Any legal ways to advertise for Private Funders besides word of mouth?
What makes you think advertising for private funding is illegal?!!! There are no ‘blue skies’ rules to adhere to with debt partners, only equity partners. If you are looking for a loan from a private party and give them a promissory note with (or without) security, they are debt partners.
Having said all that, I have advertised very few times in the past 20 years for investors on venues such as Craig’s List and the local newspapers. It can work just fine but remember that unless you have viable deals, know what you are doing, and the investor has confidence in YOU, they will not invest.
This is a relationship business. Go to the people you already know who have confidence and trust in you. Bring them viable deals with realistic expectations and they will invest.
Rob
I would be very careful with the advice in the previous post. Debt instruments are absolutely considered a securities instrument. Advertising is absolutely legal in certain situations, but not in every situation. Every state has the authority to regulate the rules and laws within their borders. And, they can each have a different interpretation of the laws. Again, it’s not necessarily illegal, but you can’t just advertise willy nilly either. Most states require you to file some sort of documentation and a copy of your ad before you are allowed to use it. They want to make sure you don’t use words like guarantee and low risk.
You also need to be especially careful when you post on a website. Asking for money on a web site is considered advertising. I would make sure you include a statement saying that you only accept money from people who live in your state. If you don’t, and someone from another state calls and you take their money, your now playing with a very big fire.
I’m not posting this to scare you. I’m posting this to help keep you out of trouble. You need to speak with a good SEC attorney before you just assume you’re safe. Most will give you a free consult when you first talk with them. This is a very misunderstood concept even among attorneys. I have talked with attorneys who have said that I can and some that said I can’t. You absolutely can advertise in almost every state, but you need to follow the process to stay out of trouble. Unfortunately this is not a black and white topic. If you talk with an attorney who says you can’t, move on to another one. If they tell you can do almost anything you want, move on, they’re aren’t good either.
These postings are ‘opinions’ for which we get no pay…not advice. Anyone and everyone that has concerns regarding legality of a transaction would be foolish not to consult a legal team and pay for ‘advice’ to be certain of their actions conforming with the laws in their respective States.
Rob
I would think that I could put an ad somewhere asking if people were interested in partnering in real estate deals and when they call I could let them know I am looking for a funding partner. Whadaya think?
I think ads should not be your major source of developing investors. This is a relationship business which takes knowledge, confidence, and much effort. Advertising can be effective but if that is all you do, that would be the ‘lazy man’s way’ to build your business and less effective. If you develop relationships and know what you are doing, people will invest. Give them an attractive deal, a great return, plenty of security, and be confident in what you do…then you will get the money you need.
Rob
Rob, I didn’t mean any disrespect regarding your advice. I only meant to expand the legal ramifications on it.
With that said… I agree with Rob on both of his most recent answers. While advertising is a legal way to attract money to deals (provided you follow the rules), this is definitely a relationship business. Getting out and meeting people is the best way to raise money.
I would like to add one more thing… I would be careful as to what you consider a partner to be. If your money partner doesn’t have any say in the project, then the SEC won’t consider them a partner. They will consider them a lender.
Just my 2 cents worth…
Jeff
Good job, Jeff.
I’ll clarify my earlier statement. You want debt partners (which are lenders, both commercial and private). You don’t want equity partners, whom you share ownership in the property. Once there are numerous equity partners, you must deal with blue skies rulings through the SEC.
Rob