SEC Advisory
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?”
No more daisy chain deals! Personally, I said no to these types of deals as far back as 2018 when I was being pitched by these operators.
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:
- Eliminates the need for artificial dead weight and liability in our GP and deal (risk for even LPs)
- 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
Advisory from Syndication Attorney, Amy Wan
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.
Never invest in a company that’s NOT regulated.
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 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.