How to raise money
The SEC strictly governs how and from whom a real estate syndicator can raise capital. Until 2012, the restrictions were even more rigid. But after the Jumpstart Our Business Startups Act (JOBS), the regulations allowed for a small handful of exceptions to the otherwise restrictive rules.
Regulation D Rule 506 B:
One can raise unlimited amount of money from an unlimited number of accredited investors, or up to 35 unaccredited investors(accredited is defined as one whose net worth exceeds $1M not including a personal residence or makes $200,000 per year or $300,000 jointly with a spouse). Cannot raise the funds through general solicitation, there must be a substantial pre existing relationship.
Regulation D Rule 506 C:
One can raise an unlimited amount of funds from an unlimited number of accredited investors, general solicitation is permitted.
There are two other exceptions, Regulation A, and Regulation D Rule 504, but they are less common in real estate and usually require more registration with the SEC.
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John is the owner of Bugay Investments Group. He loves Real Estate Investing and wants to share his thoughts and knowledge with you!