The private placement memorandum that's kind of like the big document the syndication attorneys work with, that we give our clients it's aside from the operating agreement, which really makes the investment entity work itself. The private placement memorandum is a absolutely critical document.
What does it do? Well, in summary, what it does is it allows the syndicator, the fund manager, the business raising capital, it allows them to give to potential investors, an identification of all the terms of the investment, identify risks, identify conflicts of interest, all for the purpose of allowing that prospective investor to make a good decision for themselves about whether or not to exist, it is a benchmark at Keystone in private offerings, it is an absolutely
critical document, it is absolutely required for non accredited investors. And even though it is not required for accredited investors itself, there is hardly a private offering under 506 C, or even 506 B to only accredited investors, that doesn't use them. Why? Because it's such an important document. It's the document when the bottom falls out, and you needed the most you can say hold it up and say this
is what I told you about the investment. It is your Get Out of Jail Free card because you don't belong in jail, when you've got this document, you've shown the investors all the things that really can go wrong, you've identified all those terms. So in this video, here's what we're going to do, we're going to go through in detail, the 10 major sections that go into a private placement offering, I know you're gonna
find it helpful. And it's really just like a list of all those things that are there and the things that I think about as a syndication attorney when I draft him. I hope you enjoy this video. As a note for my podcast. As a note, from my podcast listeners, I want to say thank you. This is our 100th episode. That's why I did such a long talk for you. I wanted to make sure that you have that. And I wanted to say thank you, you listening to my podcast means a lot to me, I enjoy speaking to
you. And we've helped a hundreds and hundreds of people along the way, do their own deals. And generally, I believe putting this kind of good information out into the world is the right thing to do. So thank you. Thank you very much for enjoying my podcast, I hope you keep subscribing tell your friends, get them to subscribe. Again, thank you for being here. 100 episodes, wow, that is a big. So the private placement memorandum has a lot of parts.
Now we're going to talk about the 10 biggest parts, and how they function and what their role is. Now this doesn't necessarily mean that they have to be in this section. And it certainly doesn't mean it needs to be in this order. Because when I draft them, they're definitely not in this order.
But I thought it was the clearest organization to talk with you about how to organize what a private placement memorandum is, what that thought process is because it really goes to the, again, the heart of what the investment is, and the purpose of that of that PPM to describe those conflicts that risk those terms in a clear and concise manner. So without further ado, the first big kind of topic area of a private placement memorandum is the summary of terms. So this is the
terms of the investment. Now, it does a lot of things underneath the summary of terms, if you've seen them most often it's structured as a table. That's how I write them as well. And in that table, we're doing things like we're identifying the investment entity itself, we're identifying who the manager is. But we're also involved identifying that investment objective. So we're putting it in the summary of terms to make it clear and called out right here, that the objective of this
investment is to make returns for its investors. So it's a security right, that's the whole purpose to make, make funds make money for our investors is to do that and in some manner. So we describe in some detail about what that objective is and how it's going to be achieved. So maybe if I identified specific terms, sometimes we put that in here as well, I mean, specific goals, some targets that you want to hit in terms of IRR or, or multiples or things like that, that oftentimes goes here
as well. Another Creek, Cara absolutely critical part of the summary of offering terms is Who exactly is able to invest? Who are those eligible investors? Now, this is either one of two answers, or both. So yeah, well, it's so it's either accredited investors. So accredited investors are those people who meet the requirements of Regulation D, rule 501, they're identified there and 501 A, who those accredited investors are.
So briefly, that's the, they make 200 or $300,000 of income for the past two years with the expectation of the third year, or the current year to make that same amount, it's $300,000, that for counting the spouse, or they have the net wealth of over a million dollars, not including the value or any equity in the private or primary residence, because negative equity Does,
does have an effect. But any positive equity does not. So that's the accredited investors eligible investor time, now, almost always, you're going to be taking them because why wouldn't do the other group that is that can be available for a four a five is for a 506 b offering. And those are your non accredited investors. Those are simply those people who have not reached the level of the accredited investor. Now, they must be known to you and they must have some level of
sophistication about business and about investing. So they must meet a minimum threshold in order to invest, you wouldn't want to take somebody who's never balanced a checkbook in their life and put them in as a non accredited investor, they're probably not sophisticated enough. Not that they're bad people, they just don't fit into the criteria, and probably shouldn't be investing. But those, those people should be there. The non accredited investors, if you're doing a 506
b offering, may very well be an eligible investor in. And then like I said, third category is both. Most of the time if you're doing a 506 b offering is going to be both you'll both have non accredited investors, which is limited in their 506 beat to 35 of them in any 90 day period, and an unlimited number of accredited investors. If you're doing a rule 506 C offering, you're just taking an unlimited amount of accredited investors,
but they must be verified to be accredited investor. And so that's just a quick summary of what those of what that eligible criteria is. Another important term is what's the offering sighs Are you raising 5 million 10 million 100 million a billion, it's important for investors to know because they
need to know what they're getting into. Right, it's a very different thing to invest in something that's going to be raising a million dollars, if I'm going to give you $200,000 And your raise is a million, wow, I suddenly own 20% of this thing, if you're going to be raising $1 billion. Now I own very, very small amount, right? I own point 2% of this thing. So much, much smaller. So it's that what is that offering sighs number three is really are for is really the use of proceeds.
Now. Here we expand the use of Jenner of proceeds greatly. But here I'm going to speak just kind of generally about it. I normally put a section in my terms that says we're going to be using these funds for paying for expenses as well as investing in the primary assets, whatever those are, because remember, this isn't just real estate that uses these real estate is a lot of my clients, but it's not all. So I have an I have clients that invest directly capital into their
business. I have ones that build funds, or hedge funds or things like that. They're all buying different asset types, and they're using the funds in order to buy those kinds of things. Another main term is the estimated hold period. So I give you $200,000 How long are you going to be using those funds in this investment before I get back? Is this a three year deal?
A five year deal a seven year deal? A one month deal? It's kind of important for me to know so I have an expectation of of how long it's gonna be tied up. If you leave left this out. You're gonna have a hard time finding investors because they have no idea what they're getting into. Right if I give you $200,000 I kind of want to know Another Creek key term, and probably the term of the offering that investors flip to first is what the distributions look like. I mean, we're giving
you this money in order to get those distributions. So what do they look like? Am I getting a preferred return with some sort of water? Am I getting straight equity that's getting split out some way? Am I getting basically a preferred security? So it's paying out at a fixed rate? I want to know, I want to see the language so I can understand what exactly it is. So that's a very key piece of information for me. What do the expenses look like? Am I getting if I invest in your business? Is my
money going to be used for what kind of expenses? Is it going to be used for your as the syndicator at for your office space in your personal assistant, kind of important for me to know that is, is are one of the regular expenses going to be paying for, you know, preparation of tax returns, most of the time it is, but it's not always that kind of like to know, well, what is all this money that I'm providing you going forward. And along the same lines of expenses, this is
also where we talk about management fees. Now we have lots of different kinds of fees that oftentimes get baked in, not always so I still some, I prepare some private placement memorandums with no fees, no management fees whatsoever, which is certainly an option, certainly a good marketing advantage. But it's not, it's actually more common to have
some sort of feeds. So asset management fees, property management fees, if it's a real estate deal, acquisition fees to buy the the asset, disposition fee to sell the assets, finance fees, if there's outside financing being provided. These are all kinds of fees that are that exist, that are common. And they need to be put here, they have to go into a private placement memorandum, obviously. But this is normally where we identify where those what those fees, what that fee structure looks like.
Another key term are is transferability of membership interest. Now remember, under Regulation D, these things these, the security is not freely transferable. So that's why cryptocurrencies oftentimes don't work. Because you have if you have a cryptocurrency by its very nature, it's had its tokenized to make it freely tradable. Regulation D offerings, regulation, D securities are not supposed to
be freely tradable, is right there in the rules. So this is normally where we talk about those things, there are major restrictions on the transferability. Now the purpose of those restrictions is really just to reduce the the possibility of a secondary market being created. That's
really the goal of the SEC here is to restrict it. So there's not like these mini stock markets all popping up all over the place, where people are trading on their private placement offerings, just on the value of the stock, or the of the units that there are, they should only be an investment should be geared towards driving the business and towards the business goals of what ever it is. And I don't mean
specifically a business because it can be. But it doesn't always mean it can also mean a real estate thing or a private equity fund or something like that. But the goal is the money should be driving that not not speculation on the value of the security itself. That's why it's restricted, it is not allowed. Another key item here is income tax considerations. Most of the time, for a for a non business, we're talking about these file
partnership level tax returns. So if they're new, most of the time, the entity choice will be an LLC, and they'll file a k one and you'll get K ones for each investment that you make. And then lastly, for the major terms that I put in and this is just high level, there's actually quite a few more, but I want to give you a brace like broad overview is governing law. So I've got a problem. I invested in your in your entity, and I've got a big problem and I'm going to file a lawsuit. Well what law
governs here? Is it the state where I am is it the state where you are is a Delaware is it Wyoming? Is it Texas? Is it New York? Is it California? Where is that? It's a very important point because if things go very bad I need to know it's a major term choice of law is always a major turn. Lawyers love it because it's a major topic for us. we study it in law school for a whole year. And so that's why it ends up in your agreements. But it also is very, very important. And so that's
why it's included under the summary of terms. The next major topic, other after summary of terms, is the disclosures of risks and conflicts of interest. This is a major part of a private placement memorandum. Its job is to make sure that investors know what they're going into. Now, I oftentimes tell clients this, and I'm not really joking when I say it, although it's true, is if I were to draft the perfect risk
statement, it would look like this. Dear investor, you are going to lose every single penny, I guarantee it, we're going to keep it all no matter what if we make any and you will lose every penny. Now, if I could draft it that way, it would be great because Boy, wouldn't it protect your wealth, no matter what happens, you're right, the investor doesn't get their money back. Of course, no investor is ever, ever going to invest in that. Why? Because they're investing in it to get
money. So we need to give a proper picture of the risks and conflicts of interest that exist. So let's talk about risks. First, when we're talking about risks, we're talking about reasonably foreseeable risks that could happen. Now, I'm not going to put in the in a PPM that there is a risk that the moon is going to fall out of the sky landed in the ocean and closet tsunami, which is putting the money at risk. I don't think
that's likely to happen, could it? Probably not. But I guess, you know, in the in a quantum mechanics world, maybe there's a practically a nonzero answer that it could happen. Or if you've seen the movie, Oppenheimer, you know, there was a nonzero risk that the bomb was the atomic bomb was going to blow up the entire world. It's a nonzero risk, it's there, but you're not gonna put it into a private placement memorandum. We're putting in reasonably foreseeable risks. Now here
we're talking about like business risks. So the big kind of overarching risk, that's there for sure is, hey, investor, this is an investment investments, by their very nature are inherently risky, otherwise, there would be no return. You don't get no risk, no reward, right? So this is an investment and your money is at risk, you may lose money, it's possible. So that's sort of like the broad overall business rate
US business risk that exists. But there's also other risks, things like, when we talk to investors, we're oftentimes leaning on our past experience, right? So my experience, I personally have done quite a number of deals, I have a very good track record of generating returns for my investors. But that past history, the results that I got in the past, for my investors are the past, it doesn't mean that my next
venture is going to be successful. I'm gonna try my darndest to make sure it is successful and wildly successful. But just because I had success in the past doesn't guarantee that in the future, I'm going to have the same it's it's, that's, that's one of the risks that you also need to make sure investors know. Another key risk is you as a syndicator, are bringing to this deal, you're putting this thing together, and you're using all your talent, your skills, all all those
things that make you special, into this investment. Right. And that's why investors are making this decision because of you. Ultimately, the end of the day, that's the decision that they're making. They're trusting you to do this. So you are a key person to this investment. And there's no guarantee that you're gonna
be here next week, in order to keep it running. Right? Meaning you're gonna you want to be, you're gonna try to be, but you never know when that bus is going to be barreling down Main Street. So it's a risk that exists. It's a risk that needs to be disclosed that hey, we've got these key people, like including you that exist, and they're very important to the operations. We can't make a certain guarantee that they're
going to be with us always. Another key risk and we actually talked about under summary of terms and that's the lack of liquidity. So basically, because we can't freely trade this, because there's no public market for these securities, I can't just go and sell them on Wall Street. Right? It doesn't exist to do that. So the investors need to know, there may be a situation where you really wants your money back. But you just can't get it, you just can't find a person who's going to buy
it. Maybe the managers got their money all tied up, maybe all the other investors or have their money all tied up, and you just can't sell it. It's not a liquid asset. And the investors just need to know that that's just the reality of it. Of course, there's always income tax risks. We don't know what
taxes are going to be in the next few years. Maybe they'll they'll be more favorable, maybe there'll be less, it doesn't really matter for the purposes of rafting and ppm, other than this let investors know, hey, we're drafting this based on the tax situation that we know today. Today, if it's real estate, we know we can depreciate the property, we know that exist, it's a reality thing. Maybe that will go away. I don't know. Maybe they will do away with 1031 exchanges? Don't
know, it's just a reality that it may happen. And investors need to know it. Now, why do they need to know these risks? Because what if some one of them happened? Right, and they're very mad. So let's say that they didn't really understand about the liquidity thing. Right? They didn't understand that these are illiquid, they didn't see that section on your summary of terms that, that there's these restrictions on or they didn't draw the conclusion of what that meant for them. Well, something
happens in their life, and they need to get that cash out. This is their only pool of cash, and they need to get it. So they come to you and they say I gotta get this cash out right now. Oh, I had a life event that requires it. And they are earnest and really, really need it. But you're in a situation at that point, time point where you can't help them out and no other investor can help them out. Well, what do you think their complaint is gonna be? Why didn't you tell me that these
are illiquid? Why didn't should go through and tell me that I had no idea I would have never invested if I had known that it was illiquid. That is why it's in the private placement memorandum. So you can hold up your private placement memorandum point to the section and say, I did. See it's right here. I told you that it's not it's just not a liquid thing. If they make a complaint to the SEC, or a state regulator, and they get a copy of the PPM, you can show them and say, I told
them that this was a risk. It's just the reality that it's that these things are not freely tradable. And they'll understand if they try and take it to a lawyer and try and sue you, because Darn it, that's indicator didn't tell me about it. The attorney, the plaintiff's attorney is going to look at that and be like, it's right here, you can't, you're not going to be able to sue, because of it. It's all over
this document, that it's illiquid. I'm not gonna take your case, or I'll take it but you're gonna have to pay me our you know, no, one attorney would take it on contingency because it's a loser. So that's why we're so careful about making sure our risks are well crafted. Now, why don't we put in every risk in the known universe? Why don't we make this like a 10,000 page document that's got risks that are just crazy and
ludicrous in there? Well, courts have actually said, You've got to tell your investors risks, but you can't bury risks in other risks. So that's why we carefully tailor the risks of those risks, which are reasonably possible for a that reasonably foreseeable that could happen so that investors can make a decision about those things that are reasonable. It's not reasonable that that tsunami from the moon falling in the ocean is going to be a big problem. It's just not. So we
don't put it there. That's why so I don't list out everything. Normally, there's quite a few pages of risks, but it's only what I think is reasonably necessary. Is there one or two or three or five risks? It depends. But there's more than five and there's more than 10. It's probably and I've never really counted but my guess when you add up all the different categories of risks, there's probably about 30 or 40. That's my rough guess. So the other piece of this puzzle is
conflicts of interest. Now, when you as a sponsor are putting this deal together, you're getting paid most of the time 99.9% of the time, you're getting paid. And when you're getting paid, there is an inherent conflict of interest. So a conflict of interest is when your needs don't necessarily match up 100% to the needs of a, of an investor, I think the best example of a conflict of interest that happens all the time, is the sponsor, is a property manager.
So that property manager is making fees, property management fees on taking care of the property. In fact, that's the bulk of what they're making profit making they're making their fees on is that management of the property. And the investors have identified, hey, this really actually is a good time to sell this, this asset. While the in the sponsor has a conflict of interest, because they want to keep this thing
going. They want to keep their property management job, you know, servicing the property, that's an inherent conflict, it exists, it must be disclosed. Now conflicts of interest can exist, not saying that they can, they always are going to exist. And it's okay, they just need to be disclosed, investors have to know, hey, these are the main conflicts of interest, I'm getting paid fees, I'm getting these things, our interests are never going to be completely aligned, I'm going to do my best
to act in your best interest. But just know, there are conflicts, that way the investor can read those conflicts and decide for themselves, whether you are going to act in their best interest or not. If they don't, they don't have to invest. If they do think that you're going to act in their best interest, then they probably are going to invest. So that's why we disclose them, because they got to be there. The third big section is capital uses and expenses. So we touched
on this a little bit above under summary of terms. But that breakdown of how the money's being used is critical for investors to know, under Regulation D rule 506. B, when you have non accredited investors, it's not only a darn good idea, it's required that you make a very detailed explanation about what those uses of the funds are going to be. Now how detailed does it need to be? Does it need to be 30 pages of forecasts and analysis and things like that?
No, it needs to be reasonable enough that the investor can see for themselves, okay, I'm going to give them this kind of money, this money is going to be used here to buy this asset, some of this money is going to be paid for these fees. Some of these are going for legal expenses hid, some of this is going for this, so that the investor knows what they're buying, right,
they're buying a piece of a company most of the time. And so they need to know have a good feeling about well, this is the entity that I'm buying, even if they're taking just a preferred equity position, like a preferred stock, they still need to know, because it's a very different situation for me putting money into something that's going to be used to buy to basically pay for you. Versus it's going to be paid for this Ferrari that's going to generate all this cash.
Right, there are two different things. So I need to know that as an investor. And that's why the use of funds is very important. At the same time, this is also where we talk about expenses, the kinds of expenses that are allowed to be spent, right. So is if we're paying for the for paying for overhead management, well, that's a very important thing. I need to know that some my money is being used to pay for that manager. If I'm getting distributions on money that's coming from investor
money starting to sound like a pyramid scheme. I want to know that I want to see that in paper. Okay, well, if that money is getting is getting paid to me, Well, how is the money getting replaced on that? Because I need to know so that I can make a decision for myself on whether or not to invest. The fourth big topic is the details about the security offering itself. So this is how many units are being offered. In reality units are just sort of a construct that we use. It's not
actually in any of the LLCs laws that they are actually units. It always is a percentage because really, most of the time these are operating behind the scenes as partnerships. So it's really driven by percentages, but units is about Very convenient way to refer to it. So I almost always refer to everything in units.
Because at the end of the day, it's easier to calculate. Well, where exactly is what exactly is that percentage rather than having to deal with the math of calculating varying percentages, if there is, if you own point 37215 of an investment, but that investment was going to raise $20 million. And now it's, and now through optimization, you were able to raise 19 million, and you bought back $500,000 worth of units? Oh, my God, how do you figure it out? It's much easier to just say, Okay, well,
those units got decreased here. So then my denominator changes, and I can still figure out very quickly, what my, what my actual percentage of ownership is. So that's, that's one of the very key things, how much are those units selling for? How much? What's the minimum investment? What What kind of considerations? Are there for minimum investment? Does it have to be that? If I make an investment? Are you able to use the funds immediately? Or do you need to wait a period of time?
Is that money getting set put into an escrow account? Or is it is it going into the LLC bank account, those are the kinds of things that I want to know as an investor, and they should need to be in your PPM number five, and six, I'm going to do together. And that is your company background and the
management profiles background. Remember what I said earlier, that people are investors are ultimately making an investment in you, they're making a decision based on whether or not to trust you, and at the end of the day, give you money in exchange for this hope of making more money. So the background of the company, and the background of you, as a manager are critically important. Everybody needs to know who they're
investing into. If it was blank, nobody would invest. If they had no idea that was going to happen, it's just not going to happen. It's one of the major hurdles that exists when you're marketing a security under 506. C, and you put it on the internet and are trying to get investors because investors still need to know they need to feel who that invest, oh, that sponsor it, they need to know who's behind the curtain because nobody just throws money at a blank wall, hoping that it's
going to be happen. It's you're just not going to collect anything. So that somehow you need to overcome that hurdle. This is part of that. It also sets up as part of a private placement memorandum separate from a brochure it's separated puts you forward to give a reasonable basis for why somebody would make that investment in the first place.
If you're a super experienced real estate professional, for example, then by putting that sort of detail into your private placement memorandum, if somebody is reading the private placement memorandum, it's like, okay, I can see why somebody who's reasonable would invest in this. If you've if your private placement memorandum for building a 20 foot story, high rise, what says, Well, you went to clown school and dropped got kicked out. And that's it, there's probably not a
reasonable basis in order to invest. So that automatically weakens the entire structure. So setting up a good foundation of that background is necessary as part of the PPM. Now what about the situation where you just don't have it? That's okay, too. But we need to kind of make it kind of clear, right, we need to make it so that there's nothing will being lied to. There's nothing hidden about that. So maybe you went to college and you graduated top of your class. Great, that's perfect for there.
Maybe it's you know, you've led a team in a similar type of setup, but it wasn't specifically about whatever this is, okay, well, that still needs to be there so that we can come up with a rational reason, in order for this to happen. Remember, investors invest in you, but they do it on an emotional level. But at the end of the day, they need a rational reason to prop it up. They need to justify it rationally. And
this is part of that justification. It's a part of the justification to if something goes wrong, and somebody is looking at the details of the investment. If that kind of rational explanation isn't there, there's a big problem. Also very important is our seventh topic. And that is financial statements. Financial Statements basically give the money situation that It exists. Now, most of the time, my clients don't actually there is no financial statements. This is a brand new entity. Oh, that's a
risk, we need to put that there. There's no financial statements. There's no background, there's no history on this entity to give financial statements for. We put that in a risk statement. But here we're talking about the financial disposition of our company. What is the basis for? What's the source of funds look like? Is it primarily through this offering? Is it all through
this offer? Is there a third party lender, what's the metrics that are being used in order for a third party lender to have cuz that lender, if I go to a bank and get a bank loan, the bank has priority over all of my investors, your bar, your your investors need to know that what position that they're in, so they can kind of make good estimation of it. It's why your preferred equity people need to understand the business as well, because they actually have priority over those common
investors, but they need to know who's over them. They need to understand that as well. Is there going to be co investment from you as the sponsor? Are you going to be putting money in as well? If you are fantastic. If you're not, if your investors would like to know that? I wouldn't necessarily say call it out if you're not putting money. But if you get the question, you certainly should tell them. If you if you are, you definitely should tell them because investors are almost always
going to ask how much skin in the game are you putting in? So this is another place where you can put that? What are the costs of the asset? You know, are you buying that one acre of land for $50? billion? That seems suspicious? Or are you buying that one acre of land for $10? Wow, what a great deal. Right? So what is the what are those expenses that are being associated with it? If there's a development activity? What kind of development costs? Are there
hard, hard and soft costs? What does the operating expenses look like that I as an investor ultimately paying for by giving you this money? What are management fees? You know, it might, if I make this investment today, and say we're buying a piece of real estate? Are you immediately taking an acquisition fee? I kinda would like to know, if you're getting your pocket, getting money in your pocket right away. It's probably not a problem. But I need to know that that's what's
going on. Lastly, what kind of reserves are you planning and now reserves to me, you know, as an investor that signals you know what you're doing? Because if you have $0, in reserves, something's wrong. You know, what kind of budget is that? Where there's no, there's no safety net whatsoever? It's not very safe, I would be thinking you're probably going to be making a capital call within a month. So what is the reserves look like? And what's your plan on reserves? How's that gonna
work? That's the talk about financial statements that needs to be in your private placement memorandum. The eighth topic, our legal considerations, now, probably you're doing this under Regulation D, it covers 98% of all of the funds that are got are gathered in the private investment world go under Regulation D. So it's probably a Regulation D rule. But what kind of entities are using? It's a different thing, whether it's an LLC versus a corporation. Is it a partnership? That would be
strange? Is it a limited partnership that's important to now? Because that certainly changes the game and how I think about an investment. What, what rule under Regulation D, are you going under? Are you going under Rule 506? B so that you accept non accredited investors? Are you going over under regulation? Five, rule 506 C, that allows for only accredited investors, I have to go through a verification process. Those are things that need to be discussed. What is that criteria
that you're using for accredited non accredited investors? What have you decided you need to do in order to verify accredited investors? If you're going under Rule 506? See, if their confidentiality in this, that's an important legal consideration as well. You know, how open is Am I allowed to be? Can I tell everybody about this investment? Or there's certain things you're disclosing to me that need to be kept secret? What about international investors, international investors can
invest, but are they being allowed to invest? What are the rules that you're using in order to allow those international investors to invest? And of course that restriction on
transferability is also a major legal consideration. The ninth major topic and this really kind of is Oh critical because it's kind of the whole purpose behind the PBM to begin with, and that is investor suitability an investor needs to be able to make that determine that determination that your investment is suitable for their own needs, they need to be able to figure out is the amount of risks that you're that you're that you have inherent in your investment, is that suitable to
me is a super high risk, but I need something very low risk, or is this something extremely low risk? And it's just not going to give me the kind of returns? So is this suitable? Does it serve my needs? Are you a cash flow deal? But all I want as appreciation? Or are you an appreciation deal, and I just got, I'm going to be living off this money. This is cash flow, I mean, to make those kinds of things, what kind of expertise exists in it? So if you're buying just real estate, how
much do I know as real estate? Is it really something I want to get involved in? Is it something I want to invest in? So when I'm looking at your, your strategy and your tactics, I can understand them, because if I don't maybe is isn't the right kind of investment, right, you get all sorts of investors who know that I'm just not going to go into it, because I just don't understand it. I mean, Warren Buffett himself didn't go into tech stocks for a very, very, very long time, because they
said he just didn't understand it. Now, he is invested in a number of tech stocks, but for a very long time, he didn't do any, just because he didn't understand that market. And that's a sensible reason. It just wasn't suitable for him. So that those kinds of decisions are necessary for the your investors to make, and that's the suitability analysis that
they need to go through. You at the same time have also somewhat of a burden in order to understand their, their own suit the investor suitability, if you know that the investor is a cash flow dependent person, they need that cash flow, but your deal is not going to cash flow for 10 years, you need to make sure that they really understand that your deal is not cash flowing,
it may not be suitable for them. It would not be right to put them in the position of buying into your security and not making and, and just not telling them not making sure that they understood that. So this idea of suitability is critical. And the last thing that's often in a private placement memorandum is the process. So what do you need to do to invest? I've read through your ppm. I understand I am ready to give you my $200,000 today, what do I need to do? That's oftentimes part of your
PPM as well. Typically, the process is after you've read the PPM and have the opportunity to ask questions of the sponsor, then you will sign a subscription agreement, you will fill out an investor questionnaire, if you need to get accredited, get a third party that say you're an accredited investor, you'll do that you give those to the sponsor. The sponsor looks at them says great, we're what
happy to have you aboard. Now you wire the money to the sponsor, and then you countersign the subscription agreement that's most often the the order of events. But it may be totally different. Maybe you have some other thing, maybe they need to register on a website or a portal or something like that. So this is the place where you would describe that. Wow. So there is our big deep dive into private placement memorandums. So I hope that you have found this video helpful.
Now, me i My name is Tilden Moschetti. I am a syndication attorney with the Moschetti syndication Law Group. What do we do? Well, we write PPM s. We also put together operating agreements, subscription agreements, questionnaires, file Form DS, notify states, everything that's needed in order for you to start a syndication, put together an investment fund, a real estate fund, or raise capital for your
business. This is what we do every day. This is all we do every day is specialize in Regulation D. If we can be of service to you. I'd be happy to talk with you and see if there's a good fit. Give us a call and we'll schedule an appointment