Last blog, I talked about private money and why I felt it was not a good long-term solution for my real estate investment goals.
I’m not sure if it was a podcast or something else that triggered my curiosity again, but I went back to the crowdfunding well with the thought of starting my own fund, rather than using one of the existing platforms.
Can I Start a Crowdfund?
My initial thoughts were that crowdfunding for real estate would involve lots of legal fees: specialty accountant, big commissions, and lots of rules.
One attorney was asking for $125,000 just to do the Private Placement Memorandum (PPM), the document that you give to prospective investors. This dollar amount did not include actually creating or managing the fund.
I ran my initial calculations with a startup cost of $250,000.
As I got deeper into my research, I found a huge variety of information.
There were useful one-pagers like the crowdfunding cheat sheet.
Attorneys ran the gamut from high to low price, experienced to relatively new, and crowdfunding “specialists” to generalists.
Crowdfunding False Start
Much faster than anticipated, I found some folks who had successfully raised money in the past. As we talked, I started to see how it could all come together.
Soon others wanted to be a part, and that’s when the numbers started to skew toward commissions and profit sharing for people who would only help raise money for the fund and not help operate it.
In short, it began to feel wrong. So I backed off.
Since then, multiple attorneys have told me to never give out ownership to people who raise funds, especially if they are not a licensed broker but just “connect” me with someone who wants to invest.
I CAN Start a Crowdfund!
A few months later I met Bruce. After some discussion, we felt we could form a true partnership to investigate and possibly do crowdfunding for real estate.
The two of us began a more detailed investigation into creating a fund. One of our conversations was with attorney Jillian Sidoti Esq. Jillian expertly laid out how these deals normally get set up and made us very confident that we had started down the right path.
After a few long phone calls and some due diligence we decided to move forward with Jillian and began to work on the details.
Bruce and his wife Debbie were engaged and taking on some of the bigger tasks. It was refreshing to have a partner that helped the process along rather than just adding tasks to my plate.
Soon things were looking up…the perfect time for fear to hit.
Next Blog is about the fear and the opportunity.