Maximizing Your Real Estate Syndication: Choosing the Right Securities Exemption
As a real estate sponsor with a real estate syndication, it is essential that you have an SEC attorney with whom you consult regularly. It is crucial, however, to remember that your attorney is there to provide you with guidance and advice, but the final decision on which securities exemption to use for your syndication rests with you. It is vital that you thoroughly research and consider all of your options before making a decision, rather than simply relying on the suggestion of your attorney.
One exemption that attorneys often suggest clients use in real estate syndications is the 506(b) exemption. This exemption prohibits advertising but allows for the sale of securities to an unlimited number of accredited investors and up to 35 non-accredited investors. While the 506(b) exemption can be a useful tool in certain syndications, there may be more suitable choices in many situations.
There are several other exemptions that may be more appropriate for your syndication, depending on the specific circumstances. For instance, the 506(c) exemption allows advertising and the sale of securities to an unlimited number of accredited investors, as long as the issuer takes reasonable steps to verify the accredited status of each investor.
Another option to consider is Regulation Crowdfunding (Reg CF), which enables companies to raise up to $5 million in a 12-month period from both accredited and non-accredited investors when offered through a Funding Portal such as Invown. By utilizing the 506(c) exemption and Regulation Crowdfunding (Reg CF) simultaneously, you can advertise your deal to the general investing public and accept investments from both accredited and non-accredited investors.
As a client, it is your responsibility to ensure that you are making informed decisions about your syndication. It is essential that you do your research, consult widely, and consider all of your options before making a decision. By taking the time to research and evaluate your options thoroughly, you can make the most informed and strategic choice for your syndication, which can ultimately lead to greater success and profitability.
Disclaimer: Invown is not a law firm or an attorney and is not qualified to provide legal advice. Any information provided by Invown should be taken as informational and educational in nature and should not be considered as legal advice. Invown is happy to consult with sponsors and offer advice on how to potentially structure a real estate deal, but ultimately it is the responsibility of the sponsor to seek proper legal counsel before entering into any agreements.