I would like to apologize in advance for my ignorance for I know nothing at all about what I am about to ask. I have an idea to start my real estate investing business by operating a hedge fund type operation. Is it legal to advertise for investors to be part of the hedge fund and how would I go about setting up the LLC or maybe someone could refer me to another blog entry covering this topic. As a hedge fund the funds would sit idle in the fund and as the fund manager I would have the ability to use the funds to aquire real estate?? Does this sound even remotely cose to being correct?
It is a lot more complicated than that. To invest in a Hedge Fund you have to meet certain income guidelines to be considered a “qualified investor”. I am working on something very similar to what you are doing, and what I would recommend to you is that you contact an attorney and sit down with them to answer your questions.
Thank you for your response. Isn’t it true that you can have up to like 39 non-qualified investors, 61 qualified investors bringing a total of 100? If this is true then does that mean that the 39 can be anyone with an investment of any amount? Would it be a good Idea to try and find an attorney that could handle the business end and the closing end of your company?
Be careful…you are biting off more than the average newbie can chew! You have to be concerned with many issues including blue sky rules and the Securities & Exchange Commission. You definitely do not want to be concerned about that ‘stuff’ in a challenging market, let alone if there was a strong market.
You also need to consider if you even want ‘equity’ partners in your deals. Why not look for ‘debt’ partners in the form of private money and mortgages. You can even break down your private investors into small investment portions through setting up an LLC as a first mortgage on a specific property…ie: $100,000 needed, 100 shares in LLC at $1,000 each, small investor has $7,000 to invest from his IRA would own 7/100 of the LLC until the mortgage was satisfied.
Keep it small and simple for you to attract private money. The development of money from private investor sources is the most important activity for us as investors. Deals are easy to find but you cannot take advantage unless you have the money.
Lastly, as a newbie, I would be cautious not to focus on a large project such as setting up a hedge fund. All this will do is delay your potential success as an investor. Alot of new investos who hire me to train them want ot be involved in som grandios project and all that is doing is allowing them to delay and failas the underlying issue is their fear to take action. Don’t fall into this trap. Pick a small deal that is simple, then do it! Taking action will cure all of your doubts and worries about investing and then you can do more deals with money in the bank.
Hope this helps.
I remember during the boom there were many REIT (Real Estate Investment Trust) which were investor funds people put money into which must be very similar.
Now as an investor I would STRONGLY question why I would invest money with a HEDGE FUND MANAGER who has no experience in REI