Sorry. We Can’t Talk To You.
The SEC Has Rules
Nancy knew Larry was a real estate investor. She even received his blog. She was learning a lot about real estate investing.
But, she never had met and talked to him.
When he put together an opportunity for a new deal, she wanted to make an investment, but he said “Sorry, we can’t talk to you about this one.”
Nancy was not allowed to make an investment in that deal. The Securities and Exchange Commission (SEC) regulates these kinds of transactions.
Larry’s opportunity or offering has to abide by the rules that cover investments like this.
Unless you have a “substantive pre-existing relationship” with the person or group putting together the investment, they cannot talk with you about it or include you in their deal.
That’s a problem.
But, you can solve that problem right now.
IT IS AS SIMPLE AS A CONVERSATION
You can take the initiative and help create the “substantive pre-existing relationship”, required by the SEC.
It is as simple as scheduling a conversation with any or all of the investors you might one day want to partner with in a deal.
Over the phone, in a Zoom call, or in person, make the time to get to know each other. Build that “substantive pre-existing relationship” that is required.
You and the investor or operator must establish and be able to document that you have a “substantive” relationship.
This is more than simply being acquainted with each other or even simply being friends.
We are not attorneys and we recognize there may be some lack of clarity as to what the word substantive means. And it may vary between attorneys.
OVER TIME. First, it means we have had this relationship over time. It is not just a single conversation. It is not just a form filled out and sent in. A substantive relationship to us means we have come to know you over a series of a few conversations. This gives us time to get to know each other and both be confident that partnering in an investment is a good fit for both of us. Other syndicators that we have worked with have a similar understanding.
IN DEPTH. Second, it means we have talked in some depth. We have talked about yours and our experience and knowledge of investing, your investment objectives, your tolerance for risk, and your financials.
We’ll share below some of the questions a syndicator might ask while getting to know potential investors. When you talk with people with whom you are considering investing, make sure they ask you questions like these. It is important for you and for them.
Notice that word “pre-existing”. You have to already have the substantive relationship before the opportunity is in place.
This is why Larry said “Sorry” to Nancy.
She didn’t really have a relationship. It certainly wasn’t pre-existing. The first time they talked was after Larry had the property under contract and was making the offer to investors to join him in the deal.
It was too late.
INITIATE THAT RELATIONSHIP NOW
Don’t be too late like Nancy. We have known many other people who missed out on an investment because of this SEC requirement.
Send an email or text. Pick up the phone and call. Reach out to those operators with whom you might have an interest should they find an opportunity in the near future.
Schedule a call and talk. Ask them questions to better understand who they are, the experience they have, their track record, their approach to investing, and how they communicate with investors.
See if they is a good fit for you. If you know, like, and trust them.
And get ready to share in some depth about yourself.
Talk with them about your financial situation, such as your net worth or your annual income. Tell them about your investment goals and time frames and risk tolerance. Let them get to know you and see if you are a good fit for them.
Then, when the next opportunity presents itself, they will be able to share it with you.
Do it now!
OUR GOAL IS TO DEVELOP INVESTORS FOR LIFE
Attune Investments is in this for the long term. Many syndicators share this philosophy. Multi-family investments tend to take time to develop and obtain both the cash flow and the other benefits being sought..
We really do like and understand this investment class. But, it is not a quick return. It is a good, appropriate return, all while providing needed housing for our residents. It takes time, sometimes years to pull together.
Many of our investors choose to continue to invest with us, deal after deal, over the years. We get to know each other quite well.
As you look for an operator with whom to invest, think about this as a long-term relationship which will include a series of investments.
INVESTOR/OPERATORS HAVE RESPONSIBILITIES TO YOU
We take our partnership with our investors very seriously. Look for operators who do the same.
Find an operator who has years of experience, a fine tuned set of skills, a solid team, and are good at what they do.
You are entrusting your money to them, to their efforts, to their ability to produce the expected returns.
As our SEC attorney says, find someone who treats your money with more care than they treat their own. Find someone who puts you first. Find someone who is honest and transparent and shares both the good news and the bad news with you. Find someone who will keep you fully informed.
The SEC requires operators to put in writing the complete and accurate material facts about any potential investment opportunity. This is important. It is the basis for your fully informed decision about your investment.
Find an operator who has an excellent SEC Attorney on their team. The SEC Attorney will see that they are providing the best entity structure for the investment. The SEC Attorney will see that their written investor agreements are complete and accurate, laying out all the risks and benefits.
THE TECHNICAL WORD FOR THIS IS “SYNDICATION”
When an investor or operator partners with people like you who make an investment of your money, along with others, in our common purpose, with an expectation of a profit, they are forming what is called a “syndication”.
As we said above, under certain of the SEC rules, they are prohibited from “advertising” or sharing our opportunity with people they don’t know.
The SEC has provided an exception in Regulation D, Rule 506, for those who are not accredited investors. If they have established a “substantive pre-existing relationship” with you, one developed over time and in which you have discussed some specific questions, then you may be eligible to invest.
WHAT MIGHT BE THE QUESTIONS
You might be wondering what questions a syndicator might ask you.
Here are some of the types of questions we often ask as we establish this relationship with our potential investors…
- Tell us about yourself.
- What are your investment goals?
- What experience do you have with investments (stocks, mutual funds, other real estate…)?
- How much risk can you tolerate?
- Do you have any experience in private placements or syndications like what we offer?
- What kinds of returns are you getting from your current investments?
- What is your “bottom line” expected return?
- What is the value of your current investments?
- What types of investments do you currently have?
- What is your annual income over the past couple of years?
- What is your current net worth not including your personal residence? (This might be multiple choice, such as over $500,000, over $1,000,000. This question and the one before helps establish whether or not you are an accredited investor.)
- What do you know about investing in real estate?
- What do you know about multi-family investments?
Many of the people we talk with have found our conversations to be very helpful for them in clarifying their thoughts about investing. We hope this will be true for you, as well, as you have these conversations with the operators with whom you are considering a possible investment.
Therefore, send them an email or text or phone them and get this relationship started today.
LET’S GET TO KNOW EACH OTHER BETTER
Attune Investments provides a better return for our investors. And we make a positive impact in people’s lives and in our world.
If you want to learn more about how others are investing with us then we invite you to join our club and request a conversation with us.
Through the power of a syndication partnership with other investors like you, working with managing partners who are experienced in managing apartment complexes, you can own multifamily assets.
Or you can choose to loan money, get in with a clear return, and get out earlier. If you haven’t already subscribed to our BLOG, you can increase your knowledge and comfort with this asset class by subscribing now. It’s free. We publish an article every week. SUBSCRIBE HERE
After you join, schedule a call with one of us and we can get to know each other better and answer your questions. We are required by the SEC to build a relationship with you before we can share any specific investment opportunities. So JOIN TODAY.
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Harland leads our Investor Relations. He is a “repurposed” Pastor and Army Chaplain. He is an author, speaker, mastermind facilitator, and coach. Harland lives with his wife, Barbara, in DeLand, Florida.