with me and spending time with me, at Accelerated Investor. I have a special treat for you. It’s one of my favorite topics in the world to talk about private money and private capital. I have a special guest today. His name is Mauricio Rauld. He is one of the premier real estate syndication attorneys in the country.

Josh: He’s a relatively new contact and connection of mine, so I’m excited to interview him and talk to him today. But I see his stuff all over social media. He speaks at massive live events around the country. He’s been featured on many other apartment, multi-family and syndication podcasts and I feel very privileged to be interviewing him today. His name again is Mauricio Rauld and he is just going to blow your doors off with content and information around raising private money, specifically for multifamily Mauricio. What is going on? Thanks for joining us today on Accelerated Investor.

Mauricio: Josh. Thanks for having me, my friend. Really appreciate it. I won’t make fun of the fact that I’m in sunny SoCal and you’re in a rainy Cleveland, but it’s all good.

Josh: You just didn’t make fun of it. So we got that passed us. That is fantastic. So your law firm is exclusively focused. One of the things I love about your bio and my chance to connect with you is you’ve like niche is rich, right? And you created a niche. There’s lots of things that you can do in the securities world. Your focus exclusively on multi-family syndication. So for our audience that doesn’t know you or doesn’t know what multi-family syndication is, give us a quick 30 second background on you and your firm and then just describe for us in your own words what’s multi-family syndication.

Mauricio: Yeah, so I’m a syndication attorney. 100% of my practice is syndications and like 99% of my clients are real estate syndicators. And I started this firm and doing this for now 20 years, but I started my firm about 15 years ago and exclusively on the syndication side, probably about eight or nine. And what’s kind of fun for me is I’ve kind of gone through, started working at a law firm, kind of did that thing working on the litigation side. So I did all the sort of the complaints and the motions and trial work and appeal work and depositions and motions, all that stuff. And then I left that great law firm, but I left to go in house for, I don’t know if you guys know the real estate guys, but Robyn and Russ can do a lot of work.

Mauricio: I went and worked in those guys and then started my practice right after that. And one of the things I really enjoy about it is that for the first time in my legal career when I started this, is that we’re all aligned, right? Like when you do a litigation, like everybody’s butting heads and everybody wants to sue each other. Yeah it’s like a fight. And here it’s cool because everybody’s aligned. Everybody wants to work with me because in order to get their syndication done, they need the legal piece. But at the end of the day, what I tell people is I like we, the syndications of puzzle, right? The syndication is the act of putting up, raising capital to go buy something. And in my world, it’s to go buy real estate and multi-family primarily.

Mauricio: And so I’m the legal piece, right? So I like to show people how the legal piece fits into the overall syndication puzzle and that’s what I enjoy doing. I enjoy, you know, speaking at these events and you know, my good friend Tom Wheelwright likes to say that I’m one of the few attorneys that actually speaks English, which is, that’s my thing. I like to take these complex securities matters and make them easy to understand. It’s a lot of fun for me and it’s been quite a blast the last four or five years. Just kind of going on social media and getting out there a little bit more.

Josh: Yeah. That’s originally how we connected. I saw some of your content, some of your own posts and I was, you know, kind of stumbled into it, which is what social media is all about. Social, sharing and somebody shared it or you did. And I’m like, okay, this is really good stuff. This guy really knows what he’s talking about and I have a fair amount of expertise. So I was digging in and listening to what he had to say. I’m like, I really, really enjoy it and just reached out and made the connection. I saw Tom speak by the way at the capitalism conference Cap Con, which was awesome. Yeah, I was there as a speaker as well. He spoke I think on day two and I was there on day one and we were talking about you know, multi-family investing and some different opportunities in real estate for those E-COM business owners.

Josh: Guys that owned E-COM companies and Tom spoke about protecting their assets and also trying to zero out their income taxes, which is pretty cool. So Mauricio let’s talk about best practices. Obviously this whole concept of general solicitation, Rag D, 506C and different opportunities with Reg A plus some of these different regulations that are out there that allow people now for the first time to recruit capital and use general solicitation as an opportunity. We’ll talk about that in a minute. But in general, when you’re consulting with a client who’s doing a real estate syndication, what are some of the best practices, things that somebody should be checking off the boxes, right when they get going to make sure that they can successfully and legally raise money for their multi-family deal?

Mauricio: Yeah, great question. I think one of the first things that I like to point out because it’s not obvious to many is first of all, take the securities laws seriously and recognize that sometimes you might be doing a syndication or not know about it, okay. There’s a lot of complicated ways to describe when you’re actually doing a security or originating security. At the end of the day, anytime you’re taking money from someone where the returns are generated by your efforts, anytime you’re taking money from an investor where the returns are generated by your efforts, you are dealing with the security and I don’t care if it’s a joint venture or if it’s a profit sharing agreement, you know, people trying to get creative, Oh, it’s only my brother-in-law. All these creative ways that the structure itself does not matter.

Mauricio: And a lot of times I’m talking to clients and they’re like, well, it’s not really a syndication world we’re going to do it this way. And I’m like, no, no, no, no, no, that’s not, that doesn’t matter. What matters is who’s generating the results? And if your investors are passive and you’re active, then you’re dealing with the security, which means you’ve got to comply with securities laws.

Josh: Right. And so best practices basically to think, okay, again, if the passive investor, limited partner, their return is based off of my efforts, that is a security. Now let’s get compliant, right? That’s the first box to check off.

Mauricio: That’s the first thing. And just be aware of it. Like just any time you’re receiving money, just be aware that you, even if you think you’re not dealing with the security you might be. And so just, you know, maybe the best practices is kind of self evident for me. But you know, contact the securities lawyer because there’s so many people who think they’re doing a joint venture because there’s a two or three of you and you’re not using an LLC and you’re having direct title, but it turns out that you’ve crossed that line and, somebody’s active in somebody who’s passive and you’re doing that. So that’s kind of the overall big one. I think the other best practice that I’ve been talking a lot about lately is the social media. You know, you and I are pretty active in that world and everybody’s on social media obviously, which they should be.

Mauricio: It’s a great platform, but when it comes to the securities law, you just got to be really, really careful when you’re on social media, especially when you have an active deal. So when you have an active deal, I really encourage folks to kind of stay away from social media in terms of posting about the business or the, or the deal or what have you. Because I think most people understand you can’t post your deal on social media. I think that’s obvious. You can’t say, Hey look, I’ve got $1 million, I’m raising $1 million to go buy an apartment building. I think most people get that, but what most people don’t understand is that there’s something called conditioning the market, which means even though you’re not specifically talking about your deal or what you’re doing or whatever, if you’re trying to, it’s not even try, if it’s perceived that you’re drumming up excitement about your deal, that could be considered conditioning the market, which means you’re advertising your next for your current deal for sure and potentially your next deal.

Mauricio: So for example, you know you’re at the property, all these posts of people at the property doing their due diligence and they’re sneaking in there, you know, Hey, I’ve got a deal going, right? It’s obvious to me when I’m looking at the posts. They’re in the middle of a raise and they’re talking about the due diligence and you know how great it’s going and how great of a deal it is and how they’re going to make a bunch of money for their investors. Even though you’re not saying, Hey, I’m raising money, give me money or call me. That’s going to be considered conditioning the market. So the only thing in terms of best practices that you want to be doing on social media when you have an active deal are really posts that add value. If you can post something that purely adds value, like why Cleveland, do a report on why Cleveland, Ohio is the greatest real estate market of all times and you think it’s just poised to go off the roof, right?

Mauricio: That’s got nothing about you. Why real estate in general is the greatest wealth building vehicle of all times. Why, you know you should pick a really great property manager, whatever, just pure value add. That’s clearly fine. And that’s to me, that’s the way you wrote your list. And get people to know you. The other thing you can do, which is also tricky, is just factual information about your deal. I’m sorry factual information about your business and what you do in theory is fine, but here’s the tricky part.

Mauricio: If you’re consistently posting on your business kind of a quarterly updates or monthly updates or whatever, that’s fine, but what I tend to see a lot of is there’s crickets for eight months and then suddenly a week before your brave, you’re suddenly out there, you know how many fake social media about your business and this not the other, and you’re like, Hey, I’m just talking about my business and yeah, that’s true, but then when the deal is over, you go back to doing nothing. And so if you’re looking at it, it’s kind of like a bell curve, right? You’ve got nothing, nothing, nothing that somebody spikes and goes, that’s not a good thing either. But if you can consistently talk about your business and what your product or services you do, the SEC has definitely said that. That’s fine.

Josh: Got it. I love it. I’m curious to hear your take Mauricio on best practices with, so everything we just discussed is around the idea of not doing general solicitation, right? It’s around maybe a 506 B registration or exemption and you’re building relationships with people. You’re getting to know them and you’re having a prior substantial relationship before you make the offer. Now again, there’s sort of a best practices for the opposite, which is 506 C where it’s, I can post on social media, I can solicit investors from ideal. I can make the offer online to a stranger and post it everywhere I want. Of course, you know, the hook, there or the exception is I’ve got to take money from accredited investors only.

Josh: What I find is that, you know, unless somebody has a relationship with me or has a relationship with the dealer, has a relationship with the operator, they’re probably not going to invest in that deal anyway. But have you seen people, people that you’ve consulted with or work with, have you seen people successfully use social media or successfully use email marketing or video marketing for a 506 C raise? And how have they done that where they were able to take somebody who’s maybe a stranger or somebody that’s just on social media and actually successfully get them to make the investment in a deal. Have you seen that work before and the question I’m asking is I haven’t personally even tried it yet, so I’m curious to see if it’s working for anyone.

Mauricio: I definitely have a tip for a best practice on that for sure, but let me just give you a general comment. I think it’s really difficult to get investors the first time they see you on social media. Getting investors, as you know, Josh, it’s a longterm process. It’s an ongoing process and in fact the best time to find investors when you don’t have a deal, but it’s just consistently getting on social media or whatever your marketing channels are and consistently providing value and giving folks information about what you’re doing. It’s not a, Hey, I’ve got a deal and I’ve got to go find investors. It’s probably the worst way you can raise money. You’ve got to have the money basically raised before you’ve got to deal in an ideal world. It’s almost impossible I think to put an offer. Would you want to be careful too as well?

Mauricio: Because you know, you know, in a tweet for example, you don’t have that much space to put any kind of disclaimer in there. So even with the social media posting, do you want to be a little bit careful? You certainly want to be telling the world that it’s a 506 C so that nobody gets the wrong idea. I think the strategy that I’ve seen that probably works the best is using social media to advertise a webinar. Using social media, not to directly pitch your deal, but to do a webinar either on your deal, which would be one way or just an educational. Again, you know, why really if you’re new to real estate, I’m doing a webinar next week on why real estate is the greatest thing. And you can bombard social media with ads or whatever and get people to the webinar, get their email address, and then start that relationship.

Mauricio: And I think that’s probably in terms of best practice, something that has worked. I have seen that where I’ve seen my client, my clients live stream, I’ve had client’s live stream, their presentation meetings or their meetups or whatever. So, but putting an ad in there saying, Hey, I just closed on a, I just got into contract to a 200 unit apartment building, I need $2 million bucks. Call me. Probably not, I’m not saying it’s impossible, but it’s not probably not best practices, by that way.

Josh: Yeah. Yeah. It’s interesting. You know, I teach that same model. We do that same model, which is build the relationships first and even when people ask about deals, the most powerful thing you can do is to tell people, well, this is how the, these are the deals I’ve done before. Like this is how a deal is typically structured. And Oh by the way, I don’t have a deal right now. But if we come across a deal like this in the future, and assume this again assumes that we have a relationship with them, are you interested in something like this? And people say, yes, I’m interested. I’ve got money to work with. I’ve got $300,000 thousand $500,000 thousand a $100,000 whatever it is. Then when you have a real deal, come on and you’re under contract LOI, you’re under contract, you’re doing due diligence. Now it’s time to raise to take all those people that have previously made sort of a soft interest or a soft commitment and get them onto a webinar and say, look, I need to, we have relationships now.

Josh: I need to raise $2 million, but oh by the way, there’s 50 people on the line and I only need 20 units at $100,000 each or 10 units at $200,000 each because now instead of begging for money or trying to quickly create the relationship, it’s the opposite where you have the gold that everybody wants and you have sort of a feeding frenzy of people that are like, I want a unit, I want a unit, I want a unit, I want a unit. You’d rather be in that situation then the opposite, which is now you’re broadcasting on social media, Hey, we’ve got a deal, it’s going to be fully subscribed any day, right. I’ve seen that too where people are like, Hey, we’ve got this deal. It’s an amazing deal. We’re almost fully subscribed but they’re almost fully subscribed for like six weeks, right. You’ve seen that too.

Josh: So it really comes down to building relationships as part of your business, right? That’s one of the locomotives going down one of the tracks. Which is build relationships to provide value, then go find deal flow as well. The trouble is, and I don’t know if you have any thoughts on this or best practices is it’s tough to like match up the two locomotives going down two separate tracks at the same time. Have you seen successful syndicators? Like do they have a team or maybe part of the team is raising money part of the team’s finding deals or what have you seen work well in that in that way?

Mauricio: Look, well you hit it on the head obviously. I mean you’ve been doing this for awhile. I mean, it’s all about relationships and relationships don’t get formed overnight. It takes time. It takes effort to get, it means you getting out there and putting yourself out there and meetups and social media, whatever. So typically that’s the best way to do it. I think if you’re just starting out and you don’t have those relationships, what most people do, and I think this is another great best practice, is team up with someone who has that experience so that you can not only learn from their expertise, but again, you’re kind of bringing in their network that have more of an established network. And you know, even if you’re working for free or for peanuts, everybody’s got to pay their dues because it really is, I do have people who, who start syndications and I they don’t have the money raised and they’re like, Oh, I don’t know.

Mauricio: I’ve got to go raise a million and a half bucks and I don’t know where it’s going to come from. And suddenly switching to a 506 C it just doesn’t, it just in my experience, I haven’t seen it work. You really do want to be entering into relationships throughout the entire year. And like you said, I think it’s even better to do it. It’s actually more effective, in my opinion, to speak with a prospective investor when you don’t have a deal because there’s no, they know it’s not coming. They’re not expecting, hey look this guy and gal is going to ask me for money. It’s just they’re just telling me, just like you said, Hey, this is what I do. More importantly, what can I do for you? What are you interested in, Mr. or Mrs. investor? Are you looking for cashflow, short term, longterm equity?

Mauricio: What are you looking for? And then just like you said, Hey, if I find something like that, is that something I can share with you? And then of course I going to say, yeah, absolutely shoot me an email. So then when you get it, you have warm people or people you’ve talked about. The other thing I best practice if we’re talking going along these lines, is I always tell my clients, continue to talk to your email list. Hopefully everybody’s out there getting emails and it’s not just social media that is somehow capturing emails. But consistently talk to your list because the last thing you want to happen is have a deal come in and then that first email is the first time they’ve heard from you in six or seven months. You want to be continuously adding value. One of the great tips I heard just this year was share with your audience deals that you’re passing on.

Mauricio: If you’re doing the underwriting and you can go and look, I’ve gotten these deals, here’s a great deal that I came up, but we passed on it because of these reasons. You know, it was overpriced or whatever. It does. Two things. One, it adds value to your list, but it also lets the list know that you’re out there trying and looking for deals so that when you finally do come to them with a deal, three months down the road, they know you’ve, you’ve gone through a hundred of them and this is now the price. You know, you found the needle in the haystack. This is it as opposed to the opposite of the tree. Like I said, they haven’t heard from you in six months and somebody’s like, Hey, I have a deal and I need money. When you come from a place of need, it’s always going to be much harder.

Josh: Right. Yeah. Love it. Mauricio, I mean, I’m curious to hear your thoughts. You have, you know, real estate syndication, big apartment deals are typically one large joint venture. You know, you typically don’t have one guy or one gal that finds the deal, raises all the money, does all the due diligence sponsors the loan signs, the personal guarantee, does the asset management, does the boots on the ground and does everything also deals with the, you know, the syndication lawyer like yourself? Usually it’s a big joint venture. And so what would be some thoughts or tips or best practices again, for somebody that’s getting in that’s maybe not an expertise, doesn’t have an expertise in raising money.

Josh: So they know they’ve got a great deal, maybe a deal under LOI or contract and they really don’t have a lot of contacts at all, but somehow they maybe stumbled into this amazing deal or maybe they have a great contractor and if convinced the, you know, the pocket listing commercial agent to give them a shot at this and they win it, but they have very little capacity to raise money, right. I know you’re very outspoken on social media about you can’t pay someone a commission to just raise money. So I know there’s a best practice around this. And so really, I guess this answer I’m searching for, it comes with kind of two questions is what different roles can people play in this real estate syndication game? And what if you have an amazing deal but very little capacity to raise money?

Mauricio: Yeah. As you know, I feel like I’m a broken record on social media. I’m really been hammering it hard and, and I’m not, I’m not…

Josh: I love it, by the way. I love it.

Mauricio: I’m not apologizing for it anymore. At the beginning I felt kind of bad, but then I’m like, you know what I think when you look back years from now, it’s going to be fun to play these videos and show people that, you know, my concerns were there. So you know, best practice again, just be aware. I’ll just repeat a really high level. I won’t get into the details, but just be aware that you cannot pay somebody to raise money for you, okay. You just can’t do that. You’ve got to, they’ve got to be licensed, you know, FINRA, a licensed broker dealer, which obviously they’re not. So the way around that, it’s not really a way around that.

Mauricio: But the way you are able to compensate people is to bring, you’ve got to bring them in as legitimate cosponsors and by legitimate, I essentially mean they’re doing the thing. They’re helping you. You know, look, one person may not be able to do everything. So bring them in to help you with the underwriting or the asset management or the investor relations or a combination of the mall. But they have to be doing substantial work and their primary responsibility needs to be the work. It can’t be raising the money. So as long as you know when you’ve got one partner, I think that’s fairly easy or even three people. I think that’s really easy.

Mauricio: I think where it gets a little bit tricky is when you have four, five, six, I mean I’ve seen some of these that have nine or 10 sponsors and it’s like it’s just going to be a hard sell to say that all 10 of you were actively involved when somebody out there is raising a bunch of money and they’re not doing anything yet, they’re getting compensated. And compensation in the form of, you know, the GP or shares in the company is just the same as cash. I mean it’s a form of compensation so you cannot pay somebody that’s compensated that’s tied to the amount of money you’re raising. You’ve got to be a legitimate co-sponsor.

Josh: Yeah. Got it. I guess again, it comes back to relationships. If you’re great at finding deals, then start talking. Start networking. Start working with people that are good at raising money and people who are also good at underwriting, maybe co-sponsoring. Maybe it’s signing the PG on it, but work that out ahead of time that you know that, Hey, I’ve got certain qualities or certain skill sets. You have certain qualities and skillsets. Let’s mash those together before we go lock a big deal down instead of, because I’ve had people approach me before and be like, I’ve got this $10 million deal. I need to raise two and a half million. I’m $750,000 short and I’m closing next week. Can you raise money for me? And the answer is no. Sorry I can’t, unless I’m involved in some other way, like unless I’m involved in the underwrite. But you’ve already got the underwriting done.

Josh: Unless I’m going to, you know, going to sign as a PG on the loan or you already have somebody signing the PG. It’s like I can’t do anything else to legitimize my full blown partnership here other than just raise money so I’m out, right. And that’s the way I’ve got to approach it. I’ve passed on many, many, many big deals where guys are like, I know you manage a lot of money. I know you can raise a lot of money. Can you just raise money for me? Sorry, can’t do it. No way. It’s just not worth the risk, right?

Mauricio: Yeah. I mean, let me just commend you for that because it’s really hard and it’s really frustrating because let’s be honest, everyone’s doing it. And so when everyone’s doing, it’s like the social media, everyone’s doing it. And so when everyone’s doing it, it’s really, you know, and I’m trying to tell my clients, no, stay in your lanes stay in your lane. And because we’ve had such a great run over the last 10 years, you know, things have been going fine, but the minute things start, I don’t think they need to go down as long as things start tapering off and now you don’t get that rent growth that you desperately needed, maybe you just flatten out and people are going to start losing money. And it’s already happening, by the way, I’ve already started talked to some, a lot of my clients who are seeing these issues where the sponsors have the asset now for two or three years, they haven’t been able to get the rent growth and the banks basically foreclosing on them.

Mauricio: And I’m like, man, if you can’t make money in this environment, I can only wait until the thing start to be challenging again. So when that happens, and I don’t know if it’s going to happen next week or next year or 10 years from now, I don’t know. But I know it’s going to happen at some point. That’s when investors start to lose money. And when investors start to lose money, that’s when they pick up the phone and start complaining to the regulators. And that’s when your world starts collapsing because the regulators will reach out to you, they’ll ask you for your documentation, and at that point they’ll go through, nobody’s looking at your social media feed now, nobody’s checking to see if your sponsor doing everything. But the minute there’s an investigation opening and they’re, look, they’re going to be talking to your investors and your investors. Trust me, they’ve lost money, they’re not going to be on your side. They’re going to say every single thing that’s going to show how you are advertising on social media. Or like, you know, no, this person convinced me to go in the deal. And it turned out this person didn’t do any work at all. They just raised the money. So that’s my broken record, that’s my rant.

Josh: I love it. I love it. You know what I find the more and more, kind of going off in a different, a little bit different tangent about building relationships. I think there’s so many people who are going to events, meetups, webinars, the best place to make relationships is face to face, right? So the best way to sell is face to face. So if you can’t get on a stage, if you can’t speak in front of an audience, go to those places anyway and meet people in the back, meet people in the hallways. The second best way is webinars, zoom, podcasts, webinars, because you’re selling, it’s not quite face to face, but it’s kind of digitally, face to face. That’s a great way. I would encourage people, look, even if you’ve only done 10 single family home flips, you’ve done 10 more than the other guy, right?

Josh: So you got to get out there and build that audience now and talk to people. And what I love to do, Mauricio, I’d love to hear your take on this is again, I go and educate my audience. It started with friends and family. It’s mushroomed out from there. On a big scale. But I talk to people and say like, this is what we do here’s previous deals that we’ve closed. They’ve looked like this again, I don’t have a deal that you can invest in right now. But I take the approach of, you know, I’m not assuming that you’re interested in this at all. So what I want you to do is keep me as the top of mind reference in case you know someone else who you think would want to learn more. And what I find people saying is, well, Josh, like all this stuff you just taught me and showed me what, like what about me?

Josh: What, I’m right here I’m interested. And by taking the approach that they’re not interested by taking an approach that they don’t have money, it totally takes the pressure off so that when I actually have a deal, they’re like, well, I didn’t think you’d be interested at all. I had no idea if you’d be interested. You’re interested. Now they’re really in because they’ve convinced themselves without me convincing them, they’ve convinced themselves this is something they want to do with their money. So I don’t know if you have any thoughts around like the actual appointment, the actual face to face, the actual speaking to a private lender. Again, best practices on the way to kind of present a deal or not present a deal. I know you’ve done it a lot. You have clients that do it. Is it, I found it just better to kind of slow roll it than to steam roll through it, right?

Mauricio: Yeah, and that reminds me of one of our best practice that we’d like to share is look, if you’ve got an, especially if you have an individual who’s got a lot of money, you know, you can always go to that person with your business plan and approach and not, not in the approach of asking them for money, but asking them to review, know their experience. Do you mind reviewing my business? I’m not looking for any, you’re not looking for any money, but can you give me some feedback on my business plan and genuinely try and get some feedback from that person. And if it’s a good deal, again, there’s no pressure. They’re not, you’re not, they’re not asking you for money. They’re just going to review this, this plan, and they may be like, Hey look this actually sounds like a good deal I might be interested.

Mauricio: But at the end of the day, again, it comes back to relationships and adding value. You’ve always got to focus on your investor. It’s not about you, it’s about the investor, right? So you have to add value to them. So the first thing you need to understand is what they want. Like what can you offer them? Are they looking, are they busy, professional? That’s why a lot of my clients are doctors, for example, and they cater to busy doctors because they know their pain points, right? They know that they’re super busy, they’re working a hundred hours a week. They’re in the hospital. They don’t have time to go research this, and so they come to them from that point. Look, you’ve got a lot of money. You don’t have a lot of time. Let me do that work for you. Let me add value to you.

Mauricio: Let me sift through all these things. You just have to write me a check and then I’ll, you know, other people may need tax breaks. Maybe that’s their primary motivator. So now you go to them at a different angle that look, you have a tax problem, you’re a high paying professional. Real estate can help you. I’ve got this deal that has bonus depreciation or maybe it’s an oil and gas deal, whatever deal that has a thing. So you always want to come from the position of what does the investor need, what are they looking for? And making sure you have the right fit for them, not the other way around. You don’t want to have your product and try jam it down somebody’s throat. You want to be coming from the position of what do you want? What are you looking for? How can I help you? And then when they tell you have something ready for them for that because that’s how you make it happen.

Josh: No doubt, no doubt. So Mauricio rounding third here, had for home. I’ve got one final question, which is, you know, a lot of my audience might see this podcast this YouTube video and say, wow, like I’ve got syndication I’d love to talk to Mauricio about like, what does he do? How does he operate? So help me understand when you do take on a client, hopefully I work with, you know, work with you on a deal. So I’m kind of asking this for selfish reasons to. If we work on a deal or one of my, one of my listeners works with you, what should they expect in that first couple of days, couple of weeks of a relationship with you? Let’s assume that they have a, or assume that they want to start to do a raise. How do you help them kind of frame up the deal? Or how do you help them describe the deal in a private placement memorandum? What should they just expect when they’re working with a securities attorney, especially if they’re building a new relationship that first couple of days, weeks of that relationship. How do you build that relationship? How do you start to write the business plan and pour that into a PPM?

Mauricio: Yeah. So great question. So we have kind of a unique process and the two things that I focus on from one of our core values is I’m just customer obsessed. And so I just want to make sure my clients are well taken care of. The main thing I look for is communication. Just make sure I’m over communicating. But the first step is really it’s actually the client who puts together a business plan and we help them, you know, answer the questions and structure, you know, we help them structure, but we spend a ton of time on the front end helping the client either put together the business plan, not the private placement, the business plan, the pitch deck, the executive summary, whatever you want to call it. Spend a ton of time on that and then helping them put it together. And then when we get that first draft, man we look at that thing and tear it apart line by line.

Mauricio: We have a thousand questions a thousand comments. Because the only way in my opinion that your securities attorney knows what to put into the PPM is by asking you a thousand questions and having a thousand comments. If they just send you a questionnaire and they just kind of fill it out and it’s going to be kind of a template, like your deal’s unique. And the only way I know to find out and pull is the pull that information from you, get on the phone, review your plan, ask you questions and get that information so you can put it into the PPM because a PPM that doesn’t have all the information in it is kind of worthless.

Mauricio: So we really just work hard on the front end. And with the consulting piece and helping clients put their structure together. And then ultimately, you know, underwriting essentially their business plan. So we know what goes in the business plan and the PPM. And then we just like to do a really fast turn around. Because the last thing that we want is for our clients to have investors ready to write checks and the docs aren’t ready. So we do a one week turnaround, which I think is, I think is probably the fastest around, but that’s what we try to do.

Josh: Music to my ears. One week turn around. Now guys, I just want to explain again to our listeners. The reason why this business plan and private placement is so important is because again, if there’s a downturn or if somebody loses money, they complained to a regulator, it’s going to become a, he said, she said, right? And the only way a regulator can know, like every business deal has risk and the SEC and regulators, they know this, they know that there’s risk. So if somebody loses money, it just doesn’t mean that they’re going to take the person who’s complaining. They’re not just going to take their side, right? Because they’re complaining against the big bad company that took their money or they lost money.

Josh: The reason why this is so important is because if you’re sitting in front of a regulator sitting in front of a judge and jury, and they’re really doing a deep complaint about your business model. The he said, she said can be eliminated by these documents being in writing the business plan, the private placement, the executive summary, the subscription agreement in writing with those disclosures. So it’s Mauricio’s job and his firm’s job to pull out all this information so they can make full fair and adequate disclosure. Because if there’s full fair and adequate disclosure and someone loses money, then that’s just business if there’s not full fair and adequate disclosure and some things withheld that’s called fraud. Right. So Mauricio, any other final thoughts on that piece?

Mauricio: No, you hit it on the nail. I mean it’s all about the disclosure. One of the things I love about syndication generalized as you can be as creative as you want to be, right. And I love that structure part in the beginning of the consulting, because we can be creative. You construct this however you want as long as you disclose, disclose, disclose in that PPM. And that protects not only the investors, making sure that they’re making an investment, you know, with fully aware of what’s going on. But it also protects you as the sponsor because now if something does go wrong, you can just say, Hey look, page 75 over here in the bottom, I let you know that, you know, maybe this is a bridge loan and we may not get another loan and we had to fire sell it because we couldn’t get permanent financing and I disclosed that risk to you. You knew about it. But if they have something go wrong and it’s not in the PPM, that could be problematic.

Josh: Sure. Love it. So, Mauricio, I know you’ve got to run. Thank you so much for all this content and information. I know some of my audience is going to want to reach out to you, connect with you, engage with you, get some more information about you and your firm. Where can they get more information or connect with you?

Mauricio: Yeah, probably the best way to connect me. Just shoot me an email at Team T E A M @PremierLawGroup.net, Team@PremierLawGroup.net. Also started a YouTube channel, Mauricio Rauld, if you want to check that out and dropping a lot of videos there.

Josh: Fantastic. Yeah, we’ll put that in the show notes also on our blog, AcceleratedInvestorPodcast.com YouTube. You’ll find this everywhere. Podcasts are found. Mauricio listen, so much fun again, building our relationship and getting to know more about you and your firm and talking shop about syndication. Thanks so much for joining us today.

 

Mauricio: Thanks for having me, Josh. Appreciate it.

 

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.

You’ve found a great property, you’ve drummed up about 90% of your money, you’re getting close to closing on the deal, and your neighbor wants to know if he can invest with you. He’s just a friend, and this is all just a profit sharing venture, right?

Anytime you’re taking money from someone where the returns are generated by your efforts, you are dealing with a security. It doesn’t matter if you’re calling it a joint venture or profit sharing; if the investors are passive and you’re active, you’re dealing with a security law. 

Attorney Mauricio Rauld has focused on real estate syndication for the last 15 years, and he wants you to take compliance seriously. As you begin drumming up money for your next deal, he suggests that you have a solid private placement memorandum (PPM) in place. This means that you and the investors know exactly what the deal will entail. 

If there’s a downturn and the investor complains to a regulator, your PPM shows that you adequately disclosed the risks to them, and they knowingly accepted them. If you withhold information on a deal, that’s fraud. If a deal fails to return an investment and you have a PPM, that’s just business.

Getting investors is a long term process. You have to nurture your audience, adding value to their real estate education, and finding the kind of deal that fits their needs. Mauricio has some great advice about:

  • How to nurture investors with consistent marketing.
  • How to build trust with lead gens and webinars.
  • How to get soft commitments from investors.
  • How to prove that you’re a discriminating investor.

Protect yourself when you take on investors by having your legal stuff locked down and solid. This is not an area that you want to skimp on or hope that no one’s watching you. Staying compliant with the SEC helps you sleep at night.

What’s Inside:

  • How a full, fair, and adequate disclosure protects you.
  • The importance of legitimate co-sponsors in a syndication deal.
  • The difference between “conditioning the market” and adding value.
  • Why focusing on the investors’ needs yields better, more interested investors.

Mentioned in this episode​

WordPress Video Lightbox