So you think that you have investors? So you think you might have some potential investors who are interested in investing in your syndication, or investment fund? What are the next steps? So what are those next steps? When you think somebody is interested in investing in your syndication or investment fund? Well, first, it's probably to get some sort of soft
commitment. So and by soft commitment, this isn't anything formal, it's basically, so you can complete in your ledger, that you're keeping track of your, your potential investors, hey, I think that this person is going to come in for $100,000, or whatever it is. So to do that, we basically ask them, so in this investment, what do you think you would be likely to invest in? Or does this sound like something that you'd be interested in investing in? And if so, how much? Are you
thinking about? Are there any questions that you have about this investment product before you come in? So that I can answer them for you? One of my questions off the bat is going to be you know, is this something that you're interested in? And if so, you know, how much money are you thinking about doing it, it's gonna be the minimum amount or more. Those are like three examples of getting a soft commitment that
can be done by email or things like that. A lot of times, if it's written down in an email, it's a little bit easier to convert to the next step to the hard commitment stage. But a lot of times, you'll just do it in and just kind of an informal way like this. When you've got those soft commitments, the next thing that you need to do is you want to provide them the key information. Now that not only is not only as unnecessary, but
it builds that level of trust. So the first thing that you always make sure that you do, and it's not provide them a document yet, the first thing that you do is make sure that they know that they have access to you for follow up questions. That's what you're there for you're a salesperson, you need to make sure that any questions that they have get answered in a timely manner, they need to know that. So that's the first thing
that you provide them. Now we go on to the legal documents. So first, certainly provide them that private placement memorandum. This is the document that describes in detail, the risks, the conflicts of interest, the terms, what they're basically getting for their investment dollars.
Another document is the operating agreement, the operating agreement describes the company or funds structure itself, in terms of how it's going to work in order to fulfill what you're talking about in your marketing materials and in the private placement memorandum. The third document is the subscription agreement. The subscription agreement is what the investor will sign that basically says, in exchange for this money that I'm about to give you, I am
going to get those members of units. Here's what I promised, I've read the PPM, et cetera, the syndicators saying, Yes, I understand that, here's what I promise I'm going to live by the operating agreement, it binds the investor to the operating agreement to the investment fund itself. The last thing that I do that I think is very helpful as an investor questionnaire, this can take care of a lot of different things. Certainly, it makes it easier at tax time by putting all the information in
one place. But also, it also can set that basis for making sure that people coming in under a rule 506 B are knowledgeable about investing. So that it's not a it's not unusual for them to invest in something like your investment fund. After your investors have the all the documents that they need. It's now time that you do that you and address any questions that
they have. Now, they may have a bunch of questions. So it's also a very important that you've read through the operating agreement and the PPM and the subscription agreement, so that you can answer any questions that are there things that are likely to come up as discussing about the risks of the investment, talking about what the terms are, what kind of return are they likely to get, and why they think that your investment is worth going into, they may have questions about
your management team, how it's actually going to function so that they can build that level of trust even higher so that they're willing to give you that $100,000 that they already gave you a soft commitment for they may be interested in the exit strategy, what sort of timing are you thinking about going the you know, timing is defined in the private placement memorandum most of the time, but they want some assurance on what that timing is. It can it can be deviated from but they need to
know what to expect. And also fees and expenses is the normal thing as well. They need to know you know, what sort of fees are you charging off the top if you're charging 20% asset management fee? Holy moly, that's a big number. Normally, it's something and closer to do. So they need to know what that is and why why you've allocated expenses and fees that way. And
they may have questions on it beyond what's in the PPM. After you've given the investor the documents after they've asked all the questions that they need to, now it's time to finalize the investment. A lot of times we call this the closing of the subscription. So sometimes you'll see that in the subscription agreement itself, we're referring to closing note for this on the side, that's not the closing of the real estate property, we're talking about closing of the contract of the
subscription agreement. So what are those steps look like? Well, the first is signing the subscription agreement, the investor signs it saying and exchange for this amount of dollars, I'm getting this much units or this much interest in
the company or the fund or the syndication. So they sign that agreement, then I have them complete the questionnaire that gives them not only get not only gives you the information you need on the taxes, but it also gives you that additional information to make sure they know what they're getting themselves into, and that they have the level of sophistication to get into it in the first place. And then third, they wire their funds or send by Ach, there's different mechanisms for
it. There are pros and cons to both and if you like once, once you're a client of mine, we can go over what the different choices are. Last step is confirm the last step after your investor has wired you the money. What do you do then? Do you just deposit it or what what happens? Well, that money typically gets deposited into your LLC, your investment LLC bank account, typically we don't use escrow accounts, typically,
it's going into that bank account. So you as the syndicator, the investment fund manager, the sponsor, you are going to look in that account and verify it's there. So you want to make sure it's there, you want to make sure that there's no nothing funny about it. And that the money is is basically safe, because you don't want to get yourself caught into a situation where something bad can happen.
Second, and wait till those funds have cleared. By the way, there is bad things that can happen with fake checks and things like that. So just make sure that the money has cleared and is truly in the bank account first. So you're going to confirm that those funds are there, you're going to confirm you're going to counter sign the subscription agreement and send it back to the investor. You can also issue what we think of it's like stock certificates or membership certificates and
things like that. It's not very common, but I have had clients do it. There's reasons why it's not very common, mostly because their specific language that needs to appear on them, if you're going to do it, and it kind of takes away though, the fun of it, because we have to say it's not for resale and things like that on the investment certificate if you decide to issue them. Very, very rarely does do people do that probably maybe 2% of my clients actually issue something like
that. So that is what happens. Those are the steps in order to get the money from or go from an investor is interested into, they've already invested in now all is good. From very just make sure you've got that communication. You execute your plan the way it is. If there are problems that come up, you deal with those problems and still stay in constant communication with your investors. So ultimately, they are confident in you and they will trust you in your very next deal. My name
is Tilden Moschetti. I'm a syndication attorney for the Moschetti syndication Law Group. If we can help you with your Regulation D rule 506 B or 506 C offering, be happy to help give us a call set up a time to meet with us and we can go from there.