how to crowdfund a house

35
How to Crowdfund a House

Upload: tuyen

Post on 25-Feb-2016

45 views

Category:

Documents


6 download

DESCRIPTION

How to Crowdfund a House. Disclaimer: This is NOT LEGAL ADVICE !. Buying property $ from individual investors . Win-Win:. Access to financing Ethical investments. Not donations. What would this make possible?. What would this make possible?. Stability. - PowerPoint PPT Presentation

TRANSCRIPT

Page 1: How to  Crowdfund  a House

How to Crowdfund a House

Page 2: How to  Crowdfund  a House

Disclaimer: This is NOT LEGAL ADVICE!

Page 3: How to  Crowdfund  a House

Buying property

$ from individual investors.

Win-Win:

Access to financing Ethical investments

Page 4: How to  Crowdfund  a House

Not donations

Page 5: How to  Crowdfund  a House

What would this make possible?

Page 6: How to  Crowdfund  a House

What would this make possible?• Stability

Page 7: How to  Crowdfund  a House

What would this make possible?• Stability

Page 8: How to  Crowdfund  a House

What would this make possible?• Stability• Savings

Page 9: How to  Crowdfund  a House

What would this make possible?• Stability• Savings

Page 10: How to  Crowdfund  a House

What would this make possible?• Stability• Savings

Page 11: How to  Crowdfund  a House

What would this make possible?• Stability• Savings• Community

Page 12: How to  Crowdfund  a House

Let’s slash property prices (not values)

Page 13: How to  Crowdfund  a House

Add: $100,000 for remodeling – add 2 bedrooms (maybe 1 more bath)Total: $600,000Price per household: $300,000Financed (4.5% for 30 years): $1520/mo

Page 14: How to  Crowdfund  a House

Split 3 ways! No remodeling needed!Total price: $549,000Price per household: $183,000Financed (4.5% for 30 years): $927/mo

Page 15: How to  Crowdfund  a House

Split 4 ways! No remodeling needed!Total price: $949,000Price per household: $316,000Financed (4.5% for 30 years): $1601/mo

Page 16: How to  Crowdfund  a House

Legal strategies

Page 17: How to  Crowdfund  a House

Legal strategies

Page 18: How to  Crowdfund  a House

Legal strategies

• CA residents only intrastate exemption

Page 19: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption

• Secret loans to CA residents (??) § 25102(e): “any offer or sale of any evidence

of indebtedness, whether secured or unsecured, and any guarantee thereof, in a transaction not involving any public offering.”

Page 20: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)

• Small number of investors who know you:§ 25102(f):– No public advertising– Sales to no more than 35 investors– All investors have a preexisting personal or business

relationship, or by reason of their business/financial experience, could be reasonably assumed to have the capacity to protect their own interests.

Page 21: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)

• Private placements § 25102(d)“Any offer or sale of a security with respect to a transaction that is exempt from registration under the Securities Act of 1933 pursuant to Section 18(b)(4)(E) of that act….” (=§77r(b)(4)(E), which refers to § 77d(a)(2), “transactions by an issuer not involving any public offering.”Adds CA notice and fee requirement

Page 22: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)

• Private placements § 25102(d)Match Federal Rules 504, 505, or 506 (private)

Adds CA notice and fee requirement

Page 23: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)• Private placements § 25102(d)

• Loans Secured by Real Property, where loans do not have equal priority § 25100(p)“A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.”

Page 24: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)• Private placements § 25102(d)• Loans Secured by Real Property, where loans do not have equal priority § 25100(p)

• Realtors § 25102.5:“a series of notes secured directly by an interest in the same real property, or the sale of undivided interests in a note secured directly by real property equivalent to a series transaction, that complies with all of the provisions of Article 6 (commencing with Section 10237) of Chapter 3 of Part 1 of Division 4 of the Business and Professions Code.”

Page 25: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)• Private placements § 25102(d)• Loans Secured by Real Property, where loans do not have equal priority § 25100(p)• Realtors § 25102.5

• CA Qualified Purchasers § 25102(n)– Net worth $500,000 (excluding home, furnishings & cars) or– Net worth $250,000 (excluding home, furnishings & cars) plus gross

income over $100,000– Can only invest 10% of net worth

Page 26: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)• Private placements § 25102(d)• Loans Secured by Real Property, where loans do not have equal priority § 25100(p)• Realtors § 25102.5

• CA Qualified Purchasers § 25102(n)– Advertising in prescribed form: brief description of

issuer, certain legends/warnings, call this number for more info.

– Written only.– Notices required.

Page 27: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)• Private placements § 25102(d)• Loans Secured by Real Property, where loans do not have equal priority § 25100(p)• Realtors § 25102.5• CA Qualified Purchasers § 25102(n)

• Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only.– Net worth exceeds $1M (excluding home), or– Income over $200,000 or $300,000 w/ spouse

Page 28: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)• Private placements § 25102(d)• Loans Secured by Real Property, where loans do not have equal priority § 25100(p)• Realtors § 25102.5• CA Qualified Purchasers § 25102(n)• Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only.

• Investment Crowdfunding under the CROWDFUND Act (part of JOBS Act) (15 U.S.C. §77d(a)(6))

– Will be legal soon??????– Raise up to $1 M in any 12-month period;– Limit per investor: $2,000 or 5% of income/net worth, or if income or net

worth is over $100,000, then 10% of income or net worth up to $100,000– Must use a Portal, which is going to be highly regulated– Disclosures/documentation required– May “not advertise the terms of the offering, except for notices which direct

investors to the funding portal or broker.”

Page 29: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)• Private placements § 25102(d)• Loans Secured by Real Property, where loans do not have equal priority § 25100(p)• Realtors § 25102.5• CA Qualified Purchasers § 25102(n)• Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only.• The CROWDFUND Act

• Subdivided Lands § 25100(f)

Page 30: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)• Private placements § 25102(d)• Loans Secured by Real Property, where loans do not have equal priority § 25100(p)• Realtors § 25102.5• CA Qualified Purchasers § 25102(n)• Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only.• The CROWDFUND Act• Subdivided Lands § 25100(f)

• Register the Security = Direct Public Offering(special regs for real estate)

Page 31: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)• Private placements § 25102(d)• Loans Secured by Real Property, where loans do not have equal priority § 25100(p)• Realtors § 25102.5• CA Qualified Purchasers § 25102(n)• Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only.• The CROWDFUND Act• Subdivided Lands § 25100(f)• Register the Security = Direct Public Offering

• Nonprofit § 25100(j)– Organized exclusively for educational, benevolent,

fraternal, religious, charitable, social, or reformatory purposes…

– Can sell securities EXCEPT loans … ????

Page 32: How to  Crowdfund  a House

Legal strategies• CA residents only intrastate exemption• Secret loans to CA residents (??) § 25102(e)• Small number of investors who know you § 25102(f)• Private placements § 25102(d)• Loans Secured by Real Property, where loans do not have equal priority § 25100(p)• Realtors § 25102.5• CA Qualified Purchasers § 25102(n)• Rule 506(c). ADVERTISING OK!!! Sales to Accredited Investors Only.• The CROWDFUND Act• Subdivided Lands § 25100(f)• Register the Security = Direct Public Offering• Nonprofit § 25100(j)

• Agricultural Cooperatives § 25100(m); Food and Agriculture Code §§ 54001 – 54294. See also 15 U.S.C. § 77a(c)(a)(5)(B)

Page 33: How to  Crowdfund  a House

Total price: $549,000Downpayment: $120,000Need to Raise: $429,000§25102(n) CA Qualified Purchasers100 loans of $4,290 each? 5% for 5 years $8095.76, $2699/mo/household

Page 34: How to  Crowdfund  a House

CHALLENGES

Long-term loans?Doing the workShowing it will be a good investment (aka why

not just get a bank loan?)

Page 35: How to  Crowdfund  a House

Solutions

1. Form a group, the more sharing, the better• Cheaper per person• Easier to show it’s a safe investment

2. Self-directed IRAs3. Intermediaries

e.g.: patch of land,PRIMARQ,fundrise,crowdstreet,realtyshares