Raise Capital for Real Estate

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					Real Estate
Hedge Fund
 5 Steps to Your First
Real Estate Syndication

                   by Susan Lassiter-Lyons                             1
Seek Professional Advice. The author or publisher of this document is not
responsible for any losses or damages whatsoever due to the information
published in this report. This document should not be considered legal,
accounting, or any other form of professional advice. This document is provided
for educational purposes only. The reader assumes all risk and responsibility for
the usage of any information or ideas contained in this report.                                                                    2
Hey, it’s Susan Lassiter-Lyons and I want to personally thank you for
downloading this report. Real estate hedge funds and syndications are a topic
near and dear to my heart primarily because they are the best way I know of to
raise money to invest in bigger deals. And let’s face it, bigger deals means bigger

In this report, I tell you what hedge funds are, how you can use them and the
five steps to creating one.

Here’s something important to remember as you go through this information:
Don’t be overwhelmed. Hedge funds and syndication might seem like a super
advanced topic but the truth is it’s actually very simple to put together once you
educate yourself.

So, let’s get started…

What is a Hedge Fund?

A hedge fund sounds a bit daunting but it’s simply a private investment fund or
pool that trades and invests in various assets such as securities, commodities,
real estate, currency and derivatives on behalf of its clients, typically wealthy

As a real estate investor you can put together hedge funds to invest in all kinds
of real estate – commercial, residential, bulk REO’s, notes, mortgages and more.
Once you’ve decided on your investing criteria, it’s time to create an “offer.”

What is a Private Placement?

Private Placements or private stock offerings are “private” equity/debt
transactions and are less expensive to complete than an initial public offering
(IPO) for the purpose of raising capital.

The 3 Pre-Acquisition Phases

Private placements are the most common syndication format in real estate
investing. In terms of putting one together there are three distinct phases
leading up to the actual acquisition of the property or real estate assets: the pre-
offering planning phase, the document creation phase and the marketing phase.                                                                     3

Regulation D Basics

“Reg D” is a government program that allows companies to raise capital through
the sale of equity or debt securities.

It provides two things: The “exemption” to sell unregistered securities in a
private transaction and the paperwork.

The Offerings

There are 2 basic types of Regulation D Offerings. First, an "equity" offering is
where the company sells partial (or a majority) ownership in the company (via a
security, stock or LLC membership units) to raise capital. Equity offerings are
preferred by early stage companies because there is no structured repayment
schedule or debt payments, the investors receive a return when the company
profits and those profits are shared.

Second, a "debt" offering is where the company raises debt financing by selling
a promissory note to investors with a set annual rate of return, and a maturity
date for when funds will be paid back to investors. A debt offering is much like a
business loan, but instead of a bank providing the financing, a group of investors
lends funds to the company.

The Rules

There are 3 basic "Rules" which are relied upon to raise capital. These rules
allow for different amounts of capital, different types of investors and different
methods for conducting an offering.

There are 4 regulation D programs or “rules”: 504, 505 and 506. The offering
you choose is usually based on the amount of money you want to raise and
where you want to raise it.

504 Offerings may raise up to a maximum of $1,000,000 in a 12 month period.
The 504 is the least restrictive of the Regulation D programs regarding structure,
financials, disclosure, and investor suitability.                                                                     4
A 504 offering allows a company to sell securities to an unlimited number of
purchasers without regard to their sophistication or experience - although some
States may limit the company to 35 non-accredited investors while still allowing
an unlimited number of accredited investors. Some states also allow general
solicitation of 504 offerings if you’re marketing to accredited investors only.

505 offerings are used to raise between $1million and $5 million. You may sell
to an unlimited number of "accredited investors" and up to 35 other persons who
do not need to satisfy the sophistication or wealth standards associated with
other exemptions; must inform purchasers that they receive "restricted"
securities, meaning that the securities cannot be sold for at least a year without
registering them; and cannot use general solicitation or advertising to sell the

506 offerings allow up to 35 non-accredited investors and an unlimited number
of accredited investors. 506's are exempt from State securities laws - the Federal
regulations supersedes the State rules, however most States will want a copy of
the Form D submitted if you are selling securities to investors that reside in their
State. As with the 504 program a company must file Form D in conjunction with
a 506 offering to notify the SEC of the offering

What is a PPM?

The Private Placement Memorandum is the document that discloses everything
your investor needs to know about your 504, 505 or 506 regulation D private

It’s made up of many documents including the investor suitability questionnaire,
memorandum, subscription agreement, confidentiality agreement and LLC
operating agreement.

      5 Steps to Creating Your Real Estate Hedge Fund

Step 1. Planning
In my opinion, the planning stage is the most important phase of real estate
syndications. This is where you’ll decide on your investment criteria and develop
your investing plan to share with your potential partners and investors.

Specificity is key!

Step 2. Create the Offering
This is the time to decide which offering structure will work best. I usually
structure mine as regulation D rule 506 but several of my students have                                                                   5
successfully used 504’s and 505’s as well. (There is also a regulation S which
allows you to raise money internationally!)

Step 3. Market the Offering
This is usually the toughest part for real estate investors. But in this phase all
you are doing is sharing your offering to potential partners – debt and/or equity
investors. If you’ve ever had a course in raising private money, the steps are
exactly the same – just the paperwork is different!

Step 4. Acquire the Real Estate Assets
Now that you have the money and the partners, it’s time to buy the property.
For me, this is the most fun part of the entire process. Knowing that you have a
“fund” with which to acquire real estate makes real estate brokers swoon. Be
prepared to be wined and dined. Plus, having cash makes negotiating the best
deals a lot easier than if you had to rely on financing.

Step 5. Manage the Syndicate
When you create a real estate syndication, you are usually the syndicate
manager. So in this phase you manage the property managers, the bookkeeper
and make sure that your investors are happy.

                        Here’s What to Do Now

These real estate hedge fund cheat sheets are designed to give you a broad
overview of the process. To get a more in-depth look at creating your own real
estate hedge fund, visit to get a copy of my 90-
minute presentation to see how to gain access to a ready stash of cash for your
real estate deals by starting your own Investment Fund… and even get paid to
manage it!

I share…

• What does setting up a real estate investment / hedge fund involve… and
what are its main advantages over other methods of raising capital

• The 3 types of real estate funds you can start, and the important 2 which you
should focus on

• What a private placement is and why it is preferable and easier to complete
than an Initial Public Offering (IPO) for raising capital                                                                     6
• My 3 step process to starting a real estate investment fund, and what you have
to do at each stage. (I take you through each step based on my own, personal

• How you should structure your real estate investment fund by making either a
debt or equity offering (Learn what are the 2 key questions to ask, and which
kind of most investors prefer.)

• What you need to know about Regulation D (This is the government program
that makes it possible for companies to raise capital through the sale of equity or
debt securities. This is what you’ll be using to start your own investment fund.)

• The 3 relevant types of Regulation D programs you should be looking at: 504,
505, 506 (and the difference between each of them)

• Which is the least restrictive Regulation D program… and whether you should
be using it

• Which government program you should be applying for if you wish to raise
unlimited funds (from $250,000 up to $1 billion)

• What a Private Placement Memorandum (PPM) is and why it is such a
crucial piece of documentation for your real estate investment fund

• What are the typical contents of a Private Placement Memorandum (PPM) –
The 1st real estate investment fund I set up had a PPM file filled with 3 inches
worth of documents! (I tell you what to take note off when drafting the PPM.)

• The only kinds of investors that can legally invest in your real estate
investment fund (There are 8 types of investors defined under U.S laws that are
allowed to invest in your fund. Learn the 3 types you should be focusing on

• What the term Blue Sky Compliance means and why this knowledge is so
important if you wish to make your fund available to investors across multiple

• The best way to handle the thorny legal issues that can arise with setting up
your own hedge fund (Most investors are too shy to do this… but this is the
safest route I recommend.)

• What you should know about marketing your fund (With the exception of a 504
fund, general solicitation is forbidden. This means you CANNOT use Craigslist,
forums, Facebook or Twitter to “market” your fund.)                                                                  7
• The secret, most effective method I use to legally market my fund to eager,
high net-worth individuals (This is the method I have used every single time and
it works because every one of these individuals love to ____.)

• A 2nd way to instantly turn your private circle of contacts and friends into
potential investors of your real estate fund (Since the government only allows
marketing to accredited investors with a high net-worth… I show you who are the
people you should approach who can meet these requirements.)

• How to overcome your fear of approaching others to invest in your fund (This
is the method I used initially… and what I said to get people interested in my

• A sneaky technique of getting past the rule of “no general solicitation” for your
fund (If you follow my instructions and do this every single time, then it will NOT
be considered a general solicitation.)

• How to get professionals to market your fund for you in exchange for a fee
(Plus what you should take note of when dealing with these brokers, dealers
and agents. WARNING: Some of these guys can be shady!)

• How to take advantage of an Intrastate Offering Exemption which allows you
to make general solicitations under certain conditions (Find out if these
conditions apply to you.)

• What the Plan Assets Rule is and the MAJOR pitfall I encountered when
setting up my 1st hedge fund… as a result of not knowing this rule (WARNING:
Not being aware of this rule can literally cripple your hedge fund, making it
impossible to function… as I discovered the painful way.)

• How to setup a management entity (typically an LLC) for managing the fund

• How to structure your fund such that you are reimbursed for all the out-of-
pocket costs of preparing the Private Placement Memorandum (PPM) – This
allows you to be paid the attorney fees and other costs you incurred in drafting
the documents.

• How to be reimbursed for operating expenses and other offering costs for
your real estate investment fund (This has to be properly structured under the
managing entity’s operating agreement.)

• How to be paid a management fee for your expertise and time spent in
managing the fund (This provides another stream of income for you… on top of
the returns of the fund!)

• What a typical fund structure looks like                                                                   8
• How you can use leverage to instantly gain access to a line of credit that is
twice or three times the original size of your fund (I used this strategy to grow
my fund 3 times its original amount just by making an arrangement with my

• How to properly structure your fund to avoid any disputes with the investors
later on (You must ask your attorney to disclose this important fact to safeguard
everyone’s interests.)

• The terms you should include in the Operating Agreement of your fund

• How to save up to 50% on attorney fees just by doing this extra step BEFORE
hiring your attorney (This can potentially save you thousands of dollars in fees
when you first start.)

• What you should ask for from your SEC attorney (Doing this one thing saved
me during my SEC investigation. Be sure you obey this golden rule when
managing your fund!)

• 2 questions to ask any attorney to see if they are qualified enough to help you
set up your fund and one test you can use to instantly spot unethical attorneys
just by talking to them! (It is important to choose a knowledgeable attorney who
can give you proper advice.)

• The 2nd scariest encounter of my whole adult life… due to me acting on the
wrong advice and resulting in a subpoena from the SEC (Learn from my mistake
so you’ll never have to go through the same agonizing experience as I did!)

• And much more…

              Go to
        to get your copy!                                                                    9

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